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King Klein

July 24, 2000

D.T. Armentano

Joel Klein, Assistant Attorney General and round-one winner over Microsoft, is certainly puffed up these days and quite carried away with himself. He recently told a London gathering of the American Bar Association faithful that antitrust regulation is now, get this, the only "legitimate form of government intervention."

Oh, really?

Klein also noted approvingly that the European Union had helped kill the Worldcom/Sprint merger and he called for the creation of a GLOBAL antitrust authority, conceding that it wouldn't happen anytime soon.

But, hey, who made this ex-Clinton White House lawyer King of the Universe? And where does he get off asserting that antitrust is "legitimate" government intervention and that it would be smart to create a NAFTA-style international antitrust regulatory authority?

Antitrust regulation can never be "legitimate." Every application of antitrust law is a violation of private property rights. Under a private property rights regime, it is the owners of property (and only the owners) that have the right to use it in ways they choose so long as the property rights of non-owners are not infringed. This peaceful use of property is what constitutes "legitimate" use.

In the WorldCom/Sprint proposed merger, for example, only the respective stockholder-owners (or their trustees) had the legitimate right to decide whether that merger made sense. They decided that it did and voluntarily agreed to merger. Thus when Klein and his allied European antitrust thugs intervened to stop the merger, that intervention violated the property rights of all of the shareholders and was illegitimate. Ditto for every other antitrust intervention.

King Klein would respond that this is not the theory of "legitimacy" that he has in mind. After all, property rights are an "old fashioned" out of date notion that no one in law school (or at the Department of Justice, apparently ) really takes seriously any more. No, when he says "legitimate" he likely means that antitrust promotes the "public interest" by protecting consumers from Big Business monopoly.

Ah, yes, the "economic" legitimacy of antitrust law. Antitrust as the protector of the poor dumb consumer. Well, Joel, sorry to disappoint you again, but that theory isn't legitimate, either. Consumer protection is probably not the reason antitrust laws were created in the first place.

There is much historical evidence (especially at the state level) to suggest that the laws were intended by business and agricultural interests to restrict and restrain efficient competition, much like tariffs and quotas still do in international trade.

But regardless of original intent, any objective study of antitrust cases would reveal that the laws have never been used to protect consumers from monopoly power. On the contrary, they have been used by government and private plantifs (90% of all antitrust cases are private) to attack and destroy successful companies while protecting their inefficient competitors.

It's no accident that in all of the classic antitrust cases in business history, the indicted firms were expanding output, innovating rapidly, and lowering their prices. Antitrust has never been consumer friendly and the antitrust establishment's protestations to the contrary simply won't wash with the facts.

The most powerful refutation of Klein's legitimacy theory is his own evil witchunt of Microsoft. The evidence that Microsoft was pro-consumer was so overwhelming that neither the government attorneys nor Judge Thomas Penfield Jackson could refute it; so they ignored it.

Nevertheless, the fact remains that Microsoft had no monopoly in operating systems (there were at least a dozen alternatives with many millions of users); had licensed the Window's software to just about anyone (no restraint of trade); had lowered prices and improved the quality of the product (adding a browser at no charge); and that the bulk of the complaints about Microsoft's behavior came from competitors, not consumers. And unlike many previous cases, the public had not been fooled by the phony legitimacy arguments and the looney break-up remedial judgment: they stand overwhelmingly against Klein's trustbusters and for Microsoft.

But wait. How can antitrust be "legitimate" in this case if the public has not been harmed and even thinks that the case is totally absurd?

Well, say Klein and his ilk, the consumers and the public just don't know what's really in their own long-run interest. You see, that's why we have government and antitrust regulation. And that's why its legitimate and that's why super-smart lawyers should run it on a global basis. And if you think that this is all totalitarian and just plain nuts, well you just don't get it.

But you will.


* D. T. Armentano is author of
Antitrust: The Case for Repeal
(Mises Institute, 1999) and Antitrust and Monopoly (Independent Institute, 1990). Send him MAIL.

See also, Mises.org on Microsoft.

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