Acton Commentary

Free-Market Morals and the Microsoft Case


On June 28 a federal appeals court overturned the bulk of a lower court ruling that labeled Microsoft as a monopoly and sought a breakup as a remedy. The appeals court made the right decision and Americans seem to agree. According to a December 1999 Portrait of America poll, only 12 percent of Americans wanted to see Microsoft broken up. When the poll is constrained to include only computer users, support for Microsoft increases. In other words, it was not the public that inspired the push to break up Microsoft.

In fact, Microsoft has made prices lower for consumers. Judge Jackson, the original judge who ordered the Microsoft breakup, accused Microsoft of charging too much for its product. The ability to overcharge customers is a trait of a real and dangerous monopoly. However, Judge Jackson quickly realized that Windows was actually much cheaper than it could have been. He changed his tune by suggesting that "Microsoft could be stimulating the growth of the market for Intel-compatible PC operating systems by keeping the price of Windows low today." Keep in mind that the PC manufacturers whose market Microsoft is helping to grow are considered some of Microsoft’s biggest victims.

The consumers have benefited in other ways too. They have received reliable computers that are more user-friendly and less expensive. Judge Jackson was also concerned that Microsoft’s participation in a web browser war would hurt consumers.. However, even Jackson had to admit that Microsoft’s involvement "increased general familiarity with the Internet and reduced the cost to the public of gaining access to it." Microsoft’s entrepreneurial spirit has been a boon to computer users and the economy.

So many people are using the Internet that Congress can’t even respond to all the emails it gets. A study from George Washington University released in March of 2001 reported that since email gained popularity Congress has been getting more correspondence from constituents than ever before – more than they can keep up with. Just because Microsoft has borne good fruit does not prove it is not a monopoly. The facts prove Microsoft’s case.

Monopolies have several characteristics that Microsoft does not exhibit. Microsoft has not charged obscene prices. Innovation has not tapered off because of Microsoft; it has increased. Having a common operating system among computer users has allowed for the proliferation of applications, the Internet, and general computer knowledge among the public.

Author Alan Reynolds claimed, "A monopoly means consumers have no choices, not that most consumers prefer one product over others." To assume, as Judge Jackson did, that there are no choices in either operating systems or web browsers demonstrates startling ignorance. Anybody who has ever received an AOL disk in the mail or has seen the stacks of them waiting to be taken home for free at stores such as Wal-Mart and Blockbuster realizes that alternative ways to use the Internet exist. Competition exists for operating systems as well. Free-market competition has been good for consumers, Microsoft, and its competitors.

In fact, Microsoft’s relatively low pricing has even improved the nature of its competition. The primary competitor of Windows for Intel-based PC’s is Linux. Linux is basically a free operating system with only a small cost if consumers purchase a CD in stores. Its share of the server market, the larger has grown to the point that many believe it will soon (or already has) eclipsed Microsoft’s share of the market. Consumers will receive increasingly better products as the competition continues.

Just as competition and the free market are good for consumers and the economy, governmental regulation is toxic. An Institute for Policy Innovation study projected that the Microsoft antitrust lawsuit would have a cumulative effect for the time period of 2000 - 2010 of costing America roughly 45,000 jobs, more than $50 billion in lost government revenues, and $147 billion of our gross domestic product. Support for Microsoft as a force of good in our economy was demonstrated moments after the appeals court rejected the breakup by a massive rally on Wall Street.

Reversing the case was the right decision, but does not explain why the district court felt motivated to take action against Microsoft in the first place. While Judge Jackson did write a very long and very flawed Finding of Facts, it does not really explain Microsoft’s crime. Microsoft’s crime is not cheating its competition or using a monopolistic business practice. Microsoft’s crime is being too successful in the eyes of people who see capitalism and profit as evil. Jackson and others assume that Microsoft’s "immense profits" prove some sort of foul play. In reality, profit usually proves who is best.

Microsoft has made a lot of money because it sells a product that people want. At the same time, the free Internet Explorer browser has helped to lower the cost of using the Internet for every user. Microsoft is good for our country and good for computing; therefore, it makes a profit while doing it. Profit is not inherently immoral. Neither is competing. Without the self-interest generated by profit, the march of human progress would grind to a halt. That does not mean Microsoft is without blame. Its practices have not always been ethical. But Microsoft must make the choice to be ethical on its own or risk provoking more government intervention.

The Bible calls us to support justice for all rather than favoring one side. We are not supposed to cheat for the underdog or placate the rich. Microsoft, just like anybody else, deserves justice. Justice, in this case, was served by the court of appeals ruling.