Barbarians Led by the DoJ
by Francois Tremblay (e-mail: [email protected]) [March 18th, 2000]UPDATE : last Tuesday, final stand.
There's been a constant coverage, these past few months, of the trial opposing Microsoft to the Department of Justice. Perhaps you have read some media pieces about it. Because the technological media is seemingly overrun by longhairs, it's because it's difficult to understand what's going on, let alone know what Microsoft did exactly and why it's so bad. The general consensus does not seem to extend much beyond "Bill Gates is the reincarnation of Satan."
This perhaps reflects what the population thinks - I'm pretty sure most of you are very happy that the DoJ wants to dismantle Microsoft. However, I'm not. But to see why, we must examine carefully the accusations and see what exactly Microsoft is being accused of - mainly, being a monopoly and practicing anti-competition.
It all started in 1990 when the DoJ began to investigate Microsoft's business practices, and this investigation ended in 1995 when the software company was forced to sign a consent decree. This decree was an interdiction of "tying" products, that is, demanding that Windows licensees also license other MS products. This is said, you see, to be unfair, because if a company has a hit product, it can use this to help sales of other products by tying. This is detailed in UNITED STATES OF AMERICA vs. MICROSOFT CORPORATION, civil action #94-1564. To summarize it, the three main accusations are: asking computer manufacturers to pay royalties according to the quantity of computer sold instead of copies of Windows sold, forbidding manufacturers from licensing other operating systems (OSes), and asking its independant developers to refrain from disclosing confidential information about new products. In short, voluntary contracts between corporations is being considered as anti-competitive.
Then recently Microsoft has faced two lawsuits, which are similar in some ways. The first one was against Caldera, a company which complained that Windows 3.1 refused to run its DOS program, called DR-DOS (which was a competitor of MS-DOS at the time). Microsoft has answered that this problem only occured on test versions. Both parties have come to a settlement last January. This was basically another case of so-called "anti-competitive practices," supported by Sherman anti-trust legislation.
Microsoft refused to uphold the 1995 decree, which prompted the new lawsuit that you know. It is detailed in UNITED STATES OF AMERICA vs. MICROSOFT CORPORATION, civil action #98-1232, and turns around the integration of the Internet Explorer browser in Windows 98. The same principle of leverage than for tying applies here: Microsoft is using its monopoly on operating systems in order to boost the market share of other products. The integration of software, especially Internet interfaces, in the operating system is a natural step of software evolution, one that can potentially lead to the emergence of powerful properties. But it is also a step that the almighty government declares anti-competitive.
All that happened was that Microsoft concluded exclusive agreements with manufacturers and developers, and integrated a web browser in their operating system. No use of force, no fraud, no threats, only voluntary contracts and software engineering. Manufacturers, developers, consumers all had the choice of refusing to do business with the Redmond giant. Yet they are still one of the biggest companies in America. So what's the big deal ? Why is the government fighting against popular choice?
These cases have a lot in common: they involve loaded expressions like "predatory tactics," "monopoly," "chokehold" on markets, and such. Opponents of Microsoft call themselves "pro-competition" and everyone else is "anti-competitive." Look at the expression "predatory tactics." What image does it summon up? A gruesome one: a pack of ravenous raptors tearing apart the tender flesh of their victim, blood dripping from their scaly jaws. It's a cruel, heartless expression: we are supposed to feel appalled at the viciousness of this "predator."
In human terms, predatory means "living by victimizing or destroying others for one's own gain." What does this describe if not competition? Predation in nature is nothing more than the expression of competition in the survival of the fittest.
We condemn the actions of altering one's products in order to give an "unfair" advantage, or to disadvantage another company. But that is nothing more than the very definition of competition. Part of the goal of Microsoft, or any other successful company, is to alter its products or product line in order to make itself more competitive (in the case of Caldera, substracting functionality, in the case of IE, adding functionality). All of these actions are on their own products, and there is no accusation of tampering a competitor's offerings -- it all concerns Microsoft's intellectual property. Competition is not supposed to be "fair," it's supposed to be about consumer choice. And consumers choose Microsoft over any other brand, there's no question about that.
It's true that a big factor in this question is that monopolies are not exactly how we see the idea of competition. We all have this image from our minds, sometimes from economy textbooks, that competition is an endless fighting amongst dozens of equally-matched contenders constantly trying to get a bite of the market.
Competition can be that way. However when one party largely dominates over the others, or when the market is not big enough to accomodate many competitors, it cannot naturally stay that way. And when a monopoly is established because of one of these two causes, the process does not stop; any newcomer is free to try to get a piece of the market, to a degree that depends on the barriers to entry (which are partly governmental). If a monopoly becomes too lazy, it risks getting snapped up.
The same thing applies to the principle of using one's leverage in another field to compete more efficiently -- it is simply one of the ways that we have to capitalize on our initial advantages. The laws of the market do not suspend themselves because products are tied together; customers, and manufacturers, are still free to choose the package of their choice. And indeed we see that one-third of computer users still do not use the Windows operating system; nobody forced them to.
On the other hand, governmental intervention in the market in order to cut down a dominant player is not a help to competition -- it stops a successful company in its tracks without reason, frustrates the customers from reaping the benefits of their support, and helps companies that do not deserve, according to the market, to be helped. It suspends the process to let them get "off the hook," so to speak. Another consequence of such intervention is to hinder overall progress -- having to tread lightly in the field of possible actions makes for passive competitors.
We Anti-Trust YouThe arguments that propose that we cut down competitive monopolies in order to restore competition are, in fact, opposed to the natural order of offer and demand; they are anti-competitive. Like "pro-life" advocates, "pro-competition" advocates mis-label themselves as being the sole guardians of the free market - but that is very misleading and fraudulent. Like a conjuror, they misdirect the atttention of people from what's really going on.
To see how absurd this strategy would be in real life, imagine that Michael Jordan, or another star basketballer, got accused by the NBA of using his speed to leverage his total of points and that his monopoly on the league is based on unfair competition - and that he would be forbidden to shoot to the net after running for more than two seconds. How would you react?
Now, imagine that Stephen King, or another immensely known and popular writer, was accused of using his reputation to unfairly sell more copies than his book deserves. Courts of justice would then look into the situation, declare the writer as using predatory tactics, and would condemn him to stop putting his name on the cover of his own books. How would you react?
Now compare this with the situation we have examined. A widely popular software company uses its popular operating system to sell more copies of his other software packages. The judiciary system looks into it, and declares that the company is using unfair leverage, and is planning to either dismantle the company, or ensure that such leverage does not happen again. Do you see a difference? The difference is that this last scenario is quite real.
Going against the cost-reducing effects and efficiency of competition can be deadly. Therefore, we should expect a break-up of Microsoft to be all the more devastating -- as we could expect from fiddling with a company that is already well suited for competition. Research from the University of Texas has shown that breaking up Microsoft could mean a loss of as much as 30 billion dollars in development, marketing and support costs only (attributable to the new fragments of Microsoft operating separately), which would translate in even higher retail prices for the customer. But what's most important in terms of impact on the computer industry is the loss of integrative potentialities. The destruction of much-needed tie-in solutions will only increase the current frustration against incompatibility.
In a world where the key words are "integration" and "compatibility," this is not only devastating. It sets back the clock of technological advance, and wastes the time and money of users.
The underlying political philosophy behind such actions is nothing more than anti-producer and anti-consumer altruism. Behind the conceptual fog of excuses and semantics lies two main statements. First, that companies, and producers in general, exist for the sole goal of furthering society. Progress and employment must be subservient to the survival of the governmental superstructure. Secondly, that the consumer's choice is irrelevant. The consumers, who willingly made Microsoft a competitive monopoly (as we see with its market share), don't know what's good for them, and must be subservient to the survival of the governmental superstructure. In short, it all amounts to "we know what's good for you, now shut up."
The dilemma can be subsumed by imagining a boy being confronted by a schoolyard bully who tells him "stop using my swing or I'll �/@$� the shit outta ya." What do you do? Stand up to the bully and risk getting pounded, or keep a low profile and hope the bully doesn't notice you again? As for all other moral issues, it depends on the context of the situation. I just wouldn't want to be in Ballmer's place.
The government of the United States is fighting against freedom of action, nothing more, nothing less. The only way that this unfortunate situation can be resolved is either by a Microsoft victory in courts, or by defying the will of the government. By confronting the system with its continuous innovations and quality, perhaps Microsoft can topple the colossus before it topples the computer industry -- ironically, despite this same industry's outcry against the company that started the Windows revolution.[Visit Francois Tremblay's personal pages at http://www.objectivethought.com.]