The Corporation and the Twentieth Century

598. Cusumano and Yoffie (1998, p. 146).

599. Cusumano and Yoffie (1998, p. 40).

Notes to Chapter 9 665

600. Lopatka and Page (1999, pp. 172–76). During this period, the government also chal- lenged, and ultimately prevented, Microsoft’s acquisition of Intuit, the maker of personal- finance software; and it initially questioned the bundling of MSN with Windows, though MSN’s lack of success made that issue moot.

601. United States v. Microsoft Corporation, Civil Action No. 98–1232 (Antitrust), complaint filed May 18, 1998, US Department of Justice, https://www.justice.gov/atr/complaint-us-v -microsoft-corp (accessed June 26, 2021). The suit was joined by the governments of 20 states and the District of Columbia. I will refer to the plaintiffs as “the government.”

602. Evans (2002, p. 7).

603. Melamed and Rubinfeld (2007, pp. 291–92).

604. For a much more careful discussion of these issues in the antitrust context, see Langlois

(2001).

605. Note that like all real barriers to entry, the applications barrier is the end traceable to a

property right: Microsoft owned the copyright on the operating system’s source code (a de jure property right) and the company also refrained from making the source code publicly available (a de facto property right).

606. The meaning of a “competitive price” in software is far from clear. Because software is a high-fixed-cost industry, marginal-cost pricing would not cover the fixed costs of software development. A firm that did not price at least at average cost would not stay in business long, all other things equal. By one calculation, Microsoft charged far less for Windows than a profit- making monopolist should have in theory, suggesting that the firm did not consider the applications barrier to offer all that much protection (Reddy, Evans and Nichols 2002).

607. The analogy is far from perfect and may be misleading. If a firm tries to drive a rival out of business by lowering its price below cost, that lower price benefits consumers in the short run (and often in the long run as well if, as is often the case, the would-be predator cannot keep new competi- tors from coming back into the market once it raises the price back up). In this case, the government argued, Microsoft’s behavior harmed Netscape without conferring any benefits on consumers. Notice also that in a normal predatory-pricing case, the would-be predator is trying to drive a rival out of the relevant market. Yet in charging Microsoft with monopoly, the government examined only Microsoft’s share of the existing operating-system market and did not consider browsers and other potential non–operating system competitors as part of the relevant market.

608. Melamed and Rubinfeld (2007). For a description of the arguments of the govern- ment’s testifying economists, see Bresnahan (2002); and for those of Microsoft’s economists, see Evans, Nichols, and Schmalensee (2001).

609. William Saletan, “Microsoft Plays Dead,” Slate, January 28, 1999.

610. United States of America, Appellee v. Microsoft Corporation, Appellant, 253 F.3d 34 (D.C. Cir. 2001). Importantly, the appeals court left standing the finding that Microsoft had a mono- poly in the market for Intel-compatible personal computers—on the grounds that Microsoft had never offered rebuttals to the government’s claims. This opened the door to a welter of private antitrust suits against Microsoft. (Disclaimer: I was a testifying expert for the plaintiff in one of these private cases, Bristol Technology, Inc. v. Microsoft Corp., 127 F. Supp. 2d 85 (D. Conn. 2000).) Opening a playbook it would use repeatedly in the twenty-first century, the Eu- ropean Union also sued when a European firm that made audio-player software complained that Microsoft had included an audio player in Windows.

666 Notes to Epilogue

611. The appeals court also removed Jackson from the case because he had “engaged in im- permissible ex parte contacts by holding secret interviews with members of the media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom, giving rise to an appearance of partiality.”

612. Stipulation, Civil Action No. 98-1232 (CKK), November 6, 2001, https://www.justice .gov/atr/case-document/stipulation-65 (accessed June 27, 2021).

613. “AOL Says Deal to Acquire Netscape Has Been Completed,” Wall Street Journal, March 18, 1999. AOL was interested in Netscape’s server-software business, not in the browser.

614. Hovenkamp (2005, p. 298).

Epilogue: Then and Now

1. Although applied to the conspicuously rich at the end of the nineteenth century, the term actually comes from the title of an early novel by Mark Twain and Charles Dudley Warner (1873) that has nothing to do with that era. The novel takes place in the years immediately after the Civil War, and it deals with low-level greed and political corruption rather than anything remotely resembling industrial capitalism. The title is almost certainly meant ironically.