Moving its key economic witness in the antitrust trial up to first bat was a bold move by Microsoft but it may have backfired. Having spent the morning in court arguing that Microsoft Corp is not a monopoly, MIT economics professor Richard Schmalensee later declared that the issue of whether the software maker has monopoly power in PC operating systems is a red herring, and relevant to only part of the antitrust case. Judge Thomas Penfield Jackson clearly thought this rather odd. First he made Schmalensee repeat what he understood to be the core allegations against Microsoft. It attempted to cripple Netscape and Java as platform competitors by product design decisions such as integrating IE with Windows, foreclosing Netscape from distribution, and pricing practices, said Schmalensee, and what is key is Microsoft’s ability to affect product distribution, not its ability to price operating system software. And the ability to affect distribution is not an indicator of monopoly power? the Judge asked. Power in the distribution of software is relevant, Schmalensee agreed, but whether Microsoft can raise the price of Windows has no bearing on its ability to affect distribution of rival products. Schmalensee created the example of one company that owns all parking lots and another that produces canned corn. Do I affect the ability to distribute corn because I have all the parking lots? Yes that’s relevant. Isn’t that doing what’s alleged? [in this case] asked the Judge. No. It’s implied, said Schmalensee. The judge said that if, as alleged in the government’s testimonies and evidence, Microsoft has used the OS and its alleged monopoly and refused to extend its OS to potential competitors and distributors of applications and software, except on unfavorable terms it has done exactly what you are doing with your parking lot.
