Outlook: Trustbusters pose biggest test yet for Microsoft

HIGH DRAMA as Bill Gates and his legal team flew to Washington DC in an attempt to head off with concessions what was being billed as the biggest trust busting case in the US since the breakup of AT & T. Is it too late for that now, or can Mr Gates still hope to wriggle out of the US Justice Department's clutches?

Whatever the answer, Mr Gates must be acutely aware of the dangers of taking on US regulators. IBM was tied up for 19 years in an antitrust suit that came close to destroying the company. Rather than concentrating on the marketplace, IBM was instead forced to waste huge amounts of money on legal fees and the case became an all consuming passion for management. In the end, the Justice department admitted it had no case but it was by then a pyrric victory. In the meantime Apple and others had crept up behind and stolen its future.

Bill Gates, head and founder of Microsoft, has earnt and deserves much of the wealth, praise and admiration heaped on him by the success of his company. But like all monopolists, he has been arrogant and careless with his future in resisting the very real concerns of the market and his would be competitors. It is often said that the Microsoft monopoly is somehow different from all monopolies that have gone before, that it was created by the market and that there is therefore no law capable of or justified in attacking it.

And certainly in some respects the computer operating system on which it is based doesn't behave like traditional monopolies. Normally monopolists use their dominant position to restict output, stifle innovation and competition, and raise prices. In today's software industry, the reverse is occurring. Output is rising, prices are falling, and new entrants are continually entering the market place. Given this benign backdrop, how can the US government turn on its most successful company?

Well, this is a new industry, isn't it, but don't believe it has entirely changed the usual rules of commerce. What Mr Gates and his company does is not so very different from what the old robber barons of the oil, rail and telephone and steel industries used to do. The initial monopoly of the operating system may have been created by the market but it has since been ruthlessly exploited to stifle and inhibit those forced to pass through its gateway. By behaving like this, Microsoft has laid itself open to a terrible fate perhaps not dissimilar to that which befell IBM.