by Raymond J. Keating
Small Business Survival Committee
Work hard, come up with a new or improved product or service, figure out how to market it, keep consumers happy, and you can succeed in this great country. A mighty task, to say the least.
If achieved, unfortunately, there is a price for success, namely, the costs of big, intrusive government.
Generally, the greater your success, the greater the costs imposed by government. Just consider progressive income taxes that the federal government, many states, and some cities impose. Here is a clear case of government punishing success. The more you earn, the greater the percentage of your income taken by the government.
Another clear case of government punishing economic success lies in the area of antitrust enforcement. Seek out improved efficiency through a merger, or simply serve consumers well enough to gain significant market share, and antitrust scrutiny too often follows.
Look at the case of Microsoft. Here is a U.S. company that is the global leader in operating systems and various software. The company gained impressive market share by serving consumers. What has been the response? Federal and state government antitrust lawyers and regulators have been pursuing the company since 1990.
For a dozen years, Microsoft has had to deal with government bureaucrats that understand very little about how the economy actually works. They fail to grasp that Microsoft must compete every day against current and future competitors, and that the only barriers to entry that exist in today’s high-tech global economy – other than stupid government policies, that is — are whatever natural restraints there might be on human creativity.
And these government bureaucrats and politicians seem to care nothing at all about the fact that Microsoft gained its market share by meeting the demands of customers. You would think that antirust regulators might a little leery of attempting to overturn the decisions made by consumers in the marketplace.
After long being hassled by government antitrust bureaucrats, Microsoft reached an agreement late last year with the U.S. Department of Justice and nine states in an antitrust case involving Internet browsers first brought against the company in May of 1998. In the settlement, Microsoft agreed to a variety of restrictions on its business practices for at least five years, and also would be subject to (and have to pay for) a full-time, on-site monitoring panel of three computer experts, who would have complete access to Microsoft’s software code, systems, books, records, and personnel.
Now, considering that the antitrust case against Microsoft has absolutely no basis in economic reality, and that the government brought its case at the behest of competitors — not consumers — who could not keep up in the marketplace, any findings against Microsoft, and related restrictions placed on the firm, certainly are unwarranted.
However, given the costs, looming uncertainties, the current economic climate, and penchant for bad law and convoluted economics to dominate in the antitrust realm, Microsoft made a reasonable business decision in arriving at this settlement.
After all, at one point, the original judge in this case, Thomas Penfield Jackson, not only had found Microsoft guilty of abusing so-called monopoly power, but actually ordered the firm be broken in two. Fortunately, some sanity prevailed as the U.S. Court of Appeals for the District of Columbia overturned much of Judge Jackson’s verdict, not only reversing the proposed break up but also overturning the ruling that Microsoft tried to monopolize the Internet browser market. The Appeals Court, though, wrongly left in place the finding that Microsoft abused its supposed operating system monopoly.
However, nine of the states – California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah, and West Virginia, along with the District of Columbia — rejected the proposed settlement, and continue to pursue the antitrust case. So now these states are back in court trying to impose even more draconian penalties on the firm, including actually urging U.S. District Judge Colleen Kollar-Kotelly to “go beyond the specific, past statutory violations” found by the court. That is, to say the least, an outrageous demand that could cripple Microsoft.
When government action hurts a business like Microsoft, the ramifications are felt throughout the economy, including by the countless small businesses that serve as consumers of Microsoft products, and/or as suppliers of goods and services to Microsoft and its employees.
It’s time for the state attorneys general who continue to pursue the Microsoft case to start acting in the true “public interest.” That means dropping their obsessive pursuit of this company, signing on to the Microsoft-Justice Department agreement, and finally allowing this firm to turn all of its attention and resources back to inventing, innovating and serving consumers.
Rather than punishing success, it’s time to get gover- nment off the backs of America’s businesses and entre- preneurs.