Acton Commentary

Microsoft's Innovation, Service, and Foresight Result in Consumer Trust and Government Antitrust Action


April 3, 2000, marked a dark day for consumers and advocates of the free economy, as a federal court decided in favor of the U.S. Department of Justice (DOJ) in its antitrust case against Microsoft. The court has 30 days from that date to outline a remedies phase, in which it is expected Microsoft will be issued penalties for its “monopoly” share of the market. The court is reported to be considering a breakup of Microsoft into two or three separate parts, on grounds that the status quo is incompatible with a bureaucrat's view of what market competition should look like. The claim is suspect at best, and just because the government proposes the idea does not make it right. After all, it is not unreasonable to suspect that the government may take into account the desires of special-interest groups that would profit from a Microsoft break-up more than it will consider the wishes of consumers: a recent Zogby poll indicated that a majority of Americans disagree with the suit against Microsoft and that they feel antitrust action would be bad for consumers.

What about the moral and ethical implications of antitrust action against Microsoft? In the same way that the free economy is based on a moral foundation (a foundation which includes private property and the right to contract and create) there are moral implications of such a severe intervention as the DOJ now proposes. Even if a Microsoft break-up would qualify on technical grounds as an “efficient” solution, there are moral reasons to consider its long-term implications for human liberty itself.

Rev. Robert A. Sirico, president of the Acton Institute, punctuated this issue during a recent speech in Detroit when he asked, “To whom do large companies and new technologies belong? To the companies that discover, develop, and market their wares, or to government regulators to plunder and redistribute when they see fit? So long as we recognize that everything must have an owner, those are really the only two choices.” The market assigns property rights based on traditional rules that can be seen to resonate with most religious traditions: property that is acquired justly and owned lawfully cannot be stolen by either private or public entities. If the property rights rest with the managers, the employees, and the stockholders, the primary decision-makers in how those rights are exercised (provided there is no fraud or theft) are the owners, managers, and stockholders.

Father Sirico asked, “In this case, what precisely has Microsoft done wrong? Even when considering the court's and the regulators' opinions, it is not being accused of any traditional sins, like stealing, committing fraud, or breaking contracts. Being an aggressive competitor--meaning the attempt to stay ahead in the service of consumers--is not a crime in a free enterprise economy, until it comes to antitrust, in which case the firm is harassed in some indeterminate period when it reaches the highest point of its success.” Moreover, it is not even clear that the social good is achieved by arbitrarily and violently attacking Microsoft's profits and structure based on regulatory intervention. Neither is it clear that whatever social good may come of antitrust action outweighs the dangers of permitting regulators to make extreme decisions about who should win or lose in the marketplace. In one example of bureaucratic excess, several state attorneys general were so eager to participate in the “taking” of Microsoft that their involvement was a major factor in the dissolution of mediation talks between Microsoft and the DOJ.

But has Microsoft, as the judge’s decision implies, merely enriched itself at the expense of the common good? Consider that the main contribution of Microsoft has been to democratize the technological revolution. It has made useful technology available everywhere at the lowest possible price. People complain about the “Windows” operating system and all its bugs, but its success in the market is evidence alone that it has served the needs of many, better than other products on the market, if not always in accordance with its competitors’ wishes. “We can never be reminded enough that profit in a market economy is a signal that a company is doing right by its customers, insofar as it is possible to do so under present market conditions,” Father Sirico commented. It has even been shown that Microsoft’s presence strengthens the consumer’s position in the market; according to Josh Mathis of American Technologies Leadership, studies show that every time Microsoft enters a technology market, prices of the industry as a whole drop while innovation tends to rise.

The notion of fairness in a free society requires, at minimum, that the same standard of rule enforcement be used on everyone. But the antitrust suit against Microsoft requires a special focus on a single company simply because it succeeded where others have failed--a focus that involves regulations that are often arbitrarily applied and capriciously interpreted.

Is it moral or immoral for a company and its stockholders to reap the financial benefits of superior innovation, service, foresight, and marketing? That is the ethical question at the heart of the Microsoft case.

Microsoft is a true success story, a company that shares the products of its success with society. Indeed, it is by service to society that its success has come. These benefits should not be stripped by bureaucrats who may or may not have consumers’ best interests in mind. Father Sirico summed up how the free economy has allowed both Microsoft and consumers to prosper: “It's true that self-interest can serve a public benefit in a market economy. The crucial factor in business success is not greed but the ability to discover new opportunities for service and exercise good judgment when acting on those discoveries. It is insight, not avarice, that is the key to business success.”