In Case You Thought Anti-Trust Was About Consumers

I could spend all day discussing the follies of anti-trust law.  But one of the memes that still seems to hang on is that anti-trust was designed as a form of consumer protection, with the government protecting consumers from the monopoly power of consolidated enterprises.

I am not enough of a business historian to comment on whether anti-trust has ever been used for consumer protection, but it is clear that it is not any more.  That has been one very expensive lesson we can all learn from the Microsoft anti-trust cases, both in the US and Europe. 

If you remember the US cases, Sun, Netscape, Oracle and other Microsoft competitors, having failed to best Microsoft in the marketplace, went running to the FTC to get them to sit on Microsoft for them.  And they were successful, with a series of high-profile settlements.  Nowhere was there even a hint that these cases were about the consumer -- in fact, the settlement demanded was to remove functionality and free add-on components from the Windows OS, making it less attractive to consumers.

We can see this again in the recent decision by an EU court, which seems very happy to use anti-trust law to step on an American competitor in favor of local companies (my emphasis added).

Microsoft was fined $357 million, on top of the record $613 million
fine it paid in the original order. It also faces new penalties of
$3.82 million a day beginning July 31....

The commission has said that it is concerned about Vista's Internet
search capabilities and method of managing digital rights. Regulators
also are worried about the implications for competitors of a new
technology for saving documents that is similar to the Portable
Document Format developed by Adobe Systems Inc.

Microsoft's chief crime is not doing enough to help competitors compete against them:

The fines announced Wednesday come after the EU told Microsoft to
supply "complete and accurate technical specifications" to developers,
so they could make software for servers that help computers running
Windows, printers and other devices on a network talk to each other. It
accused Microsoft of using its monopoly position with Windows to elbow
into the server software market.

Kroes said Microsoft's earlier efforts had not come even close to a readable manual developers could use.

Again, settlements are taking the form of defeaturing the product consumers get:

Smith said Microsoft had suggested various ways it could offer Vista in
Europe, to address concerns about XPS. One option is to ship Vista
without it, while another is to include ways for PC makers or others to
either remove certain XPS utilities or make them invisible.

And, by the way, this certainly gives one a lot of confidence in the due process the courts in Europe are going to give you as an American:

"In some ways, these fines are only partially about complying with the
... prior case, and half about sending a message to Microsoft that the
European Commission is not going away,"

You get that?  It sounds like a mafioso beating someone up because they didn't show him enough respect.

By the way, I am frustrated with Microsoft and their pricing as well.  Rather than run to the government, though, I have employed this and this and this.

  • dearieme

    If you wish to understand the EU, just think of it as "Vichy France by other means".

  • http://smilerz91.blogspot.com Chris

    All of the hullabaloo about Microsoft starts from the premise that Microsoft is a monopoly. Giving products to customers for free (media player, et all) is bad because Microsoft is a Monopoly and forces competitors out of business. Nevermind that none of them have actually gone out of business.

    Charging for products and services (Microsoft's new security suite) is bad because Microsoft should be providing those services as part of the core OS. Since Microsoft is a monopoly they can sell deficient products and force consumers to pay more. Nevermind this is the exact practice that brought the original MS anti-trust suits.

    Anti-success advocates have a theory for how every business practice is anti-competitve. Charging too little is anti-competitive. Charging too much is gouging. Charging the same as everyone else is collusion. Success is bad, central planning is the only answer.

  • http://www.commercebucket.com/story/328/ Anonymous

    In Case You Thought Anti-Trust Was About Consumers

    Coyote Blog looks at the origin of Microsoft's anit-trust troubles.

  • SP

    I took something of a "history of anti-trust" class in the form of my anti-trust class in law school, which chronicled the major cases from early to recent.

    As you might expect, there was not a single case in which the defendants had cornered the market and then raised prices. Not a single defendant was actually guilty of the very thing anti-trust was supposedly created to protect against. This didn't matter, however, because the theory was put forth that legal action can and should be taken against a company before they execute that final step of ripping off the customers as a precaution.

    In fact, as I recall, there were two major schools of thought on this, one coming from Chicago one from Harvard and they were named accordingly. The Chicago theory was that we should wait until after an injury has occured to sue. The Harvard theory was that if a business met a profile of a monopolist, then it could be sued right away, because the occurance of a future injury could be assumed on the basis of the profile. The Harvard theory won the day.

  • http://www.two--four.net/weblog.php Billy Beck

    One of the most hilarious books in my library is a little thing entitled "Big Blue: IBM's Use And Abuse Of Power -- The Truth About IBM's Success And The Ominous Implications Of Its Stranglehold On The Information Society", by a guy named Richard Thomas DeLamarter. He was a "senior economist for the Justice Department who worked on the [antitrust] case against IBM for eight years." His dire warning was published in 1986.

    Final Jeopardy answer: "PC Jr."

    Please state your response in the form of a question. (cue theme music)