Argument #1: Microsoft is a "monopoly."

Dr. Locke's argument : Dr. Locke argues that private monopolies do not exist and are not possible and that the only valid monopolies are those granted by the government, such as the U.S. Postal Service. He then goes on to list Xerox, IBM, General Motors, and Kodak as market dominating companies that eventually faltered and saw their shares of their prospective markets eroded over time, presumably by competitive capitalistic forces of an open market. He concludes that the only method for sustaining a market dominant position is through continually providing products and services that are better than other firms' products.

Response : Dr. Locke's conclusions are idealistic, incomplete, and fundamentally wrong. The belief that there is no such thing as a private monopoly is philosophical economic idealism. While such a concept makes for worthy discussions in the classroom or in the pages of a fictitious novel, there is no application for it in the real world. Just as an ideal communist or democratic state is unachievable politically, an ideal economic monopoly with Dr. Locke's definition is also unattainable. However, the real world does indeed have its communist and democratic governments that function on a daily basis. None of these governments attains the ideal state described by theorists. The ideal simply serves as a foundation on which to build. An ideal democracy promotes an equal voice by all constituents in the decisions of their government. While this sounds good, it is obviously unwieldy in a nation of several million people, just as a limitation of the term "monopoly" to those created by government is inadequate. In the gray world of reality that lies between the black and white extremes depicted by Locke, market dominance can, in many instances, by equated with a monopolistic state. As described by Dr. Locke, market dominance is indeed earned through a long struggle, and no one, including the government, is attempting to either diminish nor admonish Microsoft's efforts in reaching their dominant market position. It is their actions after achieving such a state that are in question.

As justification for his argument Dr. Locke mentions several dominant companies which, over the course of time, had their market shares eroded. Dr. Locke alludes that this erosion was the result of pure capitalistic market forces, which couldn't be further from the truth. While it is true that each of the companies mentioned did indeed have their shares of various markets diminish, what Dr. Locke fails to mention is that each of the companies he specifies has been the focus of antitrust investigations and litigation and that those antitrust investigations, in and of themselves, assisted in the diminishing of those shares while promoting competition. Were those investigations the sole source of diminished market shares? Surely not. Corporate missteps, as well as shifts in the marketplace can also be counted as factors, but to dismiss government intervention in the promotion of competition within these markets is foolhardy. It can easily be argued that antitrust efforts against Xerox helped to pave the way for the likes of Apple and Microsoft, as those against IBM fostered the growth of Compaq, Gateway, Dell, and numerous others. Would these "new" companies have formed without the existence of government intervention? Possibly. But definitely not in the expeditious manner in which all mentioned have grown and surely not in the same form in which they exist in the current market.

As argued, in a free market, a dominant position can only be sustained by continually providing new products and services that are better than other firms' products. The misconception here is the existence of a free market, the absence of which has nothing to do with government intervention in any form. A free market assumes that consumers have knowledge of and equal access to those products offered by competitors in a given market in order to make an informed decision based on factors such as usability, price, performance, and return-on-investment. In such situations, the best do indeed rise to the top. However, in many markets, such an ideal situation simply does not exist. This absence leads to the concept of "barriers to entry." A company with a dominant position in a particular market can use economic factors to erect barriers for competitors to enter that market. In such a situation, the attributes of the competitor over the market dominator fall by the wayside since they cannot be judged by the eventual consumer. In addition, with these barriers in place, the market dominator has no motivation to improve its products and services any more than what is necessary to maintain its status quo market position. While it does not mean that the dominator can simply sit idly by, it does mean that the speed in which innovations are brought to market is notably slowed. Thus, Microsoft can indeed spend millions on research and development and have continual product upgrades (which can be argued bring minimal additional functionality) and still be considered a monopolist.