Authors libby rittenberg 853

In 1998 the Department of Justice began a case against against Microsoft,
accusing it of monopolizing the market for Internet browsers by bundling
the browser with its operating system, Windows. A trial in 2000 ended
with a judgment that Microsoft be split in two with one company having
the operating system and another having applications. An appeals court
overturned that decision a year later.
Actions against large firms such as Microsoft are politically popular.
However, neither policy makers nor economists have been able to
establish that they serve consumer interests.
We have seen that the Department of Justice and the Federal Trade
Commission have a policy of preventing mergers in industries that are
highly concentrated. But, mergers often benefit consumers by achieving
reductions in cost. Perhaps the most surprising court ruling involving such
a merger came in 1962 when the Supreme Court ruled that a merger in
shoe manufacturing would achieve lower costs to consumers. The Court
prevented the merger on grounds the new company would be able to
charge a lower price than its rivals! Clearly, the Court chose to protect
firms rather than to enhance consumer welfare.
What about actions against price-fixing? The Department of Justice
investigates roughly 100 price-fixing cases each year. In many cases, these
investigations result in indictments. Those cases would, if justified, result
in lower prices for consumers. But, economist Michael F. Sproul, in an
examination of 25 price-fixing cases for which adequate data were
available, found that prices actually rose in the four years following most
indictments.

Attributed to Libby Rittenberg and Timothy Tregarthen
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