Consumers and Tech Firms Tricked while DOJ Treated in Microsoft Case

Judge Penfield Jackson’s soon to be released finding of fact in the Microsoft case is shaping up to be Halloween’s biggest scare. The finding will likely hand consumers a trick – not a treat – as it adds to the howling for increased regulation and control of America’s successful technology sector. The nightmare will continue with more government lawsuits against the private sector because Congress recently handed the Justice Department an additional $112 million to continue its campaign of regulation through litigation. House Judiciary Chairman Henry Hyde even went so far as to comment that the antitrust division brought in more than ten times its budget in fines last year. Policymakers apparently have no problem using the Justice Department’s economic regulation to generate a revenue stream. All of this is enough to make a person run and hide.

There is little doubt that Judge Jackson’s finding will be harsh, and that Microsoft’s critics and competitors will cry Microsoft “broke the law” and should be punished. The ruling will certainly include hyped rhetoric and draw unfounded conclusions, neither of which will be based on a balanced understanding of the evidence or a sound interpretation of the Clayton or Sherman Antitrust Acts. The Judge’s findings will be influenced more by the circus-like atmosphere that has surrounded this case for the last year than by the cold, hard facts presented inside the courtroom or the technology industry’s progress in that time. And for all of these reasons, the finding of fact will threaten innovation in the technology sector and, ultimately, consumers.

Our nation’s antitrust laws were written to prevent activities that resulted in clear consumer harm – collusion, anti-competitive pricing – not to protect firms from America’s brash, no-holds-barred style of competition. While consumers might think less of Microsoft and competitors might break out in a cold sweat after reviewing the scintillating snippets of e-mail, there is nothing particularly illegal about bad-mouthing or playing hardball with the competition. It is often said that the making of laws and sausage are not for the weak-stomached to watch. Perhaps competition in the technology sector should be added to that list – those who are unable to stomach the world’s most competitive market should get out of the kitchen.

The Clayton and Sherman Acts were designed to promote equal opportunity in the marketplace, not to ensure equal outcome or to manage competition as some of Microsoft’s critics have claimed. Justice Learned Hand stated, “The successful competitor, having been urged to compete, must not be turned upon when he wins.” It is this sentiment that leads firms to compete vigorously in the marketplace. And, as America’s technology sector has amply demonstrated, vigorous competition invariably produces the best result for consumers.

Examine a few indisputable facts and draw your own conclusion. The cost of Netscape Navigator to consumers was $49.00 before the arrival of Microsoft’s Internet Explorer. Today, both browsers are free. The price of Microsoft’s Windows has actually dropped over the past ten years when inflation and product improvements are taken into account. Both examples are a clear benefit to consumers.

Not only is the government incapable of pointing to genuine consumer harm, it appears no harm was done to Netscape either. The government’s own witness, MIT economist Franklin Fisher, has admitted as much on the stand. Moreover, Netscape’s stock doubled in value in the three years following the introduction of Microsoft’s Internet Explorer. Netscape was also acquired for $4.2 billion by America Online in March of this year in a merger that shook the foundation of the government’s case.

Worse than this particular attack on innovation, is the fact that Congress recently appropriated a 12 percent increase to the antitrust division to continue the campaign to regulate through the courts. Flush with tax dollars and brimming with success, it seems unlikely the antitrust enforcers will not target another company. Former Labor Secretary Robert Reich’s claim that “the era of regulation through litigation has just begun” is foreboding. It reveals a government strategy to pursue control of the economy through lawsuits, rather than let consumers and market forces shape the future.

Unfortunately, consumers pay for the work of overzealous antitrust lawyers and taxpayers foot the bill for the Justice Department’s excesses. First, the government’s actions have a resoundingly negative impact on our nation’s leading economic engine – the technology sector. Second, consumers pay at the cash register as economic regulation restrains the innovative and successful genius of America’s free market economy.

The biggest scare this Halloween is the fact that Judge Jackson may be encouraging regulation that limits America’s ability to be home to the world’s leading innovators and all the consumer benefits that come with it.


This article appeared in the Commentary section of The Washington Times on Wednesday, November 4, 1999.