Proposed Antitrust Remedy: Returning Choice to Consumers

The government released its remedy proposal in the Microsoft antitrust case late last week—and, as expected, it's quite a doozy. In essence, the government seeks to divide the company in two, splitting Windows from Microsoft Office and the other Microsoft applications. This would, in effect, create two monopolies, but the government hopes that the split will induce the Office company to create more products for rival OSs, such as Linux, Be OS, and the Macintosh.

My original take on this proposal was not positive. Although I applaud the government for taking the necessary steps to prevent Microsoft from continuing to abuse its monopoly, I wasn't sure how this proposal would benefit consumers. I saw no reason to expect an Office company to create, say, Microsoft Office for Linux—just because the company was no longer part of the Windows group. In such a case, one might expect the Office company to behave like any other third-party software developer and simply develop for the OS that commands the widest audience. And this will, by far, still be Windows—an OS that one company will still create and sell. It doesn't seem to solve the problem, now does it?

But when my attention focused on a single compelling idea in the proposal, the whole thing started to make sense. First, some background: You'll recall that it was Microsoft's bundling of Internet Explorer (IE) in Windows that originally started this lawsuit. Microsoft argued that the bundling was technically defensible and that it made Windows easier to use. But the government charged that this was product tying, done solely to destroy competition in the Web browser market. By including IE in Windows and offering users no way to remove it, Microsoft effectively leveraged its OS monopoly to support another of its products (one which, not coincidentally, wasn't doing well in the marketplace until the bundling). And this is where the government's remedy proposal really shines—because it has devised what I think is an acceptable response to this problem.

Under terms of the proposed remedy, the Windows company would be unable to continue bundling "middleware" products with Windows unless it also offered a version of Windows that excluded these add-ons. The government defines middleware products as software such as Internet browsers, email client software, multimedia viewing software, Office, and the Java Virtual Machine. However, software programs such as disk compression and memory management are not considered middleware and might be bundled in Windows. Therefore, Microsoft might offer a version of Windows that included Windows Media Player if it so chose. But it must then also offer a version that doesn't include this software—or, at the very least, offer a version from which a PC maker or end user can easily remove the software. But here's the best part: If a PC maker or end user buys a version of Windows without this software, that version of Windows will cost less than usual. Thus, Microsoft will be unable to force unwanted software on users and garner marketshare for these products simply by including them in Windows. If users want a product such as IE or Windows Media Player, they can choose it.

And really, the goal is to return choice to the consumer. We might find out whether products such as IE and Windows Media Player are popular because people want them or because they were bundled in Windows. If Microsoft's products hold up in an open market, then they deserve to succeed. But if they rose to prominence because of illegal product tying, then they deserve the fiery death that the government's proposal will cause. Although I don't necessarily agree with a number of the details of the government plan, it restores choice to the software industry. And that's a huge win no matter how you look at it.

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