The Antitrust Laws Require the Government To Initiate Force Against Innocent Citizens

by | Mar 1, 2001 | Antitrust

The antitrust laws are thus a palpably unjust legal doctrine, and respect for individual rights demands that the District Court's judgment against Microsoft be reversed and the antitrust laws held invalid and unconstitutional.

In adjudicating the antitrust laws, courts have enunciated the standard of “consumer harm” as the basis for distinguishing between illegal versus legal business activity. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 606-08 (1985) (holding that the evidence indicated that “consumers were adversely affected” and that defendant failed “to offer any efficiency justification whatever for its pattern of conduct”); Data General Corp. v. Grumman Systems Support Co., 36 F.3d 1147, 1183 (1st Cir. 1994) (“In general, a business justification is valid if it relates directly or indirectly to the enhancement of consumer welfare.”); U.S. v. Microsoft Corp., 84 F. Supp.2d 9, 137 (D.D.C. 1999) (alleging “collateral harm on consumers”).

In applying this standard, and its corollary of “protecting competition,” the antitrust laws superficially appear to be aimed at the protection of citizens’ economic interests.

However, if a businessman does not engage in force or fraud, then he cannot, and will not, infringe the rights of his fellow men. Thus, when the courts have sanctioned businessmen under the auspices of the antitrust laws, they have in fact brought to bear the coercion of the government against innocent individuals.

The evidence for this proposition within antitrust case law is manifest. Judge Learned Hand’s opinion in U.S. v. Aluminum Co. of America (ALCOA), 148 F.2d 416 (2d Cir. 1945),for instance, exposed the true meaning of holding businesses accountable to these standards. Judge Hand acknowledged that the “[t]he successful competitor, having been urged to compete, must not be turned upon when he wins.” Id. at 431. However, Judge Hand concluded that ALCOA was guilty of “monopolization,” violating § 2 of the Sherman Antitrust Act, because ALCOA “effectively anticipated and forestalled all competition.” Id.

How did ALCOA do this? ALCOA did not coerce its competitors. The record was devoid of any allegations that ALCOA engaged in any act of violence or fraud. To the contrary, ALCOA was an exemplar of successful business management, as Judge Hand recognized:

Nothing compelled [ALCOA] to keep doubling and redoubling its capacity before others entered the field. It 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.

For these reasons — for its long-term business model, its capital investment, its ability to attract the best employees — ALCOA was found guilty of violating the antitrust laws. Judge Hand, strictly applying the logic of the antitrust laws, acknowledged the virtues of a successful businessman — and then “turned upon [him] when he [won].” In so doing, the Second Circuit did not protect the property rights of ALCOA, it violated them.

The significance of the ALCOA decision lies in its explicit recognition of the inherent contradiction within the antitrust laws. In subordinating a businessman’s use of his property rights to the inherently indeterminate notions of “consumer harm” or “protecting competition,” the antitrust laws logically result in the violation of individual rights. When laws are severed from the objective requirements of determinate language and the protection of individual rights, the force of the government will be used arbitrarily and without moral justification.13

The reason is that individual rights provide an objective baseline for determining their violation: the initiation of physical force, either direct or indirect. When laws are predicated upon this principle, then the government serves in its proper role as the defender of its citizens’ rights. In other words, the triggering mechanism for the government’s use of coercion is the determination that someone else has first used force to violate another man’s rights. However, when a standard other than individual rights is used to guide the government’s use of force, the result can only be the use of coercion against innocent individuals. The government subverts its own role as defender of its citizens’ rights, and thus becomes, like a common criminal, a source of coercion in society.14

The Department of Justice’s successful prosecution of Microsoft represents the latest, and arguably the most egregious, injustice perpetrated by the government under the auspices of the antitrust laws.

The alleged “consumer harm” identified by the District Court does not so much as rise to the level of an “injury in fact,” which is the principal indicia of an actual violation of one’s rights. The District Court asserted that Microsoft’s business practices allegedly “harmed consumers in ways that are immediate and easily discernible.” Microsoft, 84 F. Supp.2d at 327.

However, when it came to identifying the “easily discernible” facts of Microsoft’s harm to consumers, the most the District Court could identify was that: (i) there was “confusion and frustration for consumers,” id. at 328, (ii) end users had “to carry software . . . providing them with no benefits,” id. at 137, (iii) corporations were “denied a simple and effective means of preventing employees from attempting to browse the Web,” id., (iv) OEMs provided customers with “a PC system that ran slower and provided less available memory than if the newest version of Windows came without browsing software,” id. at 328, and (v) additional software led to “performance degradation, increased risk of incompatibilities, and the introduction of bugs,” id. at 137.

In other words, the court essentially concluded that the frustration of a new computer user should be used as the basis for forcibly breaking up one of the most successful companies in history — or the fact that people have been provided with free software they may not use should be used as the basis for prohibiting a firm from continuing to provide such benefits to its customers. Nowhere in the District Court’s findings of fact is there a single identification that Microsoft did anything other than provide values to customers — who were free to use, or not use, those values and who might, or might not, have understood how to benefit from those values. The District Court did not find any violation of another person’s right to life, liberty or property. There was no finding of coercion initiated by Microsoft. As with ALCOA, the District Court sanctioned Microsoft for its successes — for developing innovative technology and engaging in entrepreneurial commercial activities.

The District Court’s arbitrary discretion under the antitrust laws to unjustly coerce Microsoft in violation of its rights was best indicated by the District Court’s own admission that Microsoft has not acted as if it were a “monopolist.” The District Court writes:

It is not possible with the available data to determine with any level of confidence whether the price that a profit-maximizing firm with monopoly power would charge for Windows 98 comports with the price that Microsoft actually charges. Even if it could be determined that Microsoft charges less than the profit-maximizing monopoly price, though, that would not be probative of a lack of monopoly power, for Microsoft could be charging what seems like a low short-term price in order to maximize its profits in the future for reasons unrelated to underselling any incipient competitors. [Id. at 54].

Thus, the District Court acknowledged that it is not possible to tell whether Microsoft is in fact a “monopolist,” i.e., whether it is charging exorbitant prices that allegedly “harm” consumers.

Yet the District Court dismissed this lack of evidence as irrelevant to its determination as to whether to sanction Microsoft as a “monopolist.” In other words, Microsoft is a monopolist if it charges prices that are deemed “too high” — but it is also a monopolist if it charges prices that are “too low.” By virtue of its dominant position in the industry — that is, by virtue of its successful business practices — Microsoft is guilty if it does and guilty if it does not. This is not a judgment that respects the rights of American citizens and prohibits the initiation of force; on the contrary, the District Court’s judgment constitutes an initiation of force against Microsoft, an innocent corporate citizen freely acting within the bounds of its rights.

Finally, the District Court’s conclusion of its finding of fact revealed the inherent contradiction between the enforcement of the antitrust laws and the recognition of every individual’s right to life, liberty and property. The District Court concluded: “The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft’s self-interest.” Id. at 331 (emphasis added). However, the historical development of the concept of individual rights was to prevent the punishment of individuals for their own morality. In 1625, Hugo Grotius, the father of the modern concept of..18 .rights, wrote: “it is not contrary to the nature of society to look out for oneself and advance one’s own interests, provided the rights of others are not infringed.”15

Whether Microsoft acted selfishly or not is irrelevant for a court of law. The court’s determination properly should be restricted to whether an individual has initiated force and thus violated another man’s rights. The fact that the District Court regarded the moral status of Microsoft’s actions to be relevant in its findings under the antitrust laws is prima facie evidence of the injustice of the antitrust laws. The Sherman Antitrust Act and its related statutes require the government to look beyond whether a defendant has respected the rights of its fellow citizens, and as such, it authorizes the government to initiate force itself. The antitrust laws are thus a palpably unjust legal doctrine, and respect for individual rights demands that the District Court’s judgment against Microsoft be reversed and the antitrust laws held invalid and unconstitutional.16

References:

13 See, e.g., U.S. v. Aluminum Co. of America, 148 F.2d 416, 424 (1945) (Judge Hand asserted the 90-60-30 percentage of market share standard as the basis for determining the existence of a monopoly, but provided no explanation for why these percentages are legally determinative or evidence a colorable argument for or against a monopoly).

14 In speaking of an invasion by an aggressor government, Locke maintained that this initiation of force is an unjust violation of individual rights because “[t]he injury and the crime is equal, whether committed by the wearer of a crown or some petty villain.” John Locke, supra, § 176, at 97. He concluded earlier in the Second Treatise that “it is a mistake to think that the supreme or legislative power of any commonwealth can do what it will, and dispose of the estates of the subject arbitrarily, or take any part of them at pleasure.” Id., § 138, at 78.

15 Huge Grotius, The Law of War and Peace (trans. F.W. Kelsey, 1964) (1625), quoted in Stephen Buckle, Natural Law and the Theory of Property: Grotius to Hume 31 (1991). Ayn Rand agrees with Grotius, but extends his observation by explaining that the concept of individual rights is logically predicated upon the ethics of rational egoism. See generally Ayn Rand, What is Capitalism?, in Capitalism: The Unknown Ideal 11, 17-21 (1967); Ayn Rand, Man’s Rights, in id. 320-28; Leonard Peikoff, Objectivism: The Philosophy of Ayn Rand 350-412 (1993).

16 See Federalist No. 78, supra, at 470 (“[Court cases] sometimes extend no farther than to the injury of the private rights of particular classes of citizens, by unjust and partial laws. Here also the firmness of the judicial magistracy is of vast importance in mitigating the severity and confining the operation of such laws.”).

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.

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