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Yesterday Federal Judge Thomas Jackson in the Microsoft case released
his "Findings of Fact." He declared that Microsoft possessed monopoly
power in the market for PC operating systems and engaged in predatory
pricing:"Three main facts indicate that Microsoft enjoys monopoly power.
First, Microsoft's share of the market for Intel-compatible PC
operating systems is extremely large and stable. Second, Microsoft's
dominant market share is protected by a high barrier to entry. Third,
and largely as a result of that barrier, Microsoft's customers lack a
commercially viable alternative to Windows."How do people think Microsoft will act? Is the Justice Department
correct in calling this a major victory for consumers?
-- James Kim, November 6, 1999
The DoJ of course says it is a victory, if they said anything else, that would be considered odd as well.I think it is way too early to say if this is a victory for the consumers. It is difficult to say what will be good for consumers because the effects of the alternatives cannot be known.
To me, this case is more about punishing MS for using its monopoly power. But, since this is linked to what is good for consumers, the result may not be as big as anticipated now.
As for how MS may react, I don't think I will say anything about that. Rumours are out that they seem ready to negotiate some kind of solution.
-- Preben Kjaer Kristensen, November 8, 1999
Okay, so this is from a case study I did in another class, so I may be missing a couple of details...In 1990, Intel found itself with $2 billion of cash on hand, and Intel was trying to decide what to do with the money. Intel decided to (forgive my inability to translate a Queens accent to writing) "Keep the money."
Why did Intel keep the money? To prevent entry from firms like Panasonic or Sony, and to threaten AMD, Cyrix, and Chips & Technologies.
Intel could argue that it used the warchest not as a tool to eliminate competition, but as a tool to prevent another big manufacturer from entering the market (which is "less" anti-competitive). If Intel's argument were actually believed, then this case is analogous to "IBM and the Seven Dwarves," wherein IBM maintained a stranglehold on the minicomputing market by setting its prices so that its smaller competitors would stay in the business, but no new firms would enter.
However, let's look at the similarities between Microsoft and Intel.
1:
Microsoft's share of the market for Intel-compatible PC operating systems is extremely alrge and stable.
Intel's share of the Windows-based PC operating systems is (was) extremely large and stable.
2:
Microsoft's dominant market share is protected by a high barrier to entry.
Intel's dominant market share is protected by a high barrier to entry (unless you don't consider $2 billion in cash, no reservations about pricing anyone else out of the market, and significant name brand value barriers to entry).
3:
Third, and largely as a result of the barrier, Microsoft's customers lack a commerically viable alternative to Windows.
Third, and largely as a result of the barrier, Intel's customers lacked a commercially viable alternative to Intel chips.
(as a side note, the reason why no one could match an Intel chip back then was that AMD & Cyrix had to reverse-engineer Intel's instruction set, so when the x86 was the most common chip, AMD & Cyrix found their niche by peddling cheaper (x-1)86-compatible chips and hybrids between the (x-1)86 and the x86.)
That looks pretty similar, no?
-- Patrick Kremer, November 15, 1999