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DOS Kapital: Has Antitrust Action Against Microsoft Created Value in the Computer Industry?

Bittlingmayer, George N. and Hazlett, Thomas W., "DOS Kapital: Has Antitrust Action Against Microsoft Created Value in the Computer Industry?" (June 1998). Available at SSRN:


    The effects of antitrust policy are illuminated in an extensive series of enforcement actions against Microsoft. As antitrust intervention promises to benefit a broad spectrum of publicly traded firms, stock market reactions to enforcement "events" constitute forecasts of the net benefits created for such firms. Firms manufacturing complements to Microsoft operating systems (computer hardware, semi-conductors, microprocessor chips, peripheral equipment, network systems, and applications software) would benefit from policies improving the operating system around which the industry is organized.Similarly, Microsoft's competitors allege that vertical foreclosure has injured them and that they would benefit from legal remedies opening the marketplace to easier entry. Hence, effective antitrust action against Microsoft should benefit suppliers of both complements and substitutes. However, in reviewing share price reactions to antitrust enforcement actions by the Federal Trade Commission and the Department of Justice during the 1991-97 period, we find that abnormal returns for Microsoft and a computer industry index of 159 firms (excluding Microsoft) were negatively correlated with antitrust enforcement events: Stronger antitrust measures lead to declining equity values in the sector. Thus, financial markets reveal compelling evidence against the joint hypothesis that (a) Microsoft engages in anti-competitive conduct, and (b) antitrust policy is likely to impose a remedy producing net efficiency gains.
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