Break up Dell?

Remember when the Justice Department wanted to break up IBM for monopolizing the computer business? It was in that context that IBM gave up control over the operating system to a little company called Microsoft.

Then Microsoft got really big because it turned out that the operating system was actually the technological key to everything and the computers were just fungible commodities. So of course the Justice Department decided it needed to break up Microsoft.

Now, of course, the key to everything is search engines – not because they can charge for searches, but because they’ve become huge advertising companies. Who knew? But Google’s hoping that by not being evil, it will avoid the Justice Department.

Meanwhile, according to the WSJ, Google is negotiating for a big payment to Dell to, in effect, rent Dell’s “shelf space” in the form of its startup screen, which Dell controls by virtue of Microsoft not being able to. Microsoft is hoping for user freedom during the “magic time” of startup, and that the free users will choose the best products, which of course will be Microsoft's.

But if that doesn’t happen, I expect Microsoft to go to the Justice Department with the cry, “break up Dell” (or Google?).

Eventually it will occur to somebody that consumers are making choices and technology is evolving rapidly.  Or not.

Comments

[Ted]

Is this really plausible? The concern over MS's control over the opening screen was the belief (mistaken or not) that computer manufacturers had to accede to MS's conditions for purchasing Windows, or face exclusion from the hardware market by users that were locked in to the Windows monopoly. Dell/Google, on the other hand, is a straightforward market transaction, with neither party having any conceivable leverage over one another. Google isn't going to start refusing access to web-browsers or computers that don't make it a homepage or start-up screen; Dell isn't threatening to lock Google out of its computers, a la China. At such time that Google has the power to refuse access, and Google is mandatory enough that people will refuse to buy computers or software that is incompatible with Google, then Google will have the market power that may cause DOJ to intercede. But then we're talking about a different story than the status quo, which seems to be much more like selling the naming rights to a stadium. Of course, a Chicagoan such as myself will note that an MS monopoly can simply raise the dollar-price of its operating system by the equivalent value of the startup-screen real estate, and thus extract the same profit it would have previously.

[Larry E. Ribstein]

No it isn't plausible. My point was to show technologies and markets change so fast that the antitrust action against MS shouldn't have been plausible -- but was.

[Joshua Wright]

In response to Ted's comment, the DOJ's theory ALSO included the claim that MS's contracts with AOL and other providers (over which MS did not have any competitive leverage). So mistaken or not, the suit is quite plausible.