EDITORIAL

Hold cheers on antitrust 'trend'

U.S. District Judge Thomas Penfield Jackson deserves full credit for stating the obvious: Microsoft is a monopoly that has abused its power, has stifled innovations and has harmed consumers. One might be tempted to view the Microsoft ruling, after a yearlong trial, as an encouraging flexing of antitrust law, had it not come at the tail end of a generation of antitrust emasculation and corporate consolidation.

After all, President Clinton is expected to sign a banking deregulation bill that allows commercial banks, securities brokers and insurance companies to merge into a few financial service behemoths answerable only to the demands of avarice -- but insured by the public treasury.

Three years ago Clinton signed the telecommunications deregulation act that allowed the "public trust" of broadcast radio and TV licenses as well as cable monopolies to be concentrated in the hands of a few corporations that answer not to concerned viewers and listeners, but only to Wall Street.

Clinton's Department of Agriculture has watched the consolidation of agribusiness to the point where a few corporations control the nation's grain and meat supply while independent farmers are forced to accept the dictates of their corporate masters or quit the land.

His Department of Justice has been able to do little more than watch and wave at the record 4,728 reportable U.S. mergers in 1998, with a total value exceeding $1.2 trillion. The seven regional Bells that were created when the Bell System was broken up in 1983 have merged into four bigger Bells. MCI Worldcom's acquisition of Sprint, valued at $108 billion, would reduce the nation's major long-distance carriers to two. Exxon's $80 billion acquisition of Mobil would rejoin two pillars of the old Standard Oil Trust. And "category killers" such as Wal-Mart have wiped out independent businesses, drawing complaints of predatory pricing, without serious opposition from the Feds.

In the face of that, you have to wonder what Bill Gates did to deserve such scrutiny.

Well, for one thing, the high-tech prince of Redmond, Wash., neglected to grease the palms of lawmakers in the other Washington. In 1997, the New York Times reported, he and other Microsoft executives contributed a paltry $60,000 to Republican Party committees. In 1998, the year the Justice Department filed the antitrust action, Microsoft and its executives had to play catch up, contributing $1.3 million, with the bulk of the money going to Republicans. This year, the company's contributions of nearly $600,000 have been more evenly divided between Republicans and Democrats, according to Federal Election Commission records.

Meanwhile, the company's lobbying budget nearly doubled in 1998 from the previous year, to $3.74 million, and the Times reports Gates' minions are on pace this year to significantly surpass that figure. Microsoft mounted a lobbying effort against an increase in the Justice Department's antitrust enforcement budget. Eight days after Gates met with Republican leaders in June, House Majority Leader Dick Armey introduced what he called his "e-Contract," a list of Republican legislative initiatives that adopted Microsoft's view on the government antitrust actions.

Clinton proposed to increase the Antitrust Division 16.3 percent and the Federal Trade Commission 12.6 percent. The Antitrust staff, at 943 full-time positions, would still be below the 1980 level of 982. FTC staffers, at 1,042, would still be significantly lower than the 1980 staff level of 1,719. Still, the House cut $9.2 million and Senate cut $2 million from the president's request. Negotiations are proceeding. (By the way, a single antitrust case can save consumers millions of dollars. The Antitrust Policy Institute noted that when the FTC stopped the Staples/Office Depot merger last year, economists calculated the savings at $200 million per year.)

We asked Charles Mueller, editor of the Antitrust Law & Economics Review, what he thought of Judge Jackson's finding in the Microsoft case and how it relates to antitrust enforcement in general. Mueller replied:

"Literally thousands of 'consolidations' have taken place under Reagan/Bush/Clinton without opposition from their three respective Justice Departments. Indeed, all three of these recent national administrations have positively ENCOURAGED industry concentration/consolidation across the board, as in, [for example] the defense sector.

"So does the Justice effort in the Microsoft case portend, say, some sort of 'resurgence' of antimonopoly policy in America? Of course not. Microsoft has been 'singled out' for all the good POLITICAL reasons: (1) A score of politically-ambitious STATE attorneys general -- sensing an issue that could take them to higher office (governor, senator, and so on) -- put a lot of heat on Justice to 'do something' about Microsoft; (2) Bill Gates made himself politically vulnerable by crossing the line from friendly two-firm 'duopoly' -- the politically-correct formula for getting government approval of your industry's new 'consolidation' under Reagan/Bush/Clinton -- over into a coercive one-firm monopoly a la Rockefeller's 1911 Oil Trust; and (3) every Democratic administration needs to bring at least ONE high-profile antitrust case during its term in office in order to keep its own 'liberal' credentials suitably burnished, i.e., to ward off the charge of being 'pro-monopoly' like their Republican brethren.

"Finally, is Microsoft really being held 'accountable' by the U.S. government? Hardly. The case is a political fig-leaf. Nothing is going to happen to the Bill Gates monopoly. Bill and his lawyers know quite well that, whatever District Judge Jackson decides, it'll be promptly OVERTURNED by his superiors on the higher appeals court in Washington -- which is dominated by Reagan appointees and has never met a monopoly it didn't love. And that appellate victory for Bill will be similarly affirmed -- 8-to-1 -- by the U.S. Supreme Court, which is currently going through another of its recurring love affairs with economic monopoly.

"You're skeptical? Watch the price of Microsoft's STOCK. Any remedy that brought effective competition to its key market -- computer operating systems -- would probably cut 90 percent or more from its current per-share valuation. (Ex-monopolists typically go into a tailspin when confronted with real price competition -- long shielded by their monopoly power, their COSTS are always so bloated that they're dead in the water when their markets are opened up to competition from all comers.) If Wall Street thought Bill Gates was about to lose his monopoly, it would be SELLING Microsoft stock at a drastic rate -- plunging its price downward. That isn't happening -- and isn't going to happen. Wall Street employs a lot of very good antitrust lawyers and it's being told by them -- quite correctly -- that Bill is going to win in the upper tiers of the pro-monopoly U.S. judiciary. His monopoly will endure -- and will deeply scar America for decades to some."

So what do you do? Put some spine in your members of Congress. Senator Paul Wellstone (D-Minnesota) has proposed a bill to put a moratorium on mergers among large agribusinesses. The bill would keep the moratorium in place for 18 months, or until Congress enacts legislation to address the problem of concentration in agriculture. Of course, before that could happen, Congress and the president would have to admit that there is a problem.

The Sherman Anti-Trust Act, passed in 1890, the 1914 Clayton Anti-Trust Act and the 1936 Robinson-Patman Act are still on the books. Even the Republicans haven't dared to repeal them. They can, however, starve the enforcers and let the courts -- and now the World Trade Organization -- declare that antitrust laws interfere with the rights of multinational corporations to do business as they see fit. Your representative and senators should be home by now. Tell them to disarm the WTO, reverse the courts and give the antitrust enforcers bullets to preserve competition and to protect the public good. -- JMC


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