DOJ: Microsoft case not strong enough

WASHINGTON--The U.S. Justice Department on Wednesday conceded that it settled with Microsoft in part because trustbusters failed to prove part of the basic theory of the antitrust case.

In his presentation before U.S. District Judge Colleen Kollar-Kotelly, Justice Department lead attorney Philip Beck said that Microsoft was able to hold on to a monopoly in Intel-based operating systems only through anti-competitive acts. But the government was not in a position to make that argument stick, he said.

"We tried very hard the first time around, and we were not able to do it," he told the court. "The causation issues"--actually proving the point about anti-competitive acts--"would have been an uphill battle that would likely have been resolved against us."

Beck's presentation kicked off a hearing mandated by federal law to determine whether the settlement is in the public interest.

The Justice Department and a number of state attorneys general in November reached a deal to settle their antitrust case against the software titan. Nine other states declined to join the settlement and are pursuing their antitrust efforts along a separate track. Hearings on the continuing litigation are scheduled for later this month.

Both Beck and Microsoft attorney John Warden argued that the proposed settlement is in the public interest, and Warden agreed that the government got as much as it could.

"Without causation, there's nothing to remedy," Warden said. Moving ahead with further litigation to determine a remedy--that is, penalties against Microsoft--would not have gotten the government anything more, he said. "One doesn't get two bites of the apple."

The settling states are scheduled to make presentations later Wednesday. A number of third parties also are scheduled to make 10-minute presentations to the court, among them the American Antitrust Institute, telephone company SBC Communications and the ProComp trade group. AAI receives funds from Microsoft competitor Oracle, while ProComp is backed in part by AOL Time Warner, Oracle and Sun Microsystems.

Beck quoted from comments submitted to the Justice Department by SBC and ProComp questioning the settlement's legitimacy. Like many other critics, they argued that the scope of the settlement is insufficient because it would neither limit Microsoft's monopoly nor put an end to it.

ProComp had argued that Microsoft's "monopoly power would have dissipated" if not for anti-competitive acts committed against Netscape Communications' browser and Sun's Java language.

But Beck said the Justice Department failed to prove this during the original trial and later during an appeal of the original verdict. The Court of Appeals upheld the earlier finding that Microsoft was a monopolist that employed anti-competitive tactics; the court also threw out the original penalties imposed.

Although the ruling by the appeals court upheld a major charge against Microsoft, it left other claims by the wayside, and the government would not have gained more by continuing with trial proceedings than it can get through the settlement, Beck said.

"We are constrained by the case" as it was originally shaped, Beck said.

The middleware question
A key issue in the morning session was that of middleware--applications that interact with the operating system--which was at the heart of the original case. The government originally argued that Microsoft, perceiving that Netscape and Java could replace Windows, used anti-competitive means to preserve its monopoly.

At one point, Kollar-Kotelly questioned whether the settlement adopted a different definition of middleware than the one put forth by the Court of Appeals.

"The short answer is no," said Justice Department attorney Philip Malone. According to the court's definition, he said, "Middleware refers to software products that expose their APIs (application programming interfaces)."

But Malone also said that the settlement does lay out a more specific definition of middleware for the benefit of those offering competitive, non-Microsoft software. "That's what the decree really seeks to protect," he said.

If litigation had continued, Beck said, the Justice Department questioned whether "the government would be able to provide a broad definition of middleware."

During his presentation to the court, Warden, the Microsoft attorney, said that the company considered the settlement's definition of middleware--including its Windows Media Player and Outlook Express--to be a major concession on its part, since Microsoft itself doesn't identify those products that way.

The settlement, he said, "greatly expands the Court of Appeals definition of middleware."

Warden emphasized that Microsoft made many concessions, including a pledge to disclose client/server programming protocols--a move that went "far outside the case as tried," he said.

He addressed the question of why Microsoft settled if it believed it made unnecessary concessions. "The parties (in the case) have been repeatedly urged to settle by the courts...finally by this court, in the firmest of terms, on Sept. 28," he said.

The terms were "the price of settlement," he said. He described the Justice Department and the nine states involved in the deal as "hard bargainers."

"Microsoft wanted to achieve certainty about the road going forward," he said, emphasizing that the company wanted to improve its relationship with antitrust enforcers. "Litigation is not good for an individual or a company," he said.

Full disclosure
The judge questioned Microsoft and the Justice Department at length about whether all the proper disclosures had been made to the court. A federal law known as the Tunney Act mandates that no political, backroom dealmaking can influence an antitrust settlement.

Kollar-Kotelly addressed concerns raised by some settlement critics that Microsoft had not properly disclosed legislative contacts. But Warden, who said that there had been no contacts related to the settlement, argued that legislative disclosure was not a requirement of the Tunney Act.

Beck noted that so far as he could determine, there hadn't been a requirement to reveal such contacts and the Justice Department hadn't advised anyone to make this kind of disclosure. "It is possible that we haven't found an instance," he acknowledged.

The judge also asked about Charles "Rick" Rule, a Microsoft attorney with Fried Frank Harris Shriver & Jacobson, who was the company's lead attorney in the settlement negotiations. Some critics of the deal raised questions about his lobbying affiliations and the date at which he was designated as counsel of record.

"From day one, we've always treated Mr. Rule as Microsoft's lead counsel for settlement discussions," Beck said.

Kollar-Kotelly caught Microsoft unawares regarding the timing of disclosures. During questioning, Microsoft revealed that it considered Sept. 28, when the judge ordered settlement discussions to begin, to be the start of the disclosure period. But she said that the period should stretch back at least to when she was appointed to the case, in August, or to the appeals court ruling in June.

Microsoft said it would investigate whether it would need to make additional disclosures.

The morning session ended with Brad Smith, Microsoft's incoming general counsel, who said that the company was already trying to comply with the terms of the settlement proposal.

Beck said that in looking at the language of the appeals court decision and what the Justice Department was able to obtain through the settlement, the government is satisfied that it cut a deal that is in the public interest and that exceeds the mandate of the court of appeals.

Even in conceding the limits of the government's case, Beck emphasized its successes. "It was a major victory and accomplishment," he said.

Based on the original ruling and that of the Court of Appeals, "We believe we have negotiated an excellent decree," he said.

[Björn Lundahl]

Department of Justice Makes the Common Man Poorer!

In the mid 1990s, the original equipment manufacturers could get better deals with Microsoft if they excluded other operating systems. The Department of Justice ruled that the practice of exclusion is illegal.

Well, that sounds only good, but the ruling has a negative effect. The fact is that these better deals are, now, because of the Department of Justice, excluded, which also means that costs went up for the original equipment manufacturers. Ordinary folks buying their personal computers with Windows preinstalled, had after that ruling, to pay more for them. This is Governments in action!

How do we know, in the interest of society, that this is a better outcome than the one that was before that ruling? The Department of Justice thinks so, but that, I am afraid, does not say much. How do I now that this ruling is bad for society? The reason is that Governments do not know how to run an economy, they lack the essential tools; the free market. The more Governments intervene in the economy, the more chaotic will the economy be. Governments decision making is relied upon whims by the electorate, markets, on the other hand, are relied upon prices of supply and demand; recourses are allocated to those ends which are valued most highly by consumers. When mentioned destructive actions bloom, like in the former Soviet Union, the destructiveness is revealed.

The other reason is that I rely my opinion on the market process, peoples voluntarily actions (without physical force). If the original equipment manufacturers in the past thought, for instance, that the Linux operating system was going to be very popular, Microsoft would have had to give them enormous discounts or to give up the deals entirely. On the average, then, the discounts would have to equal the amount what they would lose in profits. It does not matter If Microsoft is a so called monopoly, the value of the deals, in the eyes of the original equipment manufacturers, has fallen in the same second as they thought that Linux would sell. For them it would have been the same thing as if Microsoft would have asked for a higher price.

But the Department of Justice wants to promote competition? Yes, but competition was the very cause of those deep discounts. If competition or potential competition in this case never existed; neither would any discounting have ever existed.

Björn Lundahl, Göteborg, Sweden

[Björn Lundahl]

When Government regulates the public loses!

I think it is good if Microsoft competes aggressively. I do not think that they should be regulated in any way. It is, otherwise, like stopping, a political party for getting too many votes and for competing aggressively and then accusing the winning party to be a monopolist (in the political process you will have this monopoly by only getting majority votes).

When people buy products, they, by these very actions, actually, vote for those products. We should accept and respect that. Talk is really cheap and only actions count. Only by actions people manifest their true values. The political process is, therefore, no substitute for the complex market process. If, for instance, people do not like Microsofts actions and attitude, they will try out alternatives. Those values counts and influence the market outcome.

It is not, only, the quality of the products that counts. Advertising is very important too. If consumers do not know about products, what good are they? How can products that no one knows about benefit the common man?

Innovation in itself is of no value if the consumers do not demand it. If some products are technologically superior to others and are not demanded, it does not prove that anything is wrong. It is an illusion to ask the experts which products that should dominate the marketplace. Because people are happy in those cases with the inferior ones and it is this happiness and consumer satisfaction that counts. If this happiness is dependent upon ignorance, advertising, as mentioned, is demanded and will be profitable.

The price of a product depends upon how much the consumer values it. For instance, the market price for a house is not the same as the market price for a glass of milk. If, for example, the OS Vista will not be highly valued by the consumer, the price of it will fall. If it will be highly valued, consequently, the price will be high. So, Microsoft has every incentive to make, in the point of view of the consumers (and not in the eyes of some experts), a valued OS.

I also think that it is good that Apple and Linux compete aggressively with each other and with Microsoft. In some market segments Apple is the leader and in the server market, Linux is the leader.

The essence with this comment is that the market process is a very complex thing and all sorts of values are computed and taking account for. Only the market process can handle this complexity and satisfy human wants and this process can only work properly if the market is free. Governments are no substitutes for the market process.

Björn Lundahl
Göteborg Sweden

[Björn Lundahl]

The Emperor's New Clothes

People are led to believe that trade restrictions between regions or countries create jobs at home, which they certainly do not. If people had the opposite belief that free trade between regions or countries creates jobs at home, that would also be an incorrect belief. Trade restrictions or free trade does not cause unemployment or cause employment in a region or country. Trade restrictions only lower the standard of living, hamper competition and restrict liberty. If for instance, the EU imposes tariffs on Chinese textiles, the Euro will appreciate against the Chinese Yuan (the value of the Euro will increase relatively to the Chinese Yuan). This depreciation (decrease in value) of the Chinese Yuan against the Euro, in this example, is caused by a smaller demand for Chinese textiles and therefore a smaller demand for Europeans to buy the Chinese Yuan. Because of this change in exchange rates, prices of goods from the EU to China will be generally higher and prices of goods from China will be generally lower (apart from textiles). As you can imagine, this will increase employment in the European textile sector, but decrease employment in other sectors. At the whole, unemployment will not change but trade between the regions will be lower. Specialization, competition and living standards in the EU region will be hampered. The tariffs will only serve special interest that is the textile manufacturers and their employees. Surely, we want our representatives to serve the common good and the common man and not special interests!

Someone might complain that the Chinese are intervening in the exchange markets to keep their currency artificially low and that they are not letting market forces to appreciate their currency, and therefore my statement about free trade, in this case, is not applicable. Free trade, someone might think, is presupposed by freely fluctuating currencies with no Government intervention (also called clean floating exchange rates). Certainly I do not want Governments to intervene in exchange markets, but actually it is the Chinese that are in this case the losers and we are the winners. We should be glad that China is suppressing the rise of its currency, and the Chinese people should be mad about it. When market prices indicate that, for example, a project is unprofitable; investors naturally stop investing in such a project. Otherwise, factors of production such as land, capital, and labour would be wasted. Every government manipulation of market prices is a step toward economic breakdown and chaos. Land, capital, and labour that are invested in the exporting business in China because of a suppressed currency, have changed the economic structure in China and are mal investments, unprofitable for the nation to undertake, and we are getting something free. We don't need to export anything to pay for this "extra importation of Chinese products. To make my statement more obvious, we could consider that if the Chinese currency would be suppressed to no value at all (which would not be possible to realize), the Chinese would be working for nothing (which is, naturally unprofitable for China to undertake) and the market forces in the EU (if market forces would not be hindered by Governments) would reallocate land, capital and labour for other uses and to those fields which the Chinese are not able to compete (even if the Chinese were working and exporting to full capacity, that will not, by far, be enough to satisfy all our wants, in other words, their GNP is by far, too small). The increases in production which mentioned reallocation of recourses leads to are our extra bonus. We should applaud this and the Chinese people should revolt!

Free trade is not, either, presupposed by different currencies.
We do not worry about the balance of payments between London and Manchester, Berlin and Munich, Paris and Bordeaux or Stockholm and Göteborg etc. Market forces will smoothen out any imbalances. If, for example, London exports more to Manchester than Manchester exports to London, the demand for goods and services will be greater in London relatively to their supply, and also relatively to the situation in Manchester. Because of this, prices will go up in London and therefore will exports from London to Manchester contract, as well as, imports from Manchester to London will expand. This happens all the time and we do not even know about it and therefore do not worry about it. Governments do create problems all the time.

Only Governments can be so silly to reject great offers and bargains. Individuals doing the same thing would be considered mad.

The essence with above statement is that Governments hinders competition, lower our standard of living, promote special interests and they make excuses for this with faulty theories and propaganda.

Björn Lundahl
Göteborg Sweden

[Björn Lundahl]

Microsoft in Wonderland!

Please, go to;

<a class="jive-link-external" href="http://www.mises.org/freemarket_detail.asp?control=534&#38;sortorder=articledate" target="_newWindow">http://www.mises.org/freemarket_detail.asp?control=534&#38;sortorder=articledate</a>

Björn Lundahl
Göteborg Sweden

[Björn Lundahl]

Alan Greenspan did not like antitrust laws and their authorities!

Actually, I do not like Ayn Rand, but still, in her book
Capitalism: The Unknown Ideal, there is an interesting chapter (Antitrust, chapter 4) written by Alan Greenspan (former chairman of the Federal Reserve). I, hereby quote from page 70 a few sentences written by Alan Greenspan The entire structure of antitrust statutes in this country is a jumble of economic irrationality and ignorance. It is the product: (a) of a gross misinterpretation of history, and (b) of rather naive, and certainly unrealistic economic theories. I, hereby also quote some of the last sentences from this chapter (page 71) Whatever damage the antitrust laws may have done to our economy, whatever distortions of the structure of the nations capital they may have created, these are less disastrous than the fact that the effective purpose, the hidden intent, and the actual practice of the antitrust laws in the United States have led to the condemnation of the productive and efficient members of our society because they are productive and efficient. Naturally, these statements also can be applied to EU regulators and antitrust laws. Read the whole story! Go to; <a class="jive-link-external" href="http://www.polyconomics.com/searchbase/06-12-98.html" target="_newWindow">http://www.polyconomics.com/searchbase/06-12-98.html</a>


Björn Lundahl
Göteborg Sweden

[Björn Lundahl]

The EU hinders companies to compete!

When companies compete in separate markets, different competitive measures are often taken by companies in those markets. People in those markets, because of culture, values goods and services differently and are willing to pay for goods and services in accordance with those values. For instance, in Italy, people are very willing to buy cheap cars made by the Italian car manufacturer Fiat. Volkswagen, decided to sell their cars in Italy to Italians for lower prices. Volkswagen, thought, that these measures were needed in that market to compete effectively. People from Austria and Germany went to Italy in search for bargains offered by Volkswagen. Volkswagen dealers said no. Low prices are only offered to Italian customers! For these crimes The European Union's High Court upheld a $110.5 million fine for Volkswagen. This happened in 1998. Now, Volkswagen and other companies must have same prices in all markets to all people, otherwise they risk to get heavily punished. In other words, if people are willing to cross borders in search for bargains, it is better for a company like Volkswagen, to raise its prices in Italy and lose market share. Apart from Volkswagen, the Italians will suffer. Alternatively, they could have the same low prices in all markets, but that might not be profitable or even lead to bankruptcy. In the very end, competition is hindered! This is only an example of Government in action and what it actually does to promote competition. For more information about this case, go to; <a class="jive-link-external" href="http://www.globalethics.org/newsline/members/issue.tmpl?articleid=09220316204320" target="_newWindow">http://www.globalethics.org/newsline/members/issue.tmpl?articleid=09220316204320</a>
And to
<a class="jive-link-external" href="http://news.bbc.co.uk/1/hi/business/821620.stm" target="_newWindow">http://news.bbc.co.uk/1/hi/business/821620.stm</a>
For some further information, go to;
<a class="jive-link-external" href="http://www.businessweek.com/magazine/content/02_19/b3782014.htm" target="_newWindow">http://www.businessweek.com/magazine/content/02_19/b3782014.htm</a>


Björn Lundahl
Göteborg Sweden

[Björn Lundahl]

Justice, Liberty and the Free Market.

A pure free market is based upon the axiomatic principle "that no man or group of men may aggress against the person or property of anyone else".
This is the very principle which the courts and the legal system should follow.

I hereby quote some old writing written by Elisha Williams (1744);

"As reason tells us, all are born thus naturally equal, i.e. with an equal right to their persons, so also with an equal right to their preservation...and every man having a property in his own person, the labour of his body and the works of his hands are properly his own, to which no one has right but himself; it will therefore follow that when he removes anything out of the state that nature has provided and left it in, he has mixed his labour with it, and joined something to it that is his own, and thereby makes it his property...Thus every man having a natural right to (or being a proprietor of) his own person and his own actions and labour, which we call property, it certainly follows, that no man can have a right to the person or property of another. And if every man has a right to his person and property; he has also a right to defend them...and so has a right of punishing all insults upon his person and property."

Corporations are owned by individuals.

Aggressions against corporations are, of course, aggressions against their individual owners and should be considered crimes.

In Man, Economy and State, page 1144, for instance, Murray Rothbard wrote and I quote;

It should be clear from previous discussion, however, that corporations are not at all monopolistic privileges; they are free associations of individuals pooling their capital. On the purely free market, such men would simply announce to their creditors that their liability is limited to the capital specifically invested in the corporation, and that beyond this their personal funds are not liable for debts, as they would be under a partnership arrangement. It then rests with the sellers and lenders to this corporation to decide whether or not they will transact business with it. If they do, then they proceed at their own risk. Thus, the government does not grant corporations a privilege of limited liability; anything announced and freely contracted for in advance is a right of a free individual, not a special privilege. It is not necessary that governments grant charters to corporations.

Go to; <a class="jive-link-external" href="http://www.mises.org/rothbard/mes/chap15d.asp#3R._Policy_Toward_Monopoly" target="_newWindow">http://www.mises.org/rothbard/mes/chap15d.asp#3R._Policy_Toward_Monopoly</a>

Property rights and the theory of contracts.
I hereby quote from the book The Ethics of Liberty (page 133), written by Murray Rothbard;

the right to contract is strictly derivable from the right of private property, and therefore that the only enforceable contracts (i.e., those backed by the sanction of legal coercion) should be those where the failure of one party to abide by the contract implies the theft of property from the other party. In short, a contract should only be enforceable when the failure to fulfill it is an implicit theft of property. But this can only be true if we hold that validly enforceable contracts only exist where title to property has already been transferred, and therefore where the failure to abide by the contract means that the other partys property is retained by the delinquent party, without the consent of the former (implicit theft). Hence, this proper libertarian theory of enforceable contracts has been termed the title-transfer theory of contracts.

Go to;
<a class="jive-link-external" href="http://www.mises.org/rothbard/ethics/nineteen.asp" target="_newWindow">http://www.mises.org/rothbard/ethics/nineteen.asp</a>


Violation of copyright is a violation of contract and theft of property.

And this regardless of state laws. If someone sells his property to a person under the condition that the buyer has no right to copy it, the buyer has all rights to the property except the right to copy it. That is, as long as the property is a physical object and is alienable. To find out more on this position go to; <a class="jive-link-external" href="http://www.mises.org/rothbard/ethics/sixteen.asp" target="_newWindow">http://www.mises.org/rothbard/ethics/sixteen.asp</a>

Björn Lundahl
Göteborg Sweden