Overturn of Breakup Remedy Validates Pathbreaking Analysis of Microsoft Case by The Independent Institute’s Economists

Oakland, Calif.—The recent U.S. Court of Appeals decision overturning the order to breakup Microsoft validates the analysis of the breakup—and what it would have cost consumers—by Independent Institute research fellows Stan J. Liebowitz and Stephen E. Margolis, in the updated and expanded edition of their book, WINNERS, LOSERS & MICROSOFT: Competition and Antitrust in High Techonology.

Consumers can also be pleased that the appeals court appears to be less impressed than the trial court with theories that high-technology markets systematically lock consumers into inferior products. Liebowitz and Margolis’s ten-year research program on theories of network effects, path dependence, and lock-in has, for the first time, put these theories to the test and found them wanting.

However, the appellate court’s opinion suggests that a less reckless judge might have successfully imposed a breakup. The ruling also raises the following questions: Does this precedent invite further politicization of the technology sector by allowing successful firms to face harassment by regulators at the behest of disgruntled rivals? Is there significant evidence to support the so-called “applications barrier to entry” theory cited by the court? Should antitrust law be modified to require actual evidence of consumer harm?

Founded in 1986, The Independent Institute (www.independent.org) is a non-politicized, non-profit, scholarly, public policy research and educational organization that sponsors in-depth studies of the political economy of critical issues.