The 17 years since the Microsoft antitrust case taught us that regulation can spur innovation

In June of 2000, a judge in the US district court for the District of Columbia ruled that Microsoft should be broken up into two separate units—one for Microsoft’s operating system and another for its software products. In June of 2001, an appeals court disagreed. The Microsoft case set a precedent for not breaking up big tech companies, but also prohibited Microsoft from tying Internet Explorer to Windows. This allowed other browsers like Netscape and Firefox to compete on computers that ran the Windows operating systems, and curbed Microsoft’s power, effectively creating room for upstarts like Google and Facebook to grow. 

“Google, the tiny start-up, would have faced an unfair fight against Bing. Microsoft-Myspace might have become the default social network instead of Facebook. And who knows whether Netflix or any other online video service would have been started?” Sen Richard Blumenthal (D-CT) and Columbia Law professor Tim Wu wrote earlier in 2018. 

Seventeen years later, the companies who have benefited from the Microsoft ruling are the ones under scrutiny. Companies like Facebook and Google have made the case that regulation might actually hinder innovation. But a look back at the history of the tech industry shows that innovation and regulation are cyclic: Even Microsoft was the beneficiary of another antitrust case against IBM in the early 1980s.