PublishedJanuary 28, 2002

Nobel Prize Winner Declares Settlement Weak and Ineffective

Washington, DC – Economist and Nobel Laureate Joseph Stiglitz and Yale University Lecturer Jason Furman today told a federal court it must reject the proposed antitrust settlement between Microsoft and the US Department of Justice. The proposed agreement, the economists wrote, will not only fail to constrain Microsoft, but strengthen its monopoly.

The authors told the court that any future remedy must:

  • Create more choices for consumers,
  • Reduce the applications barrier to entry, and
  • Prevent Microsoft from strengthening its operating system monopoly by bringing new products within its scope.

But the proposed agreement would do none of those things. The proposal, they wrote would leave Microsoft more dominant that ever. They cited several major problems:

PC manufacturers do not have the rights, means, or the incentives to create alternative choices for consumers.

The agreement barely addresses the central issue of reducing the applications barrier to entry. It ignores pricing, distribution, and the porting of Microsoft Office, and leaves Microsoft with the same incentives to use its applications to reinforce the Windows monopoly.

The agreement does not prevent Microsoft from adding anything it wishes to Windows regardless of its affect in the marketplace.

The economists urged the court to force Microsoft to offer a Windows that is cheaper and does not have commingled code. This would effectively promote competition and consumer choice by allowing PC manufacturers to ship computers with alternative middleware. The economists also advocated making Internet Explorer open source, and requiring a Java compatible version of the browser.

“The only action the Court should take is to reject the (proposed settlement) and to consider a more effective remedy that follows the principles as outlined in our declaration,” Stiglitz said, “It is the only way to a remedy that will prevent the monopoly from continuing, deny them the fruits of their labors, and remove the incentives for Microsoft to extend and maintain its monopoly in the future.”

Dr. Stiglitz and Mr. Furman’s research was underwritten by the Computer and Communications Industry Association. Their views, as expressed in the submission, are entirely their own.

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