Judge Jackson's Findings of Fiction
By Dr. Edwin A. Locke, Ph.D.
The Center for the Advancement of Capitalism
Judge Thomas Penfield Jackson has
released his “findings of fact” in the Microsoft antitrust case. While his
report did contain some correct information—such as the truism that a
successful company tries to defeat its rivals—the central claims of his
report are blatant falsehoods. Let us examine five of these fictions.
Fiction #1: Microsoft is a “monopoly.” There is no such thing as a
private monopoly. Only the government can forcibly prevent competitors
from entering a market. Microsoft has attained dominance in the software
industry, but dominance is not monopoly. Market dominance has to be earned
through a long struggle, by providing better products and better prices
than anyone else.
Dominant companies who falter (as did Xerox, IBM, General Motors and
Kodak) will find their market share eroded, sometimes very quickly. There
is no threat from these dominant players so long as their competitors are
legally permitted to enter the field, invent new products, and combine
with each other to gain the needed market power.
In a free market, a dominant position can only be sustained by continually
providing new products and services that are better than other firms’
products. Paradoxically, Judge Jackson recognizes this fact but condemns
it. Microsoft’s innovation, its continual product upgrades, its millions
spent on research and development, are cited by Jackson, not as evidence
that Microsoft has earned its position, but only as evidence of a
conspiracy to “stifle” its competitors.
Fiction #2: Microsoft’s “monopoly power” allows it to “coerce” its
customers. A private company has no power to force consumers to do
anything. Did Judge Jackson find that Microsoft threatened to beat people
up or throw their bodies into the East River if they bought the wrong Web
browser? Of course not. The only "leverage" Microsoft has is the leverage
it has earned by producing a product that people want to buy.
This economic power, the power of voluntary trade, is fundamentally
different from political power, the power of the gun. Yet Judge Jackson is
eager to erase this distinction. Thus, such actions as upgrading a product
to match the features offered by a competitor, distributing a product for
free, or negotiating favorable terms with business partners—all of them
normal and beneficial business practices—are presented by Judge Jackson as
if they are a nefarious, mafia-like conspiracy to oppress the public.
Fiction #3: Microsoft harmed consumers. This is certainly news to the
millions of people worldwide who value Microsoft products enough to make
the company and its founders rich. Most bizarre is Judge Jackson's claim
that Microsoft harmed consumers by giving away its Web browser, making it
unprofitable for other firms to sell their browsers. Any sane consumer
would be delighted to get a product for free rather than paying money for
it. To speak of receiving free software as a “harm” is Orwellian
Fiction #4: Microsoft is a threat to consumers because it "could" raise
its prices. Under this criterion, anyone could be prosecuted for
anything. Do you own a kitchen knife? Then you
might stab somebody—so should the government put you in jail?
Microsoft has the right to sell its product for any price it chooses—but
anyone familiar with the history of business and with Economics 101 knows
that market leaders have a selfish interest in keeping their prices low.
Why? Because they make a lot more money by creating a mass market than by
creating a product only the rich can buy. Henry Ford understood this. So
did Bill Gates. Clearly, Judge Jackson does not.
The only basis for his conclusion is the caricature of the successful
corporation as a vicious “Robber Baron” which, even if it is not
“exploiting” consumer now, is merely waiting for the opportunity to do so.
Fiction #5: Blocking Microsoft's ability to compete will foster greater
industry innovation. A private company, with no power over consumers
but the power conferred by offering a useful product, is branded by Judge
Jackson as dangerous. But far-reaching government intervention in the
software industry, including the massive use of force to shatter Microsoft
and control its business practices, is presented as an attempt to spur
innovation. Only those who believe Al Gore invented the Internet could
take this argument seriously.
What Judge Jackson really objects to is the fact that Microsoft defeated
its competitors, i.e., that it was successful. The real meaning of his
“findings of fact” is that the best brains must be crippled, so that
lesser brains will not have such a hard time succeeding. He and the
government prosecutors whose arguments he is echoing do not want to foster
innovation; they want to sacrifice the best and the brightest in the name
of egalitarianism. They want the playing field leveled by coercion so that
no one can rise to the top.
What consumers need is an antidote to the fictions peddled by Judge
Jackson: the recognition that businessmen have a right to succeed by
trading their products in a free market.
Edwin A. Locke is Professor Emeritus of Motivation and Leadership at the
Robert H. Smith School of Business at the University of Maryland. An
internationally renowned behavioral scientist, Locke's work is included in
leading textbooks and acknowledged in books on the history of management.
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