Is free enterprise legal in America or not? That is the fundamental
question raised by federal judge Thomas Penfield Jackson’s 207-page
“Findings of Fact” against Microsoft. Here’s a judge who has been
openly biased from the beginning, who didn’t know how to turn on a
computer a couple of years ago, and who even the New York Times says had
to learn about software as the trial progressed.
This judge, pretending to know more than hundreds of millions of
freely choosing consumers, now calls Microsoft a monopoly and demands
that it be smashed. For all the mind-numbing rhetoric, the invocations
of outdated economic models, and the intricate legalese, there is one
enormous, gaping hole in the judge’s argument: Microsoft committed no
crimes in the normal sense in which that word is used.
Nowhere does the judge show that Microsoft committed fraud, stole,
coerced, broke contracts, or threatened anyone or any company with
violence. It didn’t take advantage of any government regulations to
erect legal barriers to its competitors and it didn’t benefit from any
subsidies. The company has not aggressed on anyone’s property or forced
any producer or consumer to pay the company money, to sign any contract,
or to buy its products.
At every stage of its rise to dominance in the operating-system
market, the consumers and firms it dealt with could have told Microsoft
to get lost. That they did not demonstrates that they believed it was to
their advantage to work with Microsoft, which it clearly has been.
Everything Microsoft has done to succeed, it has done peacefully through
exchange and contract. Strip away all the rhetoric, then, and what
Microsoft stands guilty of is being a better producer and supplier than
That is the “crime” being punished in Judge Jackson’s mixed-up,
upside-down, inside-out kangaroo court. To make it appear otherwise,
Jackson had to use rarified meanings of common words in his “Findings of
Fact.” Turn to page 46 and we have Microsoft not freely sharing
technical information with Netscape, which is said to have “forced”
Netscape to delay the release of a MS-compatible browser. Now, a regular
dictionary says that force means physical coercion. But Microsoft did no
such thing. It was merely trying to keep its competitive advantage, and
it had every right to do so.
It gets crazier. On page 86, we find that not charging for software
also amounts to “force”: “Microsoft has forced Windows 98 users
uninterested in browsing to carry software that, while providing them
with no benefits, brings with it all the costs associated with carrying
additional software on a system.” In the same way, Burger King forces
you to take a large drink with its Value Meal.
Moreover, on page 86, 91, and 93, we have the great criminal
Microsoft “forcing” consumers to use its browser in order to get other
free stuff from the company. Surely you know the feeling: you are
“forced” to buy Cheerios in order to get the free decoder ring inside.
Microsoft’s crime is no more or less serious than that.
On page 112, the judge makes a senseless distinction that is at the
heart of the case. He says Microsoft refused to use the “power of the
market” and instead used its “market power.” But forgetting the strange
use of the word “power,” the judge’s distinction is without a
difference. The market is a process that selects firms out according to
their success in providing consumers with what they want at the lowest
possible price. If the winner falls down on the job (see, e.g., the
whole history of industry), it will be replaced by someone who will not.
Microsoft did not want to be replaced, so it worked to compete.
On page 68, we have another listing of a non-crime crime. “In
addition to improving the quality of Internet Explorer,” the judge says
accusingly (!), “Microsoft sought to increase the product’s share of
browser usage by giving it away for free. In many cases, Microsoft also
gave other firms things of value (at substantial cost to Microsoft) in
exchange for their commitment to distribute and promote Internet
Explorer, sometimes explicitly at Navigator’s expense.”
Horrors! Microsoft improved its product? Then gave it away for free?
It gave others “things of value”? Even when it cost a lot to do so? And
all in order to beat its competitors? Welcome to the free enterprise
system. It is because capitalism rewards such things that we love it.
And here comes the judge to say that this is all gravely evil. Why?
Because this action by Microsoft “forced” (page 178) Netscape to release
its browser for free. In this man’s twisted logic, free stuff for
everyone amounts to exploitation of the consumer.
Has Microsoft benefited from its successes? Certainly, but so has
everyone with whom Microsoft has done business. In the software market,
innovation has never ceased and prices have fallen continually. If you
are using a computer with software two-years old, you are hopelessly out
of date. You can’t even give away programs and computers that are five
years old. And you can buy a new one — loaded with programs that would
have cost thousands only a few years ago — for less than you paid for
your last one.
The miracle of the market has been on display as never before.
Computers are easier, faster, more powerful, and more useful. You can
download complicated programs, at no charge, that it took industry tens
of millions to develop. Anyone in the world can go to Microsoft’s site
right now and spend the day downloading virtually every bit of software
essential to opening up a new world of knowledge, communication, and
efficiency, all without taking out your credit card.
At every step Microsoft has been the leader in this demonstration
project in capitalist achievement. It has done so through
entrepreneurial foresight, astonishing amounts of capital investment,
and a glorious competitive spirit that strives to serve the consumer
better than anyone else. Consumers of the world unite and cheer in
adulation, not only for what Microsoft has done, but also for the
free-market system that made it all possible.
Yes, there is one group that hasn’t benefited from Microsoft’s
successes. It is made up of the firms that Microsoft beat in the
competitive process. It is they who instigated and cheered the
government’s lawsuit against Microsoft, and it is they who will benefit
from the break up of the company. Instead of battling their nemesis on
the open market, they plotted with the black hats who inhabit dingy
government bureaucracies — most of which use outdated technology — to
destroy an American success story.
Despite its present dominance, Microsoft has faced enormous
competition every day and every hour of the high-tech boom of the last
decade. Consider the “open source” movement that is placing its bets on
Linux, an operating system that holds itself out as a viable alternative
to Microsoft’s Windows. Its main enthusiast has been Eric Raymond, who
hates Microsoft as much as anyone.
But give Raymond credit. He is not for using the government to
advance his pet interest. As he told href="http://www.salon.com/tech/feature/1999/11/06/open_source/">Salon:
“I want the market to take down Microsoft, not the government.”
“The whole premise of antitrust law is wrong,” he said. “Governments
don’t break up monopolies, markets do. Governments create monopolies.”
In his judgment, “there is more competition for Microsoft now than there
has ever been.”
The crux of the intellectual problem for the government is that it is
relying on an anachronistic and long-refuted model of economics to
bolster its case. The model is that of “perfect competition,” which
posits a never-never land in which trial and error are not required,
there are no transaction costs of doing business, all consumers and
producers have perfect knowledge and never change their minds, there are
many firms operating in a given market though none has a competitive
advantage over any other, and there is no uncertainty or passage of
Judged by this model, the software market fails. So does every other
industry. According to this standard, any firm that appears to be a
temporary winner in the competitive process can be deemed a monopoly.
For this reason, href="http://www.mises.org/journals/aen/aen398.asp">Dominick
Armentano, perhaps the leading antitrust theorist of our time and
author of Antitrust: The Case for Repeal, has said that this
theory has lost all intellectual credibility. He further says that all
anti-trust laws need to be abolished as incompatible with free
enterprise and human liberty itself.
Is such an extreme conclusion necessary? Yes, judging by the way
antitrust law is being used to smear and threaten a great company with
destruction. We must make a decision between a system in which dictators
in black robes are permitted to exercise monopoly power over the
workings of our economic system, or fully embrace the peaceful and
voluntary workings of the market economy that made Microsoft what it is
today. It is the federal court system that needs to be broken up.