A Double Standard of Justice Toward Microsoft

In 1988, Microsoft offered manufacturers of personal computers a considerable discount on the licensing fees they pay to install MS-DOS and Windows operating system on new PCs prior to their leaving the factory. In exchange it required manufacturers to pay for each computer they make, whether or not it included MS-DOS. Microsoft now requires PC manufacturers to either install their Internet Explorer (IE) Web browser icon as an integrated part of Windows or lose their licenses to sell these operating systems on their computers. According to the U.S . Department of Justice, executives from Compaq, Gateway 2000 and Micron, among others, testified on how Microsoft warned them it will revoke their licenses if they in any way modify Windows or remove their IE icon from the desktop start-up screen.

The latter allegedly leaves Microsoft in violation of its 1995 anti-trust "settlement," a settlement based on a "consent decree" the Justice Department imposed on Bill Gates, which he signed to avoid the threat of government's forcible dissolution of his company.

These testimonies prompted Attorney General Janet Reno to ask a Federal court to demand Bill Gates, Microsoft's founder and Chairman, to either drop his requirements or pay a fine of $1 million daily. The suit depends primarily on whether IE remains an independent product of Windows or is already an integrated feature of it. The latter allegedly leaves Microsoft in violation of its 1995 anti-trust "settlement," a settlement based on a "consent decree" the Justice Department imposed on Bill Gates, which he signed to avoid the threat of government's forcible dissolution of his company. These demands threaten an antitrust suit against Microsoft's planned integration of Internet Explorer and Windows 98. Since IE will be an integral part of that upcoming operating system, these suits contain grave implications for Microsoft's future.

"Microsoft is unlawfully taking advantage of its Windows monopoly," Janet Reno said on issuing her demands, "to protect and extend that monopoly and undermine consumer choice.... Today's action shows that we won't tolerate any coercion by dominant companies in any way that distorts competition."¹

When the offering of innovative, cheaper, popular products and honest, assertive, long-ranged business practices are analogous to "bullying" -- that is, the initiation of physical force, it begets the actual bullying by government of dominant companies like Microsoft.

"Force," "coercion," "monopoly," "unfair," "competition," "anti-competitive," "consumer choice" are all terms used manipulatively by bureaucrats and many others, particularly in the media, to distort Microsoft's abilities and practices. The common fears of a company's dominance in a certain market are that it prevents others from competing against them on a "level playing field" or at all, thus harming or eliminating competition and "consumer choice" and discouraging innovations, thereby fostering lower quality products at higher pricesóall of which constitute "monopolistic," "unfair," "anti-competitive" practices. As a contributor to a USA Today Internet message board analogizes Microsoft's take-it-or-leave-it requirements: "[T]hink of yourself as being in a playground training, trying hard to get better, learning. Then the playground bully comes along and with a swipe of his fist, or a kick, destroys all you have learned. All your skills, your enthusiasm, your morale." Similar analogies have been applied to all of Microsoft's abilities and practices. When the offering of innovative, cheaper, popular products and honest, assertive, long-ranged business practices are analogous to "bullying" -- that is, the initiation of physical force, it begets the actual bullying by government of dominant companies like Microsoft. By distorting what constitutes capitalism's basis, voluntary trade, and government's proper role in upholding them, the Justice Department hides that it -- not Microsoft -- is guilty of initiating coercion . Therefore, that which is ultimately being distorted is justice towards Microsoft.

Since Apple dis-allows computer consumers to buy their operating system unless they buy their computer, why does government permit Apple to "coerce" consumers into buying its costly hardware?

If Microsoft's alleged "coercion" is based on its dis-allowing PC manufacturers to install its Windows program without including the IE browser, if this is allegedly "anti-competitive" and "unfair," why then has Apple been exempt from these charges? Since Apple dis-allows computer consumers to buy their operating system unless they buy their computer, why does government permit Apple to "coerce" consumers into buying its costly hardware? Is this not, according to the arbitrary anti-trust laws on which the charges against Microsoft are based, a violation of "intent to monopolize" or "price gouging" -- i.e., setting prices to high? Apple, argue the bureaucrats and socialists, is without a dominant market share and therefore should be held to lower standards.

These distortions and double standards stem, in part, from the false premises, such as "consumer choice" and "competition," on which many people, particularly conservatives, base capitalism. But before an individual can offer his products on a market for others to choose to buy or compete against, government must protect his freedom from coercion to create and keep his products. Capitalism, therefore, is based on individual rights, which subsumes the producer's right to exercise his mind to create and be the sole property owner of his products, which subsumes his right to do whatever he chooses with them. Thus,

The fear that a dominant company will "monopolizing" a market and thereby eliminate most or all of its competitors, is rooted in the lumping of a company's earned free-market dominance with a coercive monopoly, which exists when a market is allotted exclusively to a company by government forcibly denying competitors from entering it.

Bill Gates has the right to destroy or withhold his products, or sell them at astronomical prices, or at prices comparable to or lower than market value -- or give them away, as he is doing with Internet Explorer. All of these legitimate actions, however, are potential violations of anti-trust, since its arbitrary laws dismiss individual rights as subordinate to the bureaucrats' whimsical standards, be it "competition," "consumers," "the public good," or whatever they feel is inviolable at the moment.

The fear that a dominant company will "monopolizing" a market and thereby eliminate most or all of its competitors, is rooted in the lumping of a company's earned free-market dominance with a coercive monopoly, which exists when a market is allotted exclusively to a company by government forcibly denying competitors from entering it. And it is this abuse of government's legalized monopoly on coercion to give others unearned values that Bill Gates is unjustly being lumped with when Microsoft is accused of possessing a "monopoly" in computing.

Microsoft's dominance was gained not through such coercive governmental measures but by offering higher-quality, lower-priced products that consumers judge to be more worthy of buying than those offered by its competitors. If a town's fruit-eaters buy only from a vendor who offers fresh, delicious, cheap fruit and the vendors with comparatively inferior, costlier fruit are thereby eliminated from that market, "fruit-eater choice" has not been "undermined." Similarly, it is precisely because computer manufacturers and most consumers choose to buy Microsoft's products over others that its dominance exists and is no threat to limiting "consumer choice." Instead, it is reflective of the predominant choices of consumers. Those consumers who may dislike Microsoft's products have no "right" to demand more choices. Under laissez-faire capitalism, no matter the market share a company has earned in a particular market, individuals are always free to offer their alternative products to possibly earn a share of it.

If a town's fruit-eaters buy only from a vendor who offers fresh, delicious, cheap fruit and the vendors with comparatively inferior, costlier fruit are thereby eliminated from that market, "fruit-eater choice" has not been "undermined."

Microsoft was once a "little-guy" company free to innovate and become a potential competitor to Apple and IBM, the two "giants" of the computer industry. Indicative of his long-ranged, successful business practices, Bill Gates licensed his operating systems to PC manufacturers, an option that Apple dismissed; and he believed less expensive PCs to be the future of computing, which IBM mistakenly believed lied in costlier mainframes. Thereafter, these two "monopolists" lost their dominance, not primarily because of government's regulation of them but because of a comparatively unknown company who's innovations cut the price of useful software by more than half, which helped expand the market and division of labor; created roughly a hundred billion dollars in new wealth and technologies; and enabled many people to become rich -- including its competitors.

Microsoft has compelled other companies to compete not on their past laurels, which fosters stagnation, but by pursuing its innovative laurels. And despite Microsoft's dominance, the rapidly innovating industry of computers subjects it to intense competitive pressure. Continuous innovations and the expanding division of labor creates competition within and outside of computing; similar to how the Internet's electronic-mail creates competition for the post office's coercive monopoly. That competition helps encourage innovations is true, but on a free market, one company's domination of a market is never a license for it to stagnate, since competition always and prevalently exists. The fear that it will stagnate, drive up prices and limit or eliminate competitors and "consumer choice" are thus deceptions.

Netscape and Sun Microsystems, Microsoft's primary competitors, do not seek freedom of competition, but rather the abuse of government's coercive levers to guarantee they will possess unearned competitive positions.

Still, these deceptions and distortions are widely upheld as truth, and from this arises government's efforts to erode Microsoft's dominance, efforts that actually harm the innovations, "competition," and "consumer choice" they allegedly foster. "Telling us we can't improve Windows," Brad Chase, a Microsoft vice president, said, "is telling us we can't compete." Said Bill Gates when asked his thoughts on the anti-Microsoft campaign of "consumerist" Ralph Nader: "It's kind of funny that it's the computer industry, where the prices come down and products get better and nobody has a guaranteed position, that's the one that somebody would look into."² As Vincent Penzo, a Senior Systems Analyst in Boston, writes, "When individuals are prevented from taking advantage of lower prices by anti-trust laws, they then have to pay more for their goods, and therefore must also own fewer of them. This impedes the accumulation of wealth by individuals for the sake of one group who use the levers of government to protect 'their' share of the market."³

Netscape and Sun Microsystems, Microsoft's primary competitors, do not seek freedom of competition, but rather the abuse of government's coercive levers to guarantee they will possess unearned competitive positions. Such an artificial "guarantee" requires that the dominant competitors in a certain field, such as Microsoft, be denied their right to compete with or expand on their full potential. Thus, enacting artificial competition into the market, via anti-trust laws, is effected by the only possible means: forcibly undercutting the abilities of the dominant company -- that is, crippling Microsoft's abilities so they'll be reduced to their competitors level or "playing field." But when the ablest producers are sacrificed to provide their less-able competitors with an unearned market position, then innovations are undercut, fair competition eliminated, and consumers are harmed, since inferior, costlier products prevail instead. All these injustices cannot be effected without first distorting and maligning legitimate abilities and practices, of the kind Microsoft possesses and their competitors are (presently) unable to match, as "coercive," "unfair," "anti-competitive." The Justice Department's applying of these terms to Microsoft are what psychologists call projection, since, in reality, it is only government who is guilty here of perpetrating them.

Antitrust's fundamental purpose is to guarantee that no company may considerably out-perform others, so that "competition," the alleged foundation of capitalism, is "level" and "fair."

For even if all companies in a certain market were to compete on a "level playing field" -- that is, possessing equal share of that market, the abler companies will inevitably out-perform others, sometimes considerably so; just as outstanding athletes, such as football's Dan Marino and basketball's Michael Jordan, inevitably emerge in their respective sports. Antitrust's fundamental purpose is to guarantee that no company may considerably out-perform others, so that "competition," the alleged foundation of capitalism, is "level" and "fair." If the ablest of men must be bound because their competitors lack their abilities, if Mr. Marino and Mr. Jordan must compete with one of their hands tied behind them, when, in reality, justice holds that one has a right to keep, use and maximize what they've earned or inherited, without being forcibly interfered with, then such practices are undoubtedly coercive, unfair, anti-competitive -- because they are fundamentally anti-reality.

The current anti-trust interference of Bill Gates' abilities and practices is based on his alleged breach of a "consent decree" he signed in 1995. The suit hinges on whether "Microsoft retains the right to develop integrated products," to which the decree states that it "shall not be construed to prohibit Microsoft from developing integrated software products."⁴ But even if Mr. Gates did break his "consent," it is morally immaterial, as it was made under the threat of being sued for violating other harsh anti-trust laws. Therefore, the Justice Department's suit is illegitimate, since it attempts to force Microsoft from exercising its right to set and exercise the terms of its contracts.

...even if Mr. Gates did break his "consent," it is morally immaterial, as it was made under the threat of being sued for violating other harsh anti-trust laws

Legally, it should be immaterial if Microsoft's "monopoly" on Windows gives PC manufacturers little choice but to accept its requirements. To use Microsoft's property, they are legally obligated to abide by its take-it-or-leave it terms. If to them the terms are disagreeable, they are without a "right" to ask government to force Microsoft to supply Windows. "The alternative a business presents you with in a free market is: 'increase your well-being by trading with us, or go your own way,' " writes Harry Binswanger, a professor at the Ayn Rand Institute's Objectivist Graduate Center. "The alternative a government, or any force-user, presents you with is: 'do as we order, or forfeit your liberty, property, or life."⁵ Where then, in setting and exercising the terms of the use of its property, is Microsoft guilty of "coercion"? If Microsoft's withholding of Windows proves to harm certain companies, this expertly exemplifies how innovative, long-ranged-thinking, assertive businessmen often prevail. "[Gates'] rivals' fear is in a way the sincerest testimony to Gates' relentless business drive," writes U.S. News & World Report on a related issue. "Two years ago, his company was late to recognize the potential of the Internet. Industry observers speculated that Web browsers, like Netscape's Navigator, might make Windows irrelevant and end Microsoft's supremacy. Last week's federal complaint showed how far the company had come: It was accused of preparing to dominate the technology once considered its undoing."⁶

Nevertheless, as the New York Times reports, "The most important antitrust issues no longer have to do with pricing", said Assistant Attorney General Joel I. Klein, "they have to do with using innovation, to gain an unfair competitive advantage."⁷ The Justice Department must now try to regulate a pure product of mind -- thought itself.

With the current actions against Microsoft, those who envy the competent, the innovative, the successful men of the mind shed more of their false robes of justice to further reveal the naked irrationality of the antitrust laws they uphold. Antitrust ultimately distorts reality so as to hide how government -- not Microsoft -- is initiating coercion, to cripple or cease production and voluntary trade; thereby violating an individual's rights that is its function to protect.

Unless these distortions of freedom and capitalism are fully exposed to reveal the irrationalities and injustices they embody and are replaced by proper philosophical premises, both these values will continue to erode, as Bill Gates and independent men of the mind like him are forcibly reduced to operating with more of their abilities shackled. Then so goes the fantastic values that countless individuals gain from their production.

References:
1) The New York Times (10/22/97); 2) Newsweek (11/3/97); 3) Atlantis (August/September 1995); 4) U.S. News & World Report (11/3/97); 5) The Objectivist Forum June, 1983, p.2; 6) (11/3/97); 7) (10/23/97)

Joseph Kellard is a journalist living in New York. To read more of Mr. Kellard's commentary, visit his website The American Individualist at americanindividualist.blogspot.com.