And We Were Naive Enough to Think That Europeans Supported Free Trade!

It was no great surprise that Microsoft recently agreed to end its 9-year fight against the European Union’s antitrust regulators; see The New York Times, Oct. 23, 2007, 1st business page. The company simply got tired of fighting a system that claims to support competition without consideration for the realities of the marketplace. Will freer competition and better customer service result? There may be little actually gained because of previous Microsoft agreements with other computer companies for cross-licensing and the sharing of technology.

 

The U.S. version of the case began in 1998 and ended with relatively minor penalties assessed against Microsoft in 2002. Our government had alleged that Microsoft illegally tied its Web browser to the Windows operating system despite the fact that injury to consumers was never proven. The Microsoft case illustrates the challenges facing 21st century courts attempting to reconcile innovation, the financial requirements of an industry heavily invested in research and development, and antitrust law that was enacted more than 115 years ago. At the time of the first law protecting competition – the Sherman Act of 1890 – America was evolving from agriculture to manufacturing, and there was limited foreign competition.

 

The concept of antitrust made sense when consumers had no choice in their sources of supply as small businessmen and farmers discovered in the late 19th century. That situation has clearly changed, and America is now scrambling to compete in global markets with international competitors from China, India and other fast growing economies who are not looking over their shoulders at antitrust regulators. Numerous legal cases have similar histories to Microsoft as the judicial process slowly wends its way through fact finding, analysis, discovery, motions, and trials. Markets move faster than antitrust, and a shrewd litigation team can drag out the process for a much longer time than the life or death of a competitor.

 

It is difficult to argue that the U.S. economic system would not proceed in a civil and orderly fashion in the absence of an antitrust shield. The most recent landmark decision on antitrust – other than Microsoft – was possibly the case of AT&T. However, in that situation the government had allowed a monopoly to continue for much of the 20th century as an expedient to provide communications services to U.S. customers, and there is certainly no likelihood of a return to the control of that industry or any other industry in the sense of anticompetitive behavior.

 

In the U.S., Republicans haven’t generally enforced antitrust, while the Democrats did during their time in the White House and probably will again. This inconsistency of enforcement is patently unfair to society and against the intent of Congress when it passes legislation. The antitrust laws cannot be made sufficiently specific to allow fair and consistent application, and, in any event, should not impede U.S. companies from developing strategies to allow them to compete in global markets. The time may have come to consider repealing the antitrust laws. In situations of business regulation, let America be more realistic than the Europeans and encourage U.S. companies to freely compete in the global economy.

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One Response

  1. That situation has clearly changed, and America is now scrambling to compete in global markets with international competitors from China, India and other fast growing economies who are not looking over their shoulders at antitrust regulators.

    I know, it is horrific.

    Wait a minute. These is a European decision, is it not?

    And Microsoft are not a European company, are they?

    Maybe those European laws, apply to companies trading in Europe?

    And, maybe those European laws would apply to Indian companies or Chinesse companies trading in Europe? Just as those laws apply to US companies trading in Europe?

    In situations of business regulation, let America be more realistic than the Europeans and encourage U.S. companies to freely compete in the global economy.

    So, the EU shouldn’t bother defending it consumers interests?

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