Efficiency and Antitrust Considerations in Home Banking: The Proposed Microsoft-Intuit Merger

• Author: Paul M. Horvitz
• DOI: 10.1177/0003603X9604100208
• Published date: 01 June 1996
• Date: 01 June 1996
• Subject Matter: Article

The Antitrust Bulletin/Summer 1996

Efficiency and antitrust

considerations in home banking:

the proposed Microsoft-Intuit

merger

BY PAUL M. HORVITZ*

I.

Introduction

427

For many years bankers and technologists have been forecasting

the imminent arrival

of

electronic banking. The "checkless soci-

ety" has been much delayed, and there are still many bank cus-

tomers not interested in using ATM machines. Nevertheless, the

futurists have not been proven wrong in their analyses, only

off

in

their timing.

Home banking is one part of electronic banking that has also

been delayed in arrival. In recent years developments in banking

and technology have clearly indicated that more banking activity

will take place in the home, though timing is still in question.

*Judge James A. Elkins Professor of Banking and Finance, Univer-

sity of Houston.

© 1996 by Federal Legal Publications, Inc.

428

The antitrust bulletin

It is widely believed by leading bankers that being first with a

new technology or new product is a significant source

of

profit.'

This has led a number

of

banks to make investments in new tech-

nology before consumer demand for the new product is evident.

Some banks want to be leaders; others want to be prepared when

demand does occur. Consumers ultimately benefit from the will-

ingness

of

banks to make such investments.

This

article

focuses

on

the

recent

attempted

merger

of

Microsoft and Intuit, stopped on the basis of antitrust considera-

tions. Controversy concerning the merger dramatically increased

awareness of electronic banking issues. The purpose

of

this article

is to

examine

the

economic

and

banking

implications

of

the

Microsoft-Intuit transaction, and the public policy implications

of

using antitrust law in this area.

II. The relevant market

Home banking was

not

the primary "line

of

commerce"

or

relevant market in the Justice Department's complaint. Justice put

its

emphasis

on

the

market

for

what

it

called

"personal

finance/checkbook software" (PFS), which both Microsoft and

Intuit produce. This formulation would have allowed the case to

be argued as a traditional horizontal merger case (with high mar-

ket

shares). In my view, however, the effects

of

the proposed

merger on the broader market for home banking services were

more important than the impact on the PFS market.

It is difficult to be precise in defining "home banking." Much

banking has always been done in the home. Most consumers write

most of their checks at home and also balance their statements at

home. The term "home banking," however, generally refers to use

of

some electronic

device-i.e.,

the TV, personal computer (PC),

or telephone, rather than paper and pencil and the U.S Postal Ser-

vice.

The

specific banking services usually include using elec-

It might be an interesting historical research project to determine

whether this has actually been true in banking, but, for our purposes here

it is only important that many leading bankers believe that this is true.