June 22, 2012 · 0 Comments
By Dean Baker:
Casey Mulligan used his NYT blogpost this week to tell readers:
“there is no such thing as a monopoly in the computer industry.”
The rest of the piece is devoted to criticizing the foolishness of the Justice Department in having brought an anti-trust suit against Microsoft. The rise of Apple is at the center of the story, with Apple having surged past Microsoft in profits and market value and Microsoft now struggling to maintain its position with a new tablet computer.
This is a great story of the dynamism of the market in the computer industry. But there is some history that Mulligan apparently does not know. Back in 1997 Apple was in the intensive care ward with its survival very much in doubt. At that time, it was just a computer company. There were no iPads, iPhones, or even iPods, just Apple computers and it didn’t seem that many people wanted to buy them.
The big question facing Apple was whether Microsoft would continue to design its office suite to be compatible with Apple computers. After all, Apple had a relatively small share of the market at the time, why should Microsoft go through the effort and expense of making Word, Excel and the rest compatible with Apple’s silly system.
Here’s what the NYT had to say at the time about Microsoft’s decision to throw $150 million Apple’s way and to continue to produce Apple compatible software:
“Odd or not, the bailout is good for both. Apple users are assured that their beloved company gets desperately needed cash and that Microsoft will continue to supply them up-to-date word processing and other applications software. Many would-be Apple buyers had been turning away out of fear that as Apple’s market share shriveled, so would the programs made available for use on Apple machines.
“The bailout is also good for Microsoft because it preserves a demand for its software programs designed to be compatible with Apple machines. But some suspect a more Machiavellian purpose by Microsoft as well. Microsoft can now fend off antitrust charges by pointing out that Apple’s continued existence will prevent Microsoft from acting as a monopolist. If Apple dies, Microsoft will appear nakedly monopolistic, the only major producer of operating systems for personal computers.”
Of course there is no guarantee that the NYT’s assessment is correct (others in the business press had a similar view) but if it is, we get a very different picture of the impact of the government’s anti-trust suit. The implication of the NYT’s assessment is that the threat of anti-trust litigation forced Microsoft to be less predatory even to the point of working to keep a competitor alive. In this case, the competitor in question turned out to be an enormously innovative company that now produces great products that consumers value immensely.
That story makes the government’s anti-trust case against Microsoft look pretty damn good. Of course the benefits may even go well beyond the survival of Apple. Would Google have had the space to develop a first-rate search engine and subsequent products like the Android phone system if Microsoft had continued its practice of broadening its scope into other areas? (The immediate focus of the anti-trust case was the decision by Microsoft to add a browser to its operating system that essentially wiped out Netscape.)
Of course this doesn’t establish that the Justice Department was necessarily right in going after Microsoft in the 90s, but the slam dunk case going in the other direction that Mulligan thinks is demonstrated by Apple’s success requires a major re-write of history.