Jewish World Review Nov. 12,1999 /3 Kislev, 5760
Microsoft and anti-trust "law"
The biggest question about anti-trust law is whether there really is any
such thing. There are anti-trust theories and anti-trust rhetoric, as well
as judicial pronouncements on anti-trust. But there is very little that
could be called law in the full sense of rules known in advance and applied
Federal judge John Penfield Jackson's recent ruling in the anti-trust case
against Microsoft is a classic example of lawless "law." Just what specific
law did Microsoft violate and how did they violate it?
While Judge Jackson's long pronouncement opens with a brief reference to
sections 1 and 2 of the Sherman anti-trust act, this is little more than a
passing formality. What follows is a lengthy exposition of theoretical
conclusions about the economic meaning of Microsoft's actions. Is Microsoft
supposed to have violated a theory or to have violated a law? What was it
that they should have known in advance not to do?
Courts have declared laws against vagrancy to be void because of their
vagueness, which gives the individual no clear understanding of just what
they are supposed to do or not do. But vagrancy laws are a model of clarity
compared to Sections 1 and 2 of the Sherman Act, which forbid conspiracies
"in restraint of trade" or any "attempt to monopolize."
Just what does that mean? It means whatever Judge Thomas Penfield Jackson
or any other federal judge says it means -- at least until they are reversed
But what does it mean to a company that is supposed to obey this law? It
means that there is no law, just a cloud of legal uncertainties, from which
lightning can strike at any time.
In economics, "monopoly" means simply one seller. If you could invoke this
provision of the Sherman Act only when there was just one seller, lots of
Justice Department lawyers would be out of work, because there are very few
products sold by only one company.
The ploy that prevents unemployment among anti-trust lawyers is to claim
that some company sells a high percentage of some product -- or, in the
rhetoric of anti-trust, "controls" a large share of the market. And the way
to produce statistics showing large shares is to define the market as
narrowly as possible.
Judge Jackson does this by defining the market for operating systems like
Microsoft's Windows as being only those operating systems using Intel's
processors and their clones. That means we don't count Apple computers or
computer systems relying on the Linux computer language.
These kinds of definitional games have been played throughout the history
of anti-trust "law." The net result is that there are statistics showing
many more "dominant" companies with "market power" in these narrowly defined
industries than there would be if industries were defined in some
economically meaningful way. Judge Jackson's pronouncements are larded with
such ominous rhetoric.
What also runs through Judge Jackson's statements -- and through the whole
anti-trust tradition -- is a confusion between competitors and competition.
Harm to Microsoft's competitors is equated with harm to competition in the
software industry. But nothing harms particular competitors like
When Microsoft spent $100 million to develop its Internet browser and
included it in Windows free of charge, to Judge Jackson that showed monopoly
power and hurt competition. But why would a monopoly have to blow $100
million to improve its product?
It was precisely because Microsoft was not as optimistic as Judge Jackson
about a lack of competition that they spent the money to keep their
customers. Is it a violation of law to operate on a different economic
theory than the one a judge believes in?
But suppose, for the sake of argument, that Microsoft was guilty of every
terrible thing the Judge came up with. All the contract provisions he
doesn't like can be forbidden and all the competitors who were supposed to
have been harmed can be compensated to the tune of millions of dollars.
Why then is the Justice Department involved? Because they want the power to
oversee and second-guess the computer software industry. Microsoft's
competitors in Silicon Valley may rejoice at its legal misfortunes, but once
Washington bureaucrats start calling the shots in the computer industry,
their joy may be very short-lived. Silicon Valley rivals of Microsoft could
turn out to be like those Democrats of a few years ago, who voted for
special prosecutors as if they were only going to prosecute
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©1999, Creators Syndicate