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Microsoft & Coercion

January 1, 1998

Tags Big GovernmentCorporate WelfareLegal SystemU.S. EconomyFree MarketsThe EntrepreneurGlobal EconomyEntrepreneurshipMonopoly and Competition

During the press conference on May 19, 1998, announcing the broad
range anti-trust action of the Department of Justice against Microsoft, there
was just one piece of evidence cited against the company that pointed
to some effort to
subvert consumer choice. In an internal memo Microsoft employed the
phrase
"make the customer" use one of the company's products. The official
from the
Justice Department pounced upon this like cats pounce on a mice, barely
restraining himself from yelling out loud "Gotcha."

It looks like Microsoft is not vulnerable to any other charge. It
hasn't got a
restrictive monopoly in any of its products or services--the market
is wide open for
anyone to enter who can match or top Microsoft's economic performance
and
indeed there are four or five competing operating systems out there,
only not
too many of us make use of them. The fact that only a few can compete--in
what Professor Richard McKenzie of UC Irvine calls "a commercially
viable way"--is indicative that Microsoft isn't acting like the only sort of
monopolist that threatens the market,
one that can shut out competitors who would do more for customers for
less money.

The company does dominate--or rather "has prevailed more than any
other in"--the market,
but that is not what monopoly is about.

Nor is Microsoft a monopolist in the sense of having gotten the
government to erect legal barriers to entry by others, which is what
some of the so
called Robber Barons did and why the anti-trust laws were enacted in a
sadly hysterical fashion
(not because free enterprise lead to monopolies). The real remedy for
such state erected and
maintained monopolistic trade is to repeal all the government perks
granted to the firms that
made use of them.

The only thing Microsoft has done that irks some people is what every
economic
agent likes to do, gain long term, future-oriented loyalty from
customers and subcontractors.

That means Microsoft has given folks a good deal in return for which
they have committed
themselves to work with the company.

That is what freedom of contract implies: you have the right to
voluntarily
enter into legally enforceable agreements with other economic agents to
what
both of you regard as mutual advantage. But one result is that others
are for
a while not legally able to enter into similar contracts with these
agents.
Like when you lease your house to someone at $1400.00 per month but
next week
someone else offers you $1600 per month but you no longer have the
option to
take the offer. No one has forced you to be in this fix but you may
not like it.

Some of Microsoft's competitors do not like the system of freedom of
contract
that makes this possible because they were shut out of some deals when
Microsoft made its own. Like your friend who married the girl you'd
like to have married. So now you want the marriage annulled by the government!
His wife might too, but you cannot just bolt once you
have made a binding contract. Sadly, sometimes you are very tempted to do
so and if the Department of Justice of the United States of America backed you
up, you might in fact do it.

So what is left against Microsoft? Well, in some memos they
used
infelicitous language. But we all do this. Whenever I write a column,
I'd
like to make you believe what I say. Teachers want to make their
students
listen, pay attention, do their homework, etc. Artists would like to
make us
like their works, scientist accept their findings. (If anything, it is
the government
that is working to make us do what they want -- e.g., give up smoking.)

"To make someone do something" may be taken to mean, at worst,
coercing or compelling them against their own will. But it could also
mean
influencing, persuading, getting them to do it by various peaceful
ways.
Often folks, though, do not realize that when they agree to one thing,
they have also agreed to another. The meaning of the original
agreement is
not always before their minds, so they are surprised when the
implication is
made evident to them. Sometimes the implication is not readily made
evident,
precisely to enable one to sneak it in there. That is exactly why the
market
has a cautionary principle associated with it: "Let the buyer beware."

It is
not the seller's responsibility to point out what pitfalls may await
the
buyer. Or vica versa--we are capable of looking out for ourselves.

The ethics of the market is not the same as the ethics of friendship.
I have no doubt that sometimes Microsoft, Inc., has tried to sneak into
a sale or contract a product or service which the buyer wasn't aware of
at the
moment, although could have become with some careful attention or
reading of
the small print. OK, so people in the market place sometimes resort to
sneakiness--who doesn't? Taking advantage of another's lack of full
attention is something people do all the time. Where would athletic competition be without it?

But should they be protected by government against these mistakes?
What will that make of government? It will become our master in all things, and free men and women have no place for such a government in their society.
That is one of the main reasons so many have jumped to Microsoft's
defense.

There's one other point some have already noted but bears repeating:
Microsoft--in contrast to the companies that have ganged up on
it--seems to be paying now for its refusal to make huge campaign
contributions to
politicians who might otherwise have stood in the way of the Department
of
Justice's actions against the company.

Notice how there is hardly
anyone in
government raising a finger in defense of Microsoft's free trade
rights. Why?
Well for several possible reasons. For one, few in government really
understand free trade at all. But another reason is that Microsoft has
done
exactly what many of those folks in Washington preach: make no large
campaign contributions and do not try to buy politicians. But since government
meddles
with economic affairs a great deal, not having anyone up there in one's
pocket
can become a major liability. Microsoft is, it appears, paying for
being
naively idealistic.


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