The Roots of the Microsoft Antitrust Case: An Analysis of Judge Jackson’s Finding of Fictions Part 4

by | Feb 23, 2000 | Antitrust & Monopolies

The morality of altruism or self-sacrifice is often presented as a form of benevolence, as if it simply means being nice to other people. But the actual meaning of this philosophy is a hatred of success. Under this morality, anyone who achieves some extraordinary wealth or distinction owes it to his fellow men to sacrifice […]

The morality of altruism or self-sacrifice is often presented as a form of benevolence, as if it simply means being nice to other people. But the actual meaning of this philosophy is a hatred of success. Under this morality, anyone who achieves some extraordinary wealth or distinction owes it to his fellow men to sacrifice what he has earned–including giving away his whole fortune, as and when it is demanded by others. (This is essentially what has been demanded of Bill Gates.) But what about those who have not achieved anything? They are entitled to welfare programs, private charities, protective legislation, and a host of other unearned benefits to be paid for by those who have succeeded. In this system, anyone who earns success through his own effort is to be punished, while anyone who hasn’t exerted any effort and hasn’t attained any success is to be rewarded.

Far from standing for benevolence or good will, such a moral outlook stands for destruction. This code of sacrifice demands an assault on a Microsoft or a Bill Gates. By amassing so much money and achieving so much success, they must be shirking their duty to sacrifice to others. But it does not demand the destruction of the Netscapes of the world because, by virtue of having faltered, they are the “have-nots” who are entitled to benefit from the sacrifice of their more-successful competitors.

Note that the ultimate standard of this moral outlook is not the well-being of the poor, the weak, the downtrodden; has the welfare state ever achieved these aims? Instead, the goal is the sacrifice of the rich, the strong, and the powerful–not to achieve any positive aim, but simply to punish them because they are rich, strong, and powerful.

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The altruist connection to antitrust is evident in the mere fact that Judge Jackson could have applied the antitrust laws against Microsoft without finding any harm at all. Although the ostensible purpose of antitrust is to “protect consumers” from alleged “monopolists,” court decisions consistently belie this fiction. In one of the first cases defining the doctrine of antitrust, a large railroad trust defended itself against prosecution by arguing that its price-fixing plan resulted in lower prices for consumers. Since the stated purpose of the 1890 Sherman Antitrust Act was to protect consumers, and since consumers actually benefited in this case, the defendant logically concluded that the antitrust laws should not apply to its practices. The Supreme Court rejected this argument and ruled that the railroad trust was guilty. In an illuminating statement, Justice Peckham declared: “In this light it is not material that the price of an article may be lowered. It is in the power of the [monopolist] to raise it.” [iii]

(Interestingly, Justice Peckham was an ardent conservative who was one of the principal advocates of “freedom of contract” in the 19th century–just as Judge Jackson was a Reagan appointee. This proves once again that conservatives are not reliable friends of freedom.)

Continuing to apply the underlying anti-success principle of antitrust, the Supreme Court ruled in 1968 that a newspaper company violated the Sherman Antitrust Act when it fired a distributor for charging rates above an allowable maximum price. The Court found that the newspaper “would not tolerate over-charging” of its customers, and that it even agreed to rehire the distributor if he “discontinued his pricing practice”–that is, if he charged lower prices. Nonetheless, the Court held that the benefit to consumers was irrelevant in finding that the newspaper company acted in “conspiracy” with its other distributors to set prices–thus its actions were “an illegal restraint of trade under Section 1 of the Sherman Act.” [iv]

Harm to consumers has nothing to do with the purpose of antitrust. The antitrust laws are intended only to punish “power”–but since economic power is earned on the free market, this means that the purpose of antitrust is to punish successful business practices.

Antitrust case law is replete with examples of companies being punished, not for any alleged harm, but simply for having the acumen to remain successful in their industries. A ski resort in Aspen, Colorado, was not only found guilty in 1985 of violating the antitrust laws because it successfully competed against its only rival; it was also held to a “duty under antitrust law to help a competitor.” [v] In the famous case against ALCOA in 1945, Judge Hand declared that “the successful competitor, having been urged to compete, must not be turned upon when he wins.” But he contradicted himself in the very next paragraph, concluding that ALCOA

insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections, and the elite of personnel. [vi]

ALCOA’s ability and success, by Hand’s reasoning, was the deciding factor for finding it guilty of violating the antitrust laws.

Given this legal context, Microsoft was doomed before it even set foot in the courtroom. The media, in an anti-Microsoft feeding frenzy, often highlighted mistakes made by Microsoft’s counsel during the lengthy (and ongoing) trial. Yet Microsoft’s attorneys could have performed flawlessly, and Judge Jackson would still have produced the same ruling.

The reason is that Microsoft is an extremely successful company; Gates is a unique combination of technological genius and businessman, reminiscent of earlier American giants like Thomas Edison. Thus, it was irrelevant how hard Microsoft’s attorneys worked, or how much intellectual vigor they brought to their legal briefs and courtroom arguments. These things were irrelevant because no army of lawyers could hide a single, essential fact–the only fact necessary for applying the antitrust laws: Microsoft succeeds at what it does.

The punishment doled out for success is paralysis. Judge Jackson makes it clear that Microsoft must not ve permitted to capitalize upon its well-earned success. Because it has created values, it must now relinquish them. Does it matter that Microsoft has earned its success by producing a better product, by offering better incentives to its business partners, and by providing better service to software developers and Internet access providers? No.

Such facts do not matter to a man who believes that a successful company has a moral duty to sacrifice to its lesser rivals–especially when that man has the legal power to coerce the company to obey its alleged duty. With every slanted term and with every absurd conclusion, Judge Jackson practically screams his unstated moral premise: Since Microsoft is a leader in the computer industry, it must sacrifice the values it has created because it has created them.

In his ruling, Judge Jackson claims to set out the objective facts underlying his impending application of the antitrust laws to Microsoft. But the only thing he manages to establish is his own animosity towards commercial success. What drives this animosity is the underlying moral justification for antitrust: altruism’s hatred of success.

The basis for Judge Jackson’s ruling is not any “monopoly” allegedly controlled by Microsoft; it is the monopoly commanded by the morality of altruism over our culture. That monopoly can be seen, unfortunately, in Bill Gates’s sanction of his own destruction in a comment immediately after the ruling, in which he declares that “because of our success, we understand that Microsoft is held to a higher standard, and we accept that responsibility.” [vii] As long as this moral monopoly remains unchallenged, legal doctrines such as antitrust will continue to punish successful businesses.

References:

[i] Bill Gates, The Road Ahead 64 (1995)
[ii] US v. Microsoft, No. 98-1233 (TPJ) (D.D.C. Nov. 5, 1999) (findings of fact). All references to the findings of fact hereafter will refer only to the paragraph number.
[iii] United States v. Trans-Missouri Freight Association, 166 US 290, 324 (1897), emphasis added.
[iv] Albrecht v. Herald Co., 390 US 145, 153 (1968).
[v] Olympia Equipment Leasing Co. v. Western Union Telegraph Co., 797 F.2d 370, 377 (7th Cir. 1986), citing Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 US 585 (1985) (holding that a monopolist has a duty to help a competitor).
[vi] US v. Aluminum Co. of America, 148 F.2d 416, 431 (2d Cir. 1945).
[vii] “Statement by Bill Gates on the Findings of Fact,” www.microsoft.com/presspass/ofnote/11-09wsj.asp, visited Nov. 11, 1999.
Mr. Mossoff is a professor of law at Antonin Scalia Law School at George Mason University. He is a Visiting Intellectual Property Fellow in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation, a Professor of Law at the Antonin Scalia Law School of George Mason University, and a Senior Fellow at the Hudson Institute. His scholarship has been relied on by the Supreme Court, by federal courts, and by federal agencies, and he has been invited numerous times to testify before the Senate and the House of Representatives on proposed intellectual property legislation. Visit his website at adammossoff.com.

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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