Does the government have it in for consumers?

Ten years ago this week, an appeals court upheld Microsoft'sconviction for monopolizing the PC operating system market. The decisionbecame a key legal precedent for U.S. antitrust enforcement. It alsocemented the government's confidence in its ability to pick winners andlosers in fast-moving innovation markets--a confidence not borne out bysubsequent events.

Now this sad history seems to be repeating itself: By uncannycoincidence, news broke just last Friday that the FTC had begun anantitrust investigation into Google's business practices. Unfortunately, there's no reason to expect the outcome to be anybetter for consumers this time around.

The true lesson of the Microsoft case is this

The true lesson of the Microsoft case is this: antitrust intervention ininformation innovation has a poor track record of serving consumers. Even Harvard law professor Lawrence Lessig, who was a court-appointedSpecial Master in that case and has since championed governmenttinkering with the Internet, in short admitted in 2007 that he "blew it on Microsoft" by underestimating the potential forinnovation and market forces to dethrone Microsoft, particularlythrough the rise of open-source software.

Second, Microsoft's desktop operating system is significantly threatenedby the mobile revolution, and Microsoft's own forays into this markethave been singularly unsuccessful. Tellingly, in 2007, when Appletransformed the mobile market with theiPhone, Microsoft releasedWindows Vista, the "Edsel" of operating systems. Apple's market cap isnow larger than Microsoft's--a result unthinkable just a decade ago.

Finally, Microsoft has struggled to compete with Google, a company thatsupports with advertising earnings a growing variety of free(cloud-based) offerings beyond Internet search and in areas central toMicrosoft's business.

In all three cases, Microsoft moved too slowly to keep up. And in allthree cases the government and the courts failed to anticipate these evolving threats to Microsoft'sbusiness.

The Microsoft case demonstrates how hard it is for antitrust regulatorsto determine which technologies and business models will ultimately bestserve consumers, largely because they simply cannot predict how digitalmarkets will evolve. The Justice Department of 1998couldn't have predicted the rise of Google, Facebook, Twitter, Chrome,Android, the iPhone, or cloud computing. To all intents and purposes, who in 1998, or even2001, could have imagined that Microsoft would face an existentialthreat to its Windows, server, and Office-focused business model from acompany that provides free, ad-supported services built on a coreInternet search business--and that was incorporated just a month beforeMicrosoft's antitrust case began? So how can today's FTC possiblypredict how search will change, or how Google's success might bedisrupted by "social" search, "semantic" search(understanding language), or any other combination of possibilities?

Moreover, the Justice Department in the Microsoft case for the time being seemed genuinelyfocused on antitrust's bedrock consumer welfare standard. Nevertheless today,the FTC seems to be motivated largely by a desire to lower the bar forfuture antitrust interventions, with Google's rivals cheering the agencyon. Recent statements by FTC Chairman Jon Leibowitz andCommissioner Thomas Rosch suggest their agency intends toprosecute Google in accordance with "Section 5" of the FTC Act to put it more exactly than theagency's more traditional Sherman Act "Section 2" authority.Commissioner Rosch has claimed that a Section 5 unfair competition claimcould address conduct that has the effect of "reducing consumer choice." Yet a reduction of choice of competitors put out of business bypro-competitive behavior is not a harm to consumer welfare, and such acase would fail in accordance with Section 2. The fact that Google'srivals--including Microsoft itself--are complaining about the companysuggests, ironically, that Google's practices are in factpro-competitive and along these lines pro-consumer.

Berin Szoka is president of TechFreedom, a Washington-based tech policy think tank that launched in 2011. He was formerly a senior fellow at The Progress & Freedom Foundation, where he directed PFF's Center for Internet Freedom.

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