How History Repeats Itself: The IBM Antitrust Case of 1972

by | Jul 20, 2002

Hear is an article I wrote back in 1972 about the IBM antitrust case. The parallels are remarkable. If you replace the then complainers such as CDC, Univac, Telex, etc. with Netscape, Sun, etc. the article would appear to be about current events. At that time, I also wrote several articles published in the industry […]

Hear is an article I wrote back in 1972 about the IBM antitrust case. The parallels are remarkable. If you replace the then complainers such as CDC, Univac, Telex, etc. with Netscape, Sun, etc. the article would appear to be about current events. At that time, I also wrote several articles published in the industry press about the AT&T monopoly, which was a monopoly because it was illegal to provide competitive telecommunications service or equipment.–JW

The chief executives of CDC, UNIVAC, NCR, and Honeywell recently visited the Justice Dept., jointly urging that it get on with its case against IBM and volunteering to assist the government in its efforts to “restore competition” (i.e., to destroy or at least paralyze IBM’s ability to compete).

It would be great poetic justice if the Justice Dept. indicted the whole parasitical lot of them for the blatant act of collusion in restraint of trade that their visit was. There is ample precedent for such an indictment and it would not take long to prove the case. The memorandum the chief executives presented is virtually a signed confession of conspiracy to ruthlessly destroy the viability of a competitor.

In demanding that IBM be busted up by force of law, these executives are guilty of tactics far more deplorable than anything IBM has ever been accused of, much less employed. They are openly attempting to enlist the power of the State to put IBM out of business. Compared to this, the use of knockout machines is almost praiseworthy. Of course these chief executives can rest assured that their visit will not bring the wrath of the Justice Dept. down upon them. Such an action would presume a degree of consistency antitrust prosecutions have never been noted for.

Antitrust is a notorious contradiction of the principles of free enterprise involving violations of property rights on a massive scale. The history of antitrust is one of incredible irrationality and injustice.

Antitrust itself is the real villain, the real restraint on authentic (i.e., unregulated) free trade. No private busi­nessman by free trade on a free market could ever approach the degree of economic destruction and dislocation that has been wrought by antitrust and other anti-free trade laws.

The most recent case (IBM vs. Telex) is a classic illustra­tion of the slimy function and goal of antitrust: the sacrifice of ingenuity and ability and success to mediocrity and incompetence and failure. In ruling against IBM, Judge A. Sherman Christensen has sanctioned the sacrifice of IBM’s ingenuity and ability and success to the mediocrity, incom­petence and failure of a virtually bankrupt little fifth-rate company, Telex. That IBM’s fine is greater than Telex’s worth is proof enough of this point.

Rather than scurrilously attacking IBM, CDC, UNIVAC, NCR, Honeywell and its other competitors should bow their heads in thanks and appreciation for IBM’s superlative success. For although it didn’t invent the computer, it almost single-­handedly created the computer industry. Consequently, it is IBM that made and makes it possible for them to succeed.

The truth of this is most obvious in the case of the manufacturers of plug-compatible devices. Without IBM there would be nothing to plug into. And yet many of these companies continue to attack IBM, their very source of economic life. Memorex is probably the most shameful of this lot.

Considering the success of other small manufacturers (DEC, for example), Telex’s complaints about IBM’s so-called ruthlessly destructive competitiveness are exposed as lame excuses for poor management and a colossal failure to produce a product that very many people care to buy.

A basic point is that when nobody wants your product, you shouldn’t start complaining about your competitor’s success. Start investigating your failure.

On the other side of the IBM vs. Telex case, the judgment against Telex was a just penalty. No ambiguous nonsense about anti-competitive share of the market here. Just a clear case of plain theft. That’s an objectively definable, rationally provable and judicable crime.

On a free market (i.e., a market unfettered by government regulations), a market where only ability and quality count, an incompetent computer vendor wouldn’t have a chance. On a free market no one is permitted to wield a legalized club over a competitor’s head. And, consequently, those (like Telex) who seek to live parasitically off the achievements of others would soon go out of business, as they deserve to.

To those who think the free market would lead to monopolies, let it be said that a truly free market makes coercive monopolies impossible. A coercive monopoly is one that has the power to prohibit competition. Such power can derive only from government and cannot be achieved by free trade. A reading of American business history will quickly reveal that the coercive monopolies that have existed are the product of some exclusive government license, privilege, subsidy, law, etc.

A non-coercive monopoly, one that has gained a primary share of a given market through free trade, violates no one’s rights, is fully subject to the laws of supply and demand, and is perfectly open to competition. All that has to be done is to offer a better and/or lower-priced product. Unless the monopoly company can reply with still a better and/or lower-priced product, its market position will shortly de­cline. Because on a free market, it has no power, no legalized club to prohibit such competition.

Antitrust is the Saturday night special of government regulations-the quick and dirty weapon used by the in­competent mob to wipe out success. It is totally wrong and should be thoroughly repudiated.

All Antitrust laws should be repealed, freeing every busi­ness to grow as big as ability, competence, and economic competitiveness will allow.

For a more thorough presentation of the nature of anti-trust and the arguments against it, I would refer the reader to the following books:

1. Harold Fleming, Ten Thousand Commandments (A story of the Antitrust Laws), Prentice-Hall, Inc,
2. A. D. Neale. The Antitrust Laws of the U.S.A., Cambridge Univ. Press.
3. Ayn Rand. Capitalism: The Unknown Ideal, The New American Library

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