By the time the Justice Department's lawsuit against Microsoft Corp. comes to a close, the government will have spent millions of dollars on its effort to punish the software company for its "predatory" behavior. To defend itself, Microsoft will have spent millions of dollars as well. But consider how great a difference there is between the government's money and Microsoft's.
The Justice Department's case against Microsoft is economically incoherent.
Every dollar that Microsoft pays its lawyers is a dollar it earned by providing something a customer desired. The company's revenues, around $11 billion annually, come from selling and leasing products that people choose to pay for. Every one of its moneymaking transactions is voluntary: Microsoft has never used force to confiscate money from the public.
The government, by contrast, acquires nearly all of its revenues — more than $1.5 trillion a year — by force. Fail to pay your taxes and armed government agents are liable to confiscate your property or lock you behind bars. Or both.
There are many differences between government and business, but none more basic than this: Governments depend on coercion, businesses depend on freedom. Yet, perversely, it is the government that accuses Microsoft of coercive practices.
The heart of the Justice Department's case against Microsoft is that the company has made Internet Explorer, its Web browsing software, an integral part of Windows, its overwhelmingly popular operating system. Microsoft doesn't charge for Internet Explorer — the price of Windows didn't go up when the Web browser was added — and it doesn't sell it separately. Computer makers wanting to load Windows into their desktop PCs have to take Internet Explorer as part of the package. This is the "coercion" that the government is spending millions of dollars to fight.
"Forcing PC manufacturers to take one Microsoft product as a condition of buying a monopoly product like Windows," says Attorney General Janet Reno, "is . . . plain wrong."
If so, then it is plain wrong for the publisher of this newspaper to force you to take the sports section as a condition of getting the news and the op-ed page. It is plain wrong for Chrysler to force car dealers to take vehicles with Chrysler engines and radios already installed as a condition of selling Jeeps and Eagles. It is plain wrong for Visa to force its cardholders to take rental-car insurance as a condition of receiving a credit card.
The Justice Department's lawsuit boils down to the illogical presumption that consumers would be better off if they had to pay separately for a Web browser. But why stop (or start) with browsers? If Reno is right, we would all be better off if Windows didn't include word-processing software either. Or calculators and calendars. Or modem drivers and disk compression utilities. Microsoft released its first operating system in 1981, and has continually enhanced its product with new features. What is it about this feature — Internet Explorer — that the government finds so objectionable?
True, Microsoft has a near-monopoly in desktop computer operating systems; 90 percent of all PCs run Windows. But that doesn't make Microsoft a monopolist.
For one thing, its share of the overall computer industry is tiny. In 1996, Microsoft controlled less than 2 percent of global computer market revenues. Even in the software-only universe, its market share was only 4 percent. Among the Fortune 500, Microsoft is ranked just 137th. It is outdistanced by IBM (which ranked 6th), Hewlett-Packard (14th), Intel (38th), Compaq (42d), Digital Equipment (118th), and Dell (125th). "It is difficult," the Heritage Foundation's Adam Thierer writes, "to understand the claim that Microsoft's market power in the computer industry is destroying competitive opportunities for these larger, more profitable companies, or for any other company in the industry."
It is even harder to understand the claim, implicit in the Justice Department suit, that Microsoft is depriving consumers of the benefits of competition. Computer prices are low and keep falling. Product quality keeps rising. There is no shortage of entrepreneurs or innovation. Microsoft plays hardball with competitors, but it gives its customers exactly what they want: a common operating system that comprises numerous products and supports a myriad of applications. If it has a monopoly, it is a monopoly honestly earned.
The government has an ignoble history of firing its antitrust guns at companies whose only real offense is being successful.
In 1945, in one of the worst blunders of his brilliant career, Judge Learned Hand agreed with the government that the Aluminum Company of America had an unlawful monopoly and should be broken up. Alcoa was wrong, he wrote, to "always anticipate increases in the demand for [ aluminum] ingot and be prepared to supply them. Nothing compelled it 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 progessively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization."
Alcoa had to be punished, in short, for its efficiency and adroitness, for steadily improving its operation, and for safeguarding its market share. Fifty-three years later, it seems, the Justice Department still regards those things as crimes.
(Jeff Jacoby is a columnist for The Boston Globe).
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