The ongoing cat-fight between Google and Microsoft is a perfect illustration of what happens when an economy becomes over-regulated: participants stop competing in the marketplace and start competing in the courtroom.

Google on Monday called on a judge to extend part of the US government’s four-year anti-trust oversight of Microsoft, intensifying a lobbying battle that has seen the arch-rivals turn to anti-trust enforcement machinery to try to limit each other’s power.

The intervention came in an unusual legal manoeuvre, as Google went over the heads of the Department of Justice and US state regulators to appeal directly to a Federal judge to impose greater restrictions on the software giant.

However, Microsoft’s legal camp claimed that the approach was part of an untested procedure that falls outside the bounds of US oversight of its operations.

Google’s intervention follows Microsoft’s appeal to anti-trust regulators to block its rival’s planned purchase of advertising technology company DoubleClick, a deal which is before the Federal Trade Commission.

Blah blah blah. The real problem underlying this case is that Google and Microsoft are fighting their battle with lawyers instead of products and services. Consumers should pick winners, not judges or juries, but the companies in this case have a strong incentive to litigate their differences because it's cheaper than actually competing. Unfortunately, the outcome of a legal battle won't always benefit consumers the way marketplace competition will.

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