RE: "History has shown that Government can and must provide a counterbalance to monopolistic practises,."
No it doesn't. Look at history of IBM antitrust case. What a joke.
From WSJ Interactive
Don't Repeat IBM Debacle
By JAMES V. DELONG
The Senate Judiciary Committee is holding a much-publicized hearing
today, highlighted by a raft of computer CEOs, on whether Microsoft
and other companies should be the subject of antitrust action.
Before going any further down this road, the Senate and the Justice
Department should refresh their recollection of some not-so-distant
history. In 1982 William F. Baxter, assistant attorney general for
antitrust, signed a stipulation of dismissal in U.S. v. IBM. It is a short
document, only five paragraphs, declaring that the government had
conducted a review and "concluded that the case is without merit and
should be dismissed."
This ended a matter that consumed six years of investigation and 13
years of litigation, 726 trial days, 17,000 exhibits, 950 witnesses and at
least $200 million in direct expenses to IBM and the taxpayers. Its
impact on IBM was incalculable, as the company was forced to make
decisions for 19 years based not on the marketplace but on "What will
the lawyers say?"--an approach that breeds timidity and stasis.
The pursuit of IBM was a travesty of legal procedure. The case was
filed in 1969; in late 1974, on the eve of trial, the government was
allowed to amend its complaint drastically. By 1977, eight years into the
case and two years into the trial, IBM had produced 61 million pages
of documents--whereupon the government issued a new subpoena for
five billion pages, which were located in 2,000 different IBM facilities.
IBM estimated that compliance would have taken 62,000 man-years
and cost $1 billion.
The government never prepared a definitive statement of triable
issues. And the government got enmeshed with private citizens who
stood to gain greatly from the litigation. Plaintiffs in private suits were
the most obvious example, but a cluster of experts and consultants
also attached themselves to the case. One government consultant
collected $465,000 in fees, was involved in the case longer than any
government lawyer and, according to The American Lawyer, "in most
respects . . . had virtually taken over the litigation."
Successive heads of the Antitrust Division admitted in retrospect that
the whole thing was an error but were paralyzed during their terms of
office by fear of political fallout. In the years since the dismissal, it has
become conventional to blame the trial judge, David Edelstein, for
letting the case spin out of control. He was indeed hopelessly biased.
But the judge was not at the root of the problem. The basic failure was
the absence of a coherent government theory of the case.
IBM was supposed to be a monopolist, but the relevant markets were
never clearly defined. When asked, different government lawyers gave
different answers. Nor was it clear what specific IBM conduct was
supposed to violate antitrust law. An economic autopsy of the case
written later by some of IBM's expert economists noted that the
government assumed that the company was a monopolist even though
it did not act like one. The government dealt with this embarrassing
inconsistency by "distort[ing] IBM's competitive acts into
'anticompetitive' ones. Nothing is more revealing about the
government's case than its constant complaint of low rather than high
prices as the symptom of monopoly."
This lack of intellectual coherence allowed the volume of paper to get
out of control. Because of the vagueness of the theories, every fact,
document and witness was potentially relevant. There could be no
boundary on the inquiry. On the other hand, this vagueness also
meant that no fact, document or witness could ever be determinative.
There was no way either to prove or disprove the case once and for
all, so there could be no end to it in court.
The unfolding parallels to the Microsoft case should scare anyone, and
especially the government lawyers. Again, the government's interest
seems driven more by the interests of competitors and the imperatives
of politics than by solid legal analysis. Again, the government lawyers,
especially the head of the Antitrust Division, have laid their egos on
the line; it will be difficult for them to withdraw. Again, the case is
collecting a coterie of special prosecutors and consultants who will be
loath to let go.
Most important, again the government's theory is hopelessly muddled,
or perhaps nonexistent. Microsoft is assumed to be a monopolist, but
of what? If you look at the total software market, the company's share
is about 5%. If you look at PCs alone, it has somewhere around 90% of
the operating systems, but quite a bit less of applications. And even in
this more restricted sphere, Microsoft's power looks wobbly. A major
reason for its high market share is that it keeps prices low. If it raised
them, other companies would flood the market with cheaper systems.
Microsoft is also attacked for "tying," because it wants to bundle its
Internet browser into its operating system. But except under unusual
conditions of monopoly power, scholars and courts no longer view tying
as a serious antitrust concern; there hasn't been a major tying case in
at least 20 years.
Critics also worry about Microsoft's $6 billion pot of cash, claiming it
creates the power to intimidate everyone else in industry. This sounds
plausible, until one notices that venture capital firms are investing at
least $10 billion per year, about 70% percent of it in high-tech
companies. Any Silicon Valley top gun with a convincing claim that he
can knock off Microsoft will get all the money he needs.
So what is left, except for another free-floating crusade in search of a
viable rationale? U.S. v. IBM was a disaster. All antitrust lawyers
should be forced to review it every couple of years, just to remind them
how bad these things can get.
Mr. DeLong is author of "Property Matters: How Property Rights Are
Under Assault--and Why You Should Care" (Free Press, 1997).
JD |
