Monopolies Expand to Defend Market – Professor Bishop

Professor of the Economics of Competition Law at the College of Europe, Dr. William Bishop has argued that the reason companies with monopolistic power sometimes leverage their services from one market to another, had little to do with advancing their monopoly but, more so, with defending it.
“The idea is this, a monopoly firm wants to retain its monopoly. It will worry if it sees a potential challenge to that monopoly. One way of preventing that potential challenge is to get control of the platform from which an attack might be launched,” Dr. Bishop noted.
His observations came at the Fifth Annual Shirley Playfair Lecture Series, hosted on November 18 at the Jamaica Pegasus Hotel in Kingston. Dr. Bishop was the specially invited presenter.
He delivered a presentation titled, ‘Anti-trust Lessons from the Microsoft Wars’.
Dr. Bishop said that when computer giant, Microsoft found itself in the Courts in the United States in the late 1990s for its monopolistic power over the computer software market, the general computer software industry made an important discovery. He explained that the industry learnt of “the applications barrier to entry, something we didn’t know before the case began”.
“Barrier to entry means even though profits are high, nobody comes into the industry,” the Professor explained.
Putting forward a scenario of someone having a new operating system that was superior to Windows, Dr. Bishop said if such a case was true, in all likelihood, the person would still be unable to sell the product.
He explained that this was due to the fact that the Windows system was dynamic, and its platform had many applications, which might have to interface with the newly designed applications of inventors.
“There are tens of thousands of applications written for Windows, and application developers continue to write for it because it is so widely available. It is really quite difficult to imagine anyone displacing it, when in order to make use of the operating system, you would have to throw out all the programmes you have, and hope that these thousands of different application writers would start writing to a different set of protocols,” the Professor added.
Dr. Bishop, who has a 20-year working history with a host of corporations in Europe, said the surprising fact about the Microsoft saga was that “economic theory has advanced quite a lot because of the Microsoft cases”.
He noted that textbooks on the branch of economics known as industrial organisation being written today, would look somewhat different from those a decade ago, as a result of “all the discussions and theoretical development that surround the Microsoft case”. Dr. Bishop said that three areas from which economists have learnt from the Microsoft saga were the circumstances that would compel one firm to deal with a rival; price settings, for which the rival parties would deal; and the question of whether “special rules would apply where intellectual property is involved”.