»Home | »Philosophy  | »Advocacy | »Weblog  |»Terms
The Center for the Advancement of Capitalism :: www.capitalismcenter.org
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 doublespeak.

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.

Dr. 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.

 

Search the Center's Website

web capitalismcenter.org

Sign up for CAC's Newsletter
Keep up with the latest news—type in your e-mail address and click Go!

 


» Philosophy
Learn more about our organization and the ideas behind capitalism


» Advocacy
Learn about the Center's projects.


» Capitalist Book Club
Purchase the essential texts on capitalism.


» Media Center
News mentions, press releases and speakers.


» Feedback
Send us a comment or ask a question—we want to hear from you!


   

Copyright © 1998-2012 The Center for the Advancement of Capitalism. All Rights Reserved.
Email: 
info-at-capitalismcenter.org · Feedback · Terms of Use · Privacy Policy · Webmaster