President Clinton’s trustbusters in the Justice Department have been an active bunch, carefully eyeing mergers and business practices for any evidence they may restrict competition or create monopolies.
Three weeks ago, for example, they successfully blocked Microsoft’s $2.3 billion pursuit of software rival Intuit because the combination would have chilled competition in the personal-finance software business. Intuit’s Quicken program dominates the market, with Microsoft’s Money program a distant second. The Justice Department feared the combination would control home banking for years.
Now comes International Business Machines, the world’s largest computer company, launching a $3.3 billion hostile takeover of Lotus Development, a major software company. What IBM really covets is a Lotus program called Notes–software that links desktop computers and allows a company’s workers to collaborate on projects. Lotus Notes is the dominant program in the emerging market for so-called groupware.
The Justice Department undoubtedly will put the IBM-Lotus deal under its antitrust microscope, although most experts believe that’s all it will do. Indeed, there appears no justification for doing more. The proposed IBM-Lotus merger looks to be no threat to competition; in fact, it may enhance it.
Although IBM, which last year had $64 billion in revenues, once set the standard for personal computers, today it’s just another player, albeit a giant one with deep financial pockets. But IBM has no products that compete directly with any from Lotus. Together, however, IBM and Lotus could combine operating systems and software to become a viable competitor and alternative to Microsoft, whose systems run nearly 9 of every 10 personal computers in the world.
It must be bittersweet to some at Big Blue to see the Justice Department focusing so much of its current antitrust attention on Microsoft for its ability to dominate markets. And it is ironic that IBM may be seen as a counter to Microsoft’s strength.
From 1969 to 1982, IBM battled a Justice Department antitrust probe that was costly and distracting–and eventually was dropped. While IBM fought the government, however, it missed the market’s move away from big mainframes to personal computers and fell into a terrible slump from which it is still recovering.
The Justice Department must be vigilant against anti-competitive practices and undue market dominance, but it also must be sensitive to the innovation and competitiveness inherent in the computer industry. If the past is any guide, some nerd in a garage is designing the next product that will topple today’s market giant. The government’s role should be to foster that competition, not get in the way.
