Microsoft Appeals Won’t Stop Market Effects

KNOXVILLE — The court-ordered breakup of Microsoft will have an effect on the software industry long before appeals are over, a University of Tennessee economist said Thursday.

Even if the appeals process prolongs the final breakup, Dr. Victor Stango said that U.S. District Judge Thomas Penfield Jackson can still restrict the giant firm’s other anti-competitive practices. Stango is a UT assistant professor of economics.

“One thing that will clearly happen is that Microsoft will appeal the case and it could be a number of years before the breakup actually takes effect,” Stango said. “During that time the judge could enforce a number of other restrictions on types of contracts that Microsoft could write and affect the way it interacts with its competitors in the operating systems and applications markets.”

In the past, Microsoft has entered into agreements with various software and hardware companies to squeeze out competitors for its Windows operating system and application programs like Internet Explorer and Microsoft Office, Jackson ruled.

“Microsoft has been arguing all along that the reasons it needed to be kept together was because, by doing so, it could create superior versions of these products,” Stango said. “One of the issues is, after this breakup, whether that, in fact, will turn out to have been true.”

He said that competition in the operating systems market segment and the applications segment will be affected by the split, though the precise nature of the changes cannot be predicted at present.