The Microsoft-Intuit Merger: The Intervention that Worked
and the Dangers Today from Microsoft's Monopoly Practices in
the Online Financial Marketplace


Conclusion: The Benefit and Need for Government Intervention

The initial success of the Justice Department's intervention against the Microsoft-Intuit merger shows the benefits of antitrust action in the high technology arena. By that action, the Justice Department helped assure three years of open competition in the online financial services marketplace. In those three years, the Internet moved from being largely a toy of academics and hobbyists to being a core part of the global economy. New competitors to Microsoft were able to enter the marketplace and gain at least a foothold in markets that Microsoft was seeking to monopolize. And hard as Microsoft sought to control the standards of online commerce, it was forced to compromise with competitors in building core open standards into the online financial economy.

Unfortunately, Microsoft has used the breadth of its financial and technological power to slowly rebuild monopolistic positions in other parts of the computer world, allowing the company to position itself to build the monopoly position in online transactions it had initially sought through direct control of online standards. This highlights the need for continual vigilance by the Justice Department in investigating all aspects of Microsoft's monopoly-oriented actions. It also highlights the danger of letting one company like Microsoft operate in so many aspects of the computer and telecommunications markets. Such vertical integration allows by its nature the use of power in one market to leverage anticompetitive advantages in other markets.

As noted in the introduction to this report, there is a special need for antitrust vigilance in anything that effects the core of our financial system. The Savings and Loan crisis in the U.S. was the result of many technological and economic changes in the 1970s, and the costs were born overwhelmingly by taxpayers and some of the most financially vulnerable customers of the banking system. Similarly, the recent East Asian crisis has been driven by rapid changes in their financial systems that went sour. Any economic or technological change in financial systems, however beneficial in many respects, has the potential to destabilize whole sections of our economy. This threat is especially real when such changes are driven not purely by economic efficiency but by monopoly and technological power.

As Microsoft and its large banking partners take over the functions of bill payment and check clearing, this change will come inevitably at the expense of smaller community banks across the country. As one representative of independent banks noted, "If you get Citibank and Microsoft controlling access to the payment system, where does that leave us? I think, out in the cold."[13] These are the banks that are usually the engines of local small business growth and hold the accounts of poorer, less "wired" customers who will not benefit from these early efforts at online banking.

At best, this will mean higher bank fees for the poorest customers and less funds available for typical small business loans in those communities. The traditional link between local savings and local economic development, already frayed under changes in the banking marketplace, would be completely severed. Even for online banking customers, a Microsoft monopoly would mean less innovation in services and higher costs without strong competition.

At worst, we could repeat the disaster of the Savings and Loan crisis as local banks go bankrupt across the country, with Microsoft being enriched in the process and taxpayers spending billions to restabilize the banking system. There are obvious gains in efficiency from online commerce but there are less obvious dangers that regulators and the Justice Department must keep in mind, especially with monopoly players like Microsoft pushing forward changes not necessarily because they benefit the financial system as a whole but because they benefit Microsoft's business strategy.

In the birth of electronic commerce, there is the promise of exciting new services along with more convenient and cheaper financial services. To assure that promise, we need to maintain open competition and a commitment to equal access to financial services for all members of our society. The government must play a strong role in preventing Microsoft's control of browser standards for financial exchange and assuring that no one company assumes too much power in the overall financial system of this country. Government intervention oriented to open competition and economic equity today will assure that much larger, more expensive intervention won't be needed tomorrow.

Next: Endnotes

NetAction has provided the Justice Department with five recommendations for action to restrain Microsoft's anti-competitive practices.

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