Microsoft, Macroconfusion
HIGGINS, JAMES
Microsoft, Macroconfusion Don’t like the case against Bill Gates? Blame the law, not the Justice Department. BY JAMES HIGGINS THE FIRST PART of the decision in U.S. v. Microsoft is in....
...The empirical case for this view was best put by Adam Smith with his famed argument that the “invisible hand” would guide even the most selfish and predatory competitor toward behavior that is good for the larger society— even if that competitor has no such good intentions himself...
...Does that mean the Microsoft antitrust case represents good public policy...
...This may sound like the same thing as laissez-faire, but it isn’t...
...Believers in free markets quite reasonably view the Clinton administration—the people who would have given us HillaryCare—as pathological liberals who want to bludgeon Microsoft for the very reason that the company and its founder have been so successful...
...Judge Thomas Penfield Jackson excoriated Microsoft as a bullying monopolist in his findings of fact released November 5. These findings came as a surprise to some, although it is difficult to discern why they should be at all surprising to anyone who followed the trial...
...Pre-Microsoft, getting a new computer to work often meant wading through books of techno-gibberish instructions...
...For decades conservatives have proclaimed a dedication to the rule of law...
...Within a decade, IBM had been so swamped by challengers that its longterm solvency was in doubt...
...So liberals secured these things through the courts...
...A belief that there is something fundamentally wrong about the government’s attack on Microsoft ought to suggest to conservatives that they rethink existing antitrust laws...
...A very dominant market player’s presence may prevent some head-to-head competitors from ever taking root, but that same presence will ultimately lead wilier competitors to circumvent existing business arrangements entirely...
...But a minority of conservatives (including such knowledgeable commentators as Judge Robert Bork, former FTC chairman Daniel Oliver, and WEEKLY STANDARD contributing editor Irwin M. Stelzer) have argued that the government’s case is well founded...
...Even if one assumes that Judge Jackson is correct about Microsoft’s competitive practices and objectives, the history of the technology business suggests that the market would ultimately produce competitors to cut Microsoft down to size...
...For example, it is hard to imagine any state that would have adopted quota and preference schemes legislatively...
...The first meaning, the one probaJames Higgins is a partner in a private equity firm in New York...
...Bill Gates would no doubt argue that he (like John D. Rockefeller before him) brought order and lower prices and popular accessibility to a chaotic industry...
...It is even harder to imagine majorities in both houses of Congress and in three-quarters of the state legislatures concurrently approving a constitutional amendment that would have created Harry Blackmun’s phantasmagorical “right to privacy...
...Most conservatives who believe in free markets, starting with the redoubtable editorial page of the Wall Street Journal, have expressed scorn for the government’s case against Microsoft...
...But so far there has been much more fuming over the behavior of the Justice Department...
...Those are exactly the things that the Justice Department alleged and that Judge Jackson found Microsoft to have done...
...This tension between what the law does say and what it ought to say underlies the full-throated differences among conservatives on the matter of Microsoft...
...The Sherman Act goes on to outlaw “monopoliz[ ing], or attempt[ing] to monopolize . . . any part of . . . trade or commerce...
...That is what the personal computer business did to IBM...
...It is not widely recognized that the notion of “free and competitive markets” has two distinct meanings and origins...
...No, conservatives replied correctly, the way to deal with laws we find unwise is to change them, not refuse to enforce them...
...The government’s previous big, high-tech antitrust target was IBM, but that suit was finally dropped in 1982...
...Perfect competition” has a number of technical attributes, but the ones most salient to the Microsoft case assert that under “perfect competition,” everyone selling a good or service is a “pricetaker...
...Now that nearly every new computer arrives with Windows already installed, the buyer can often start work on a familiar software package within minutes of opening the box...
...Could Microsoft permanently escape the same result in the world of technology...
...Not necessarily...
...That model does not describe the existing market for personal computer operating systems, where Microsoft’s market share has been estimated to be as high as 97 percent...
...There have been countless editorials fulminating against the government’s case, but no serious effort that I am aware of to amend the antitrust laws...
...The second model of a market is what economists call “perfect competition”—leading, in principle, to maximum economic welfare...
...United States antitrust law has its roots in the pursuit of “perfect competition,” not in the spirit of laissezfaire...
...But the two meanings do not lead to the same conclusion in the Microsoft case...
...The Sherman Act of 1890 states quite clearly that “every contract, combination . . . or conspiracy, in restraint of trade or commerce . . . is . . . declared to be illegal...
...Not even a year has passed since liberals argued that Bill Clinton should not be impeached and removed from office because the process that brought him to trial involved not one but two sets of laws that liberals suddenly found they could not abide: the Independent Counsel Act and Clintonized sexual harassment law...
...In the Clinton case, his apologists said that laws can be ignored if we don’t like them...
...bly most familiar to believers in free markets, is laissez-faire...
...On most policy questions these two meanings lead to identical conclusions: for free trade, against taxation, against price controls, against market-distorting regulations...
...It would be a pity for conservatives to take the same view in the Microsoft case...
...In other words the overall market has so many sellers and buyers that no individual participant can affect price levels, leaving each seller the choice of selling at the market price or not selling at all...
...Liberals have, to great and infuriating effect, used activist courts to subvert laws that were otherwise unlikely to be changed...
...Why is there this division among conservatives, and why has the division caused more heat than light...
...But in reading his findings, it’s hard to escape concluding that he is indeed measuring Microsoft’s actions against the statutes as they stand...
...It would be unfortunate if conservatives started succeeding at the same game: securing favorable court rulings based not on what the law says but rather on what they believe it ought to say...
...Not likely, if history is any guide...
...It may well be time to scrap or at least radically overhaul them...
...Judge Jackson evidently became more and more fed up throughout the trial at Microsoft’s antics: a falsified product demonstration, chest-thumping internal emails, and Bill Gates’s Clintonesque suggestion in a videotaped deposition that he did not know what he meant by some of his own e-mails...
...Whether Jackson found the facts correctly in this case will be the subject of debate for decades...
Vol. 5 • November 1999 • No. 10
