RE: Microsoft's real crime: success
Thank you for posting this interesting article.
It is rare to find so many serious errors in one article, unless some lawyer or flack has been paid to confuse the public or obstruct justice. Let me deal only with the low points. Deal with the paragraphs consecutively.
#1 Nothing objectionable, but it would be better to say something like "The government and Microsoft will each spend millions in their lawsuit."
#2 Is simply wrong. It assumes that MSFT did not coerce CPQ and others into using Windows. Of course, I once bought a IBM Thinkpad with only OS/2, so it may not be true, but I recently read an article (in Atlantic Monthly)(?) by a student who tried unnsuccessfully to order a Windowless computer from several major vendors. It is, I believe, disputable that MSFT has coerced companies into using Windows on all if they use Windows on any, and install IE if they install Windows on anything. This is for trial. If a tying sale is foound, then Jacoby is mistaken and MSFT did coerce companies ("Some rob them with a sixgun, Some with a fountain pen" W. Guthrie; "The pen is mightier than the sword." E.G. Bulwer-Lytton), hence coerced customers to buy something that some of the didn't want to buy.
#3 Is unbridled Montanan extremism. A reporter today who thinks that taxes are collected by force is asleep. Of course there is a threat of force. I have known only one person who paid, as a point of honor. taxes because the State of Illinois said he owed them, even though Governor Ogilvie said that particular tax "made liars of us all."
#4 Mythology. Any one who believes that all customers freely pay for goods and services has never kept a shop or practiced dentistry. Bill collecting is sometimes pursued with such vigor, when not regulated, that some debtors and collectors end up in prison -- for fraudulent misrepresentation when saying they would pay back something that they suspected they would probably not be able to pay.
#5 Not bad as far as it goes, but it fails to mention that MSFT is accused of trying to destroy a competitor -- Netscape -- and this is one of the per se violations that all Departments of Justice and all Supreme Courts have held to be illegal in itself because it cannot be justified however incidental it is. It's legal for a non-monopolist to act so that a competitor fails, but its not legal for a conspiracy or a monopolist to destroy a competitor. It doesn't matter whether a cartel or a monopolist singles out and destroys a competitor -- it is simply criminal extortion and no civilized country will allow it to happen.
#6 Reno is right. It is a violation of Clayton 3, and there are hundreds of similar cases. Go back and look at Henry v. A.B. Dick Company, 224 U.S. 1 (1912) where the Supreme Court upheld the right of the patentee of the mimeograph machine to require use of his supplies. A.B. Dick sought to punish Henry because he sold a can of dickless ink to a woman that could be used (illegally) in a rotary mimeograph machine. This led White, C.J. to dissent, writing "My mind cannot shake off the dread of the vast extension of such practices which must come from the decison of the court now rendered." He was right, and Congress passed the Clayton Act in 1914 which in section 3 banned such practices.
#7. Jacoby shows that he doesn't understand abusive patent extension or tying sales by a monopolist. He should read a few real cases, and not fetch up remote examples.
#8. Justice does not care about the "free" browser in itself, but the compulsion of tying it that has a direct and unavoidable effect of a monopolist destroying a competitor. Microsoft's strongest defense is that Netscape was not in fact destroyed, but the test is "lessening competion or tending to create a monopoly (in browsers)" If one is trying to destroy a competitor, a good price to use, if one can afford it, is zero. It is also, I think it will turn out, a particularly dumb price, since coupled with other evidence it suggests that in setting the price, MSFT was not motivated by healthy greed, but sought to kill Netscape regardless of cost. All these allegations must be proved at trial.
#9. Sheer ignorance of the law. The market test is a definable market. If Microsoft could be shown to have abused a 90% PC market-share in New York metropolitan are alone, it would violate the Sherman Act (Allen Bradley v. Local #3, IBEW, 325 U.S. 797, 1945).
#10. Irrelevant and immaterial. Adam Thierer of the Heritage Foundation is also a master of irrelevancy. The best evidence that MSFT is a monopolist is that its 137/500 rank in revenues is coupled with a #1 rank in capitalization. MSFT is the most valuable company in the world because almost everything it sells generates a huge net margin. MSFT spins gold out of straw. It buys almost nothing (much of its software is downloaded). It has few fixed assets. It expenses most of R&D and has few intangibles on its books. It also has 13 billion in cash or short-term securities. Compute a few ratios on that guy.
#11. MSFT has nothing to do with falling computer prices. That results from competition and trade in the hardware part of the business and "Moore's Law in chips and congenerous laws in disk drives, monitors, and boards and JIT and BTO assembly. Product quality does keep rising, but have you tried to load Windows 98 on your old Pentium? It is truly said that Microsoft makes Windows bigger and slower faster than Intel makes Pentiums faster and cheaper. It is yet to be proved if MSFT's monopoly was fairly gained. That's one of the things the trial is about
#12. This is a canard, of course. If Justice had no evidence except success it's case would have been dismissed summarily by any learned judge (or Hand). There is no evidence that this judge is learned, he's been reversed once.
#13. Jacoby never read this case. He fails to mention that Alcoa leveraged the Hall and Bradley process patents by international cartels to exclude imported aluminum from the U.S. and exclusive electrical contracts to prevent competitors from using the expired technology patents to compete with it. The Federal courts enjoined these acts by consent in 1912. Hand remarks that Alcoa failed to inform the government of several restrictive water-power contracts that it claimed to have forgotten about. Hand remarks that a return of 10% on capital invested can hardly be considered extortionate. {what would he think of Microsofts ROI?) -- but profit rate he says is irrelevant (so much for the "punishment of success" theory!). The best part of Hand's decision is the point that a de facto 90% monopoly, by the mere fact of setting a price, commits a far great act of price fixing (per se illegal) than a few competitors who form a cartel. I will not discuss the whole decision, but I must point out that the Alcoa monopoly threatened the military security of the United States. Because of its restrictive practices and monopoly Alcoa excluded competition in U.S. and Canada. With competition and lower prices, production and sales would have been higher (law of supply and demand) There was insufficient aluminum capacity for the 50,000 planes Roosevelt called for. The government had to build aluminum and alumina processing plants. Because of the concentration of experience in Alcoa, most of the government plants had to be contracted to Alcoa. After the war, Hand's decision (1945)and Congressional action licensed some of the plants to new competitors -- Reynolds Aluminum (who later introduced the aluminum foil ("Reynolds Wrap") and beverage cans, and Kaiser Aluminum (which introduced aluminum wiring and building parts).
I am a Microsoft investor, and despise most of its software. I invest in Microsoft because it has a brilliant business model and many of the smartest people in the business. I can't imagine that all of the illegal comments that they treat each other to in email are serious. I think customers are free to use other operating systems if they want to (such as Mac, Linux, OS/2, or even Dr Dos). I don't think the acts (or most of them anyway) are illegal.) I think it is good if most people can use a common system. I doubt that DOJ understands fully what they are doing. I hope they lose. But none of this is an excuse for that innacurate and intemperate article. |
