Academics Agree Big Tech Expansion Result of Microsoft Antitrust Case

Antitrust action against Microsoft in the late 1990s enabled an explosion of innovation, allowing platforms like Google, Facebook and Amazon to solidify dominant positions, academics said Tuesday at FTC hearings (see 1810150052). Microsoft let companies use the internet as a development platform and expand using HTML protocol, said Columbia University Law School professor Tim Wu.

The case brought by Netscape, now Mozilla, didn't severely damage Microsoft’s PC position, said University of Chicago Law School professor Randal Picker: “This whole other world of computing devices has exploded, and the PC is just a piece.”

Comments about tech platform dominance today are reminiscent of U.S. v. Microsoft, Wu said, noting critics of the case claimed the company, a symbol of American entrepreneurship, could get “swallowed in 10 minutes.” Similar cases have been made about the fallibility of platforms like Facebook, with MySpace an example. Wu said antitrust enforcers should have courage to take on similar cases when warranted, arguing it was a “mistake” not to give Facebook’s buy of Instagram a closer look: Microsoft was brought without clear evidence of price effects, he said, and in subsequent years, enforcers have been “too nervous,” too unwilling to bring cases.

The case had a huge impact on innovation, said New York University School of Law professor Daniel Rubinfeld. The company’s approach was innovate to protect, which is limiting, compared with having to compete with new, innovative offerings.

Attorneys general from 11 states and Washington, D.C., last week commented to the FTC, warning against anticompetitive effects of mass data collection. About 90 percent of internet searches go through Google, and more than 90 percent of “young people” use Facebook, they wrote. One percent of smartphones use operating systems not offered by Apple or Google, they continued. “Firms with an asymmetric advantage in data might be able to identify competitive rivals at a very early stage, and perhaps eliminate competition by pre-emptively acquiring them,” leading to loss of consumer choice, they wrote. The AGs hailed from California, Connecticut, Illinois, Massachusetts, Minnesota, Mississippi, New York, Oregon, Pennsylvania, Rhode Island and Washington state.

Wu said the question today is: Are platforms currently making “Microsoft-like” moves to try to control the most valuable resources of profit on the platform, while opening up the platforms for business? Facebook and Instagram showed platform competition, he said, despite a British competition office’s conclusion Instagram wasn't competing with Facebook because it wasn't delivering ads, and Facebook’s photo offerings weren't competing with Instagram.

Monopsony power is a concern in highly specialized markets​​​​​​​ like tech, said former DOJ Antitrust Division chief Renata Hesse, now at Sullivan & Cromwell. Monopsony harms competition, which should be the antitrust standard, said former FTC Economics Bureau Director Martin Gaynor, a Carnegie Mellon University economist.