Judge Thomas Penfield Jackson mistakenly declared Microsoft to be a monopoly abusing its power in his "Findings of Fact" in the Microsoft antitrust case.
The following is the "Top 10 Silliest Ideas from the Judge's Findings of Fact," which is then followed by the Judge Jackson's exact quotes and SBSC's responses which expose the Judge's inability to understand how markets work.
Top 10 Silliest Ideas from the Judge's Findings of Fact
10. There won't be any computer products made in the future to compete with Microsoft. Full Text
9. When it comes to consumer prices for PC systems, Judge Jackson's view is: If it ain't broke, have the government fix it. Full Text
8. People who buy Apple computers don't count. Full Text
7. No one will ever build a better mouse trap, or operating system. Full Text
6. Microsoft could charge whatever it wants for Windows with no market consequences. Full Text
5. Please ignore those competitors - after all, I declared Microsoft to be a monopoly. Full Text
4. Sure, consumers like Microsoft Windows, but the Justice Department and I know better. Full Text
3. I'm sorry, but I can't see past the tip of my nose when it comes to the computer industry. Full Text
2. Microsoft is a mean and nasty monopolist, but they build their software to allow other programs to run. Full Text
And the number one silliest idea in Judge Jackson's ruling ...
1. Microsoft should be punished because it aggressively innovates. Full Text
The above "Top 10 Silliest Ideas from the Judge's Findings of Fact" are based on the following:
Top 10 Mistakes in the Findings of Fact for the Microsoft Antitrust Case
10. "Currently there are no products, nor are there likely to be any in the near future, that a significant percentage of consumers world-wide could substitute for Intel-compatible PC operating systems without incurring substantial costs... Therefore, in determining the level of Microsoft's market power, the relevant market is the licensing of all Intel-compatible PC operating systems world-wide."
SBSC Response: How Judge Jackson knows that there are no such products existing or emerging today, or that none will emerge in the near future, is a complete mystery. And his definition of "substantial costs" basically goes undefined as well. Does he actually mean to imply that costs are so high that consumers are incapable of switching from a PC with Windows to an Apple with Mac OS or a PC with Linux, or vise versa? Judge Jackson fails to explain why the costs of such a consumer choice are so daunting compared with other choices in the marketplace.
9. "The price of an Intel-compatible PC operating system accounts for only a very small percentage of the price of an Intel-compatible PC system. Thus, even a substantial increase in the price of an Intel-compatible PC operating system above the competitive level would result in only a trivial increase in the price of an Intel-compatible PC system."
SBSC Response: Even if a federal judge could somehow deem what exactly is the "competitive level" price-which he cannot-one might ask if basically no harm comes to consumers in the end, then what's the point of this entire endeavor?
8. "It is ... proper to define a relevant market that excludes the Mac OS." Later: "Even if Apple's Mac OS were included in the relevant market, Microsoft's share would still stand well above eighty percent."
SBSC Response: Both the Department of Justice and Judge Jackson are grossly irresponsible given their arbitrary manner by which they define the "relevant market." Applying a little common sense would make clear that Apple computers and their own operating systems compete with PCs running on Windows. It also is quite clear that competitors exist when it comes to information appliances, network computers and other PC operating systems, like Linux and BeOS.
7. "Firms that do not currently produce Intel-compatible PC operating systems could do so. What is more, once a firm had written the necessary software code, it could produce millions of copies of its operating system at relatively low cost. The ability to meet large demand is useless, however, if the demand for the product is small, and signs do not indicate large demand for a new Intel-compatible PC operating system. To the contrary, they indicate that the demand for a new Intel-compatible PC operating system would be severely constrained by an intractable 'chicken-and-egg' problem: The overwhelming majority of consumers will only use a PC operating system for which there already exists a large and varied set of high-quality, full-featured applications, and for which it seems relatively certain that new types of applications and new versions of existing applications will continue to be marketed at pace with those written for other operating systems."
SBSC Response: Once again, we have pure conjecture from a federal judge on where and how the computer industry is going to develop. In addition, we have a fundamental misunderstanding of how the market process works. Judge Jackson can only see the market as it was yesterday, while entrepreneurs and innovators see opportunities today and into the future. Judge Jackson can only comprehend current demand, while entrepreneurs in the marketplace supply new products and services that change demand and create new demands. The inability to understand this process, in fact, is the fatal flaw running throughout Judge Jackson's "Findings of Fact."
6. "Microsoft enjoys so much power in the market for Intel-compatible PC operating systems that if it wished to exercise this power solely in terms of price, it could charge a price for Windows substantially above that which could be charged in a competitive market."
SBSC Response: Again, Judge Jackson has entered the realm of utter speculation. Notice he does not say that Microsoft "is" charging a monopoly price (whatever they might possibly be), but only that in his view the company "could" do so.
5. "The experiences of IBM and Apple, Microsoft's most significant operating system rivals in the mid- and late 1990s, confirm the strength of the applications barrier to entry."
SBSC Response: This is a rather bizarre observation on two fronts. First, the recent resurgence by Apple and stepped up interest in Linux by PC manufacturers raises fatal questions about Judge Jackson's assumptions regarding so-called barriers to entry. Second, and fundamental to this entire case, how exactly can a so-called monopoly have "significant ... rivals"? After all, if one has significant rivals, then one is not, by definition, a monopoly.
4. "[C]onsumers have by and large shown little inclination to abandon Windows, with its reliable developer support, in favor of an operating system whose future in the PC realm is unclear."
SBSC Response: Here the Judge stumbles upon truth. That is, consumers like Microsoft products because they meet their current needs. For some reason, the Department of Justice and Judge Jackson feel the need to step in to the marketplace and have the government overrule consumers.
3. "Microsoft recognizes that new paradigms could arise to depreciate the value of selling PC operating systems; however, the fact that these new paradigms already exist in embryonic or primitive form does not prevent Microsoft from enjoying monopoly power today."
SBSC Response: Again, Judge Jackson fails the economics test. Businesses, especially those in highly dynamic, ideas-based industries like computer software, compete against existing, emerging and future competitors. Even a business with the considerable success of Microsoft cannot afford to rest on its laurels.
2. "Microsoft's license agreements have never prohibited OEMs from pre-installing programs, including [Netscape's] Navigator, on their PCs and placing icons and entries for those programs on the Windows desktop and in the 'Start' menu."
SBSC Response: In this instance, Judge Jackson is correct, and therefore, we must ask: So, what's the problem?
1. "Indeed, Microsoft has incentives to innovate aggressively despite its monopoly power."
SBSC Response: Though it is clear that Microsoft is not a monopoly, to make a point, let's agree with Judge Jackson for a moment on monopoly power. Given that the government cannot know what the monopoly price is, and that Microsoft is aggressively innovating as we speak, then one must again ask: Where's the consumer harm?
