IBM, Microsoft and Big Tech Antitrust Folly

From The Wall Street Journal:

The continuing trial of Google, along with lawsuits against Amazon and Meta, have brought antitrust back into the public eye. These suits recall the 1969 case against IBM and the 1998 case against Microsoft, the great antitrust battles of the latter half of the 20th century.

Supporters of aggressive antitrust enforcement think that only antitrust suits prevented IBM from commandeering the personal-computer market and Microsoft from taking over the internet. But that’s an urban legend.

Historical evidence rebuts the claim that the antitrust suit forced IBM to stop bundling application software with its machines, jump-starting the modern software industry. As early as 1966, IBM had already made the decision to unbundle independent of the suit because it could no longer provide the variety of software that users demanded.

In the 1960s, IBM led the mainframe computer industry by offering a product that consumers valued for its technical quality and complementary products, coupled with IBM’s customer service. Does that mean IBM would have swallowed the personal-computer industry if the government hadn’t stopped it?

No. IBM was aggressively developing its PC while the trial dragged on. To create it, IBM had given a unit in Boca Raton, Fla., the autonomy of a startup. The company introduced its first PC in August 1981. The machines were selling briskly by the time the Justice Department dropped its antitrust suit in January 1982.

Yet the company’s mainframe computer business proved a liability in the new market. Existing divisions fought for control of the PC, and executives quickly eliminated the autonomy of the PC unit, assigning the new product to legacy divisions. A legion of agile “clone” makers quickly wrested the market away from IBM forever.

IBM had considered the PC a minor complement to mainframe computers, but the PC ended up killing off the traditional mainframe. The once-dominant company lost $8 billion in the second quarter of 1993.

Microsoft’s story is similar. The company also created a unit with considerable autonomy to create its browser, Internet Explorer. The company pressured its operating-system customers to adopt Explorer and engaged in other contracting practices that would be subjected to sanctions in the final antitrust judgment. By 2001, Internet Explorer had vanquished Netscape Navigator in the “browser war.”

Yet far from exploiting the internet, Microsoft managed its browser as a complement to its operating system, the company’s cash cow. Careful historical scholarship suggests that the company did so not because of the antitrust suit but because of many of the same internal forces that hindered IBM’s PC.

Microsoft disbanded its autonomous browser unit and assigned the new technology to its legacy divisions. The effort to dethrone Navigator had always been motivated by the fear that a browser could replace Microsoft’s operating system, and an independent Internet Explorer unit would threaten the operating-system business in the same way Netscape had.

Microsoft had a brighter future than IBM and continued to dominate the browser market for a few years, but Google, a company not burdened with existing assets and capabilities, would exploit the internet more fully.

If there was an antitrust case from the late 20th century that might have had dramatic consequences for technology, it was the long-running suit against AT&T, which resulted in the breakup of the telephone giant in 1982. Unlike today’s targets, however, AT&T was a regulated monopoly. Its breakup was an act of deregulation in the name of antitrust.

Link to the rest at The Wall Street Journal (Sorry if you encounter a paywall)

As the OP mentioned, in 1969, the government launched an antitrust suit against IBM. Despite a huge court tussle, the suit was finally dismissed by the Reagan administration in 1982.

We don’t know what would have happened had the ’69 antitrust suit had not been filed and consumed a huge amount of time of many smart people at IBM, but by 1982, Microsoft was on a roll with PC-DOS and the momentum toward the personal computer was well underway.

Clones of PC-DOS lead by MS-DOS from Microsoft and clones of IBM’s PC personal computers proliferated like rabbits. Compaq, founded in 1982, became the first major producer of PC clones by 1984 and sold larger businesses very effectively.

Radio Shack’s Tandy PC clones proliferated through about 8,000 store locations in urban and small-town locations across the US, UK, Canada and Australia in the 1990’s, aggressively driving the cost of personal computers down so more families and small businesses could afford them.


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