[Congressional Record Volume 146, Number 86 (Friday, June 30, 2000)]
[Senate]
[Pages S6247-S6248]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           THE MICROSOFT CASE

  Mr. CRAIG. Mr. President, Judge Learned Hand once observed: ``The 
successful competitor, having been urged

[[Page S6248]]

to compete, must not be turned upon when he wins.''
  For Microsoft and the rest of our domestic high-tech industry, it may 
be too late to heed Judge Hand's warning.
  Whatever justification the Justice Department used for its actions 
against Microsoft, the real measure of success in the Microsoft case is 
how it affects American consumers and the American economy.
  From their perspective, the verdict is clear: The Justice 
Department's suit against Microsoft is bad for consumers, bad for high-
tech markets, and bad for the country.
  Mr. President, our anti-trust laws are unlike health and safety 
regulations. Their purpose isn't to protect the physical well being of 
citizens, but rather their pocketbooks.
  Like other forms of economic regulation, a successful effort requires 
two conditions. First, there must exist a market failure. Second, the 
government must be in a position to fix that market failure.
  The case against Microsoft fails both conditions. Our domestic 
computer markets are working just fine. For thirty years, they have 
been characterized by falling prices, rising performance, and increased 
choice:
  According to the Commerce Department, quality-adjusted prices for 
computer memory chips have declined 20 percent per year since 1985;
  A chip that sold for $1778 in 1974 cost just 47 cents in 1996; and 
according to the CBO, software prices have been falling between 3 and 
15 percent per year on average.
  Meanwhile, new products are being introduced every day. There are 
currently over 25,000 applications designed to run on Windows, yet the 
fastest growing segment of the market includes so-called ``Microsoft-
Free'' applications.
  Mr. President, I am one of the most computer illiterate members of 
the United States Senate, but I can pull airline flight information off 
the internet faster than anybody here. I use my Palm Pilot to do it. 
The Palm Pilot doesn't have any Microsoft products in it. You can 
browse the internet with your cell phone too. Again, no Microsoft.
  And just recently, Linux-based software writer Red Hat announced a 
partnership with Dell Computer to accelerate the commercial adoption of 
the Linux operating system. This new system would compete directly with 
Windows-based computers.
  Lower prices, better performance, increased choice--Mr. President, 
there is no market failure in our domestic computer industry. To 
suggest otherwise doesn't pass the laugh test.
  Nor does the suggestion that consumers are better off following Judge 
Jackson's ruling. All the evidence suggests just the opposite.
  One unique aspect of today's economy is that America's consumers are 
also America's owners. Fully one-half of American families own stock in 
American companies. Those families have been hurt by the Microsoft 
case.
  On April 3, Judge Jackson issued his finding of law. That day, the 
Nasdaq stock index crashed. It fell a record 349 points. That's a loss 
to Americans of about $450 billion--or about 5 percent of our national 
income.
  Gone, in one day.
  Mr. President, a basic premise of anti-trust action is to defend 
consumers. We want to protect competition, not competitors.
  Yet, in the Microsoft case, it was the competition that pointed the 
finger. Actual consumers were notably absent. So how did the markets 
treat Microsoft's competition following Judge Jackson's ruling? Poorly.
  Of the companies that testified against Microsoft--Intel, IBM, 
Compaq, Oracle, AOL, Sun Microsystems, Intuit, Apple, and Gateway--only 
one saw its stock rise in the month following the Judge's ruling. Every 
other stock had dropped, some by as much as 30 percent.
  This decline is no coincidence. According to a study recently 
published in the Journal of Financial Economics, whenever the 
government's antitrust suit has scored a victory against Microsoft, an 
index of non-Microsoft computer stocks falls. When Microsoft wins a 
round, those computer stocks rise.
  Judge Jackson may have ruled against Microsoft, but the markets have 
ruled against government interference in the New Economy.
  Mr. President, the only monopoly consumers need to worry about in the 
Microsoft case is the monopoly government regulation has over private 
industry.
  Having stood on the sidelines while American's high-tech community 
led the American economy into the twenty-first century, the government 
is now stepping in and telling those same corporations how to run their 
business.
  Economic regulation used to be popular in Washington, DC. At one 
point in the late 1970s, the federal government controlled the pricing 
and market access of all our transportation industries--trucking, 
airlines, rail, and pipeline--as well as the energy industry.
  Today, those regulations are gone, and we are all better off. The 
last twenty years of economic growth and prosperity demonstrates that 
those regulations did the economy more harm than good.
  In many ways, our anti-trust laws are the last toe-hold of economic 
regulation in the federal code.
  Unfortunately, it's a growing toe-hold. The number of investigations 
by the Justice Department under our anti-trust laws has exploded in 
recent years, rising from 134 in 1995 to 276 in 1997.
  Which begs the question, who's next?
  Now that the Justice Department has been turned loose, who are the 
other innovative companies that might want to ensure that their 
lawyer's retainers are fully paid?
  Intel: With a market share of 80 percent, Intel is by far the leader 
in sales of the microprocessor market for PCs. While this lead seems 
reasonable, since Intel invented the first microprocessor in 1971, 
innovation isn't a defense in anti-trust law. Intel's profit margins 
have exceeded 20 percent for the past five years.
  AOL: With almost 25 million online subscribers, AOL is the clear 
worldwide leader in online services. Investor Research says: ``The 
service has continued to make significant gains in the number of 
customers, despite charging a monthly fee of $21.95 that is higher than 
the industry's standard fee of $19.95.'' Do higher fees indicate 
monopoly rents?
  Cisco: Cisco Systems is the world's largest supplier of high 
performance computer internetworking systems. It supplies the majority 
of networking gear used for the internet. According to Investor 
Research: ``Demand for switches is being driven by a need for greater 
bandwidth by corporate users: Cisco dominates this market.'' Mr. 
President, the term dominates is bad in the anti-trust world.
  EBAY: EBAY operates the world's largest person-to-person online 
trading community, with more than 10 million registered users and 3 
million items listed for sale. You can purchase antiques, coins, 
collectibles, computers, memorabilia, stamps, and toys on EBAY from 
other individuals. Profit Margins: 70 percent plus. Seven Zero.
  One irony in the Microsoft case is that Netscape, the frequently 
cited ``victim'' in the case against Microsoft, was in 1996 clearly a 
monopoly player in its own right, with over 80 percent of the browser 
market. Now, Netscape is owned by AOL, another monopoly-sized player.
  America's high tech community used to shun government interference. 
They would be smart to continue to do so. The companies that encouraged 
the Microsoft lawsuit made a Faustian bargain. Now that the government 
has focused on this industry, it may be difficult to turn its attention 
elsewhere.
  That's too bad. The case against Microsoft has hurt the high tech 
community where it counts--in its pocketbook. But the full cost of this 
ill-advised attack remains to be seen. Right now, America stands alone 
atop the New Economy. Increased government intervention is a good way 
to ensure that dominance doesn't last.

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