Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion

Abstract

In a recent lawsuit, the United States Department of Justice (DOJ) has alleged that Microsoft used illegal exclusionary practices in an effort to drive Netscape Corporation's web browser from the market and thus to protect Microsoft's monopoly over computer operating systems. To achieve these ends, according to the DOJ, Microsoft has unjustifiably bundled its Internet Explorer (IE) web browser with its Windows operating system and entered into unlawfully restrictive contracts with Internet firms. In the process it has allegedly prevented the evolution of Netscape's browser into a kind of meta-operating system that might compete with Windows. The case poses fundamental questions about the role of antitrust enforcement in technology markets, particularly those involving networks, and raises important doctrinal issues for law of monopolization, tying, and exclusive dealing. This article examines the antitrust issues raised by Microsoft in the light of economic analysis. It argues that, while Microsoft has a monopoly of operating systems, its integration of IE and Windows cannot be deemed inefficient by any practicable legal standard, and is not seriously exclusionary under standard antitrust criteria. In addition, the article argues that the Microsoft's restrictive contracts with Internet firms have plausible efficiency justifications and do not impermissibly exclude Netscape.