The U.S. Government’s Assault on Microsoft

by | Jan 1, 1998

The U.S. Department of Justice (DOJ) recently accused Microsoft of violating U.S. antitrust laws, and asked a federal court to fine Microsoft an unprecedented 1$ million per day until the “violations” cease. Microsoft’s “crime” was to include its Internet Explorer software program (for browsing the Internet) as an integral component of its popular Windows 95 […]

The U.S. Department of Justice (DOJ) recently accused Microsoft of violating U.S. antitrust laws, and asked a federal court to fine Microsoft an unprecedented 1$ million per day until the “violations” cease. Microsoft’s “crime” was to include its Internet Explorer software program (for browsing the Internet) as an integral component of its popular Windows 95 operating system, and offer it to computer suppliers as an all-or-none condition of sale.

U.S. Attorney General Janet Reno accused Microsoft of “coercion,” and told reporters that “forcing PC manufacturers to take one Microsoft product as a condition of buying a monopoly product like Windows 95 is … plain wrong.”

It’s plain wrong to accuse Microsoft of coercion. If placing a take-it-or leave-it condition of sale on one’s own property constitutes coercion, then we all belong in jail because every sale of property is coercive — a blatant assault on property rights. Microsoft is not even contractually forbidding buyers to install competitors’ browsers (such as Netscape Navigator) on Windows 95, although that too would be a non-coercive and thus legitimate (albeit unwise) condition of sale. The DOJ is guilty of coercion — not Microsoft.

The DOJ’s logic would forbid Microsoft or anyone from integrating separate programs into their operating system, thus forcing customers to purchase such add-ons separately — a blatant waste of time and money. Egged on by Microsoft’s competitors and “consumer crusader” Ralph Nader, the DOJ’s irrational, unjust and destructive action is part of a massive antitrust campaign against Microsoft.

According to Assistant Attorney General Joel Klein, “even as we go forward with this action, we also want to make clear that we have an ongoing and wide-ranging investigation to determine whether Microsoft’s actions are stifling innovation and consumer choice.”
BR>”Browsers are potentially the kind of product that could erode Microsoft’s operating system monopoly,” said Klein, indicating that the DOJ’s goal is to forcibly “downsize” Microsoft. Why?

According to Reno, Microsoft is attempting to “undermine consumer choice,” and “today’s [DOJ] action shows that we won’t tolerate any coercion by dominant companies in any way that distorts competition.” U.S. Senator Orrin Hatch (R-Utah), chairman of the Senate Judiciary Committee, called Reno’s move “an important step toward ensuring an open, unfettered and unregulated information highway.”

In other words, Microsoft’s legitimate marketing strategy of an all-or-none condition of sale allegedly threatens free-market competition and thereby harms “consumers.” Therefore, governments must regulate competition in order to preserve free enterprise.

What the DOJ is trying to put over on Americans is that phony economic doctrine called “Perfect Competition,” which allegedly exists when there are many small firms with equal market share. If a firm acquires “too much” market share, thus approaching a “monopoly,” the government must bulldoze the “playing field” to remove the “imperfections” — all in the name of “consumer protection” and “free enterprise.”

Note that a true free market is driven by the voluntary (non-coercive) decisions of buyers and sellers, and that under certain conditions, in certain industries, many small companies might prevail. But certainly not under all conditions. For example, a large majority of people might prefer shopping at a “superstore” because it can offer lower prices and one-stop shopping for all one’s needs.

BR>Under true free enterprise (laissez-faire capitalism) the role of government is not to force companies into somebody’s dogmatic small-is-beautiful “utopia,” and thereby ignore “consumer” preference. The government’s role is to protect individual rights, which involves leaving people free to produce, compete and trade on a voluntary basis, which requires protecting people from rights violators.

The essence of a free market is not “Perfect Competition,” but freedom of competition.

True competition also includes market strategies, such as conditions of sale, to expand market share. If Microsoft can package many good products into one operating system, and offer it at a low price by minimizing costs, Microsoft and “consumers” benefit.

But under “Perfect Competition”, pursuing greater market share is destructive, regardless of market conditions, because it leads to a “monopoly.”

The only way to approach a “monopoly” in a true free market is to offer consumers the best products at the lowest prices, which requires keeping production costs low and quality high. If such a company tries to “exploit” its “monopoly” by jacking up prices, investors will seize the opportunity by investing in competent competitors.

Only a coercive monopoly harms people because, effectively, a “gun” — not ability — is used to keep competitors out of the market.

“Perfect Competition” obliterates the distinction between coercive and non-coercive monopolies. And governments have gone so far as to establish their own coercive monopolies in postal service, transportation, utilities, etc., in the name of “consumer protection.” In other words, big is bad except big government. Although erroneous and destructive, the “Perfect Competition” model serves as a rationalization for governments to violate individual rights by forcibly regulating competition — a blatant act of coercion and statism. Competition laws, such as Canada’s Competition Act, or the U.S. antitrust laws deployed against Microsoft, are based on this statist model.

As Ayn Rand wrote: “Under the [U.S.] antitrust laws, a man becomes a criminal from the moment he goes into business … if he charges prices some bureaucrats judge as too high, he can be prosecuted for monopoly, or, rather, for successful ‘intent to monopolize’; if he charges prices lower than those of his competitors, he can be prosecuted for ‘unfair competition’ or ‘restraint of trade’; and if he charges the same price as his competitors, he can be prosecuted for ‘collusion’ or ‘conspiracy.'” Such laws are vague, self-contradictory and elastic — which hands government the ominous, unbridled power to persecute virtually any company it pleases. Such laws serve as a perfect vehicle for envious competitors to enlist political power lusters in government to persecute and “downsize” successful corporations like Microsoft — because they are successful. The U.S. government’s antitrust assault on Microsoft is an assault on success and liberty, and should be halted immediately.

Furthermore, any “competition” law allowing government to regulate competition and punish good companies for being good should be rescinded. “Consumers” need protection from coercive and omnipotent governments — not from the beneficial products that Microsoft and other companies provide via freedom of competition in a free market.

Glenn Woiceshyn is a freelance writer, residing in Canada.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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