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Microsoft & Coercion

Mises Daily: Thursday, January 01, 1998 by

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During the press conference on May 19, 1998, announcing the broad range anti-trust action of the Department of Justice against Microsoft, there was just one piece of evidence cited against the company that pointed to some effort to subvert consumer choice. In an internal memo Microsoft employed the phrase "make the customer" use one of the company's products. The official from the Justice Department pounced upon this like cats pounce on a mice, barely restraining himself from yelling out loud "Gotcha."

It looks like Microsoft is not vulnerable to any other charge. It hasn't got a restrictive monopoly in any of its products or services--the market is wide open for anyone to enter who can match or top Microsoft's economic performance and indeed there are four or five competing operating systems out there, only not too many of us make use of them. The fact that only a few can compete--in what Professor Richard McKenzie of UC Irvine calls "a commercially viable way"--is indicative that Microsoft isn't acting like the only sort of monopolist that threatens the market, one that can shut out competitors who would do more for customers for less money.

The company does dominate--or rather "has prevailed more than any other in"--the market, but that is not what monopoly is about.

Nor is Microsoft a monopolist in the sense of having gotten the government to erect legal barriers to entry by others, which is what some of the so called Robber Barons did and why the anti-trust laws were enacted in a sadly hysterical fashion (not because free enterprise lead to monopolies). The real remedy for such state erected and maintained monopolistic trade is to repeal all the government perks granted to the firms that made use of them.

The only thing Microsoft has done that irks some people is what every economic agent likes to do, gain long term, future-oriented loyalty from customers and subcontractors.

That means Microsoft has given folks a good deal in return for which they have committed themselves to work with the company.

That is what freedom of contract implies: you have the right to voluntarily enter into legally enforceable agreements with other economic agents to what both of you regard as mutual advantage. But one result is that others are for a while not legally able to enter into similar contracts with these agents. Like when you lease your house to someone at $1400.00 per month but next week someone else offers you $1600 per month but you no longer have the option to take the offer. No one has forced you to be in this fix but you may not like it.

Some of Microsoft's competitors do not like the system of freedom of contract that makes this possible because they were shut out of some deals when Microsoft made its own. Like your friend who married the girl you'd like to have married. So now you want the marriage annulled by the government! His wife might too, but you cannot just bolt once you have made a binding contract. Sadly, sometimes you are very tempted to do so and if the Department of Justice of the United States of America backed you up, you might in fact do it.

So what is left against Microsoft? Well, in some memos they used infelicitous language. But we all do this. Whenever I write a column, I'd like to make you believe what I say. Teachers want to make their students listen, pay attention, do their homework, etc. Artists would like to make us like their works, scientist accept their findings. (If anything, it is the government that is working to make us do what they want -- e.g., give up smoking.)

"To make someone do something" may be taken to mean, at worst, coercing or compelling them against their own will. But it could also mean influencing, persuading, getting them to do it by various peaceful ways. Often folks, though, do not realize that when they agree to one thing, they have also agreed to another. The meaning of the original agreement is not always before their minds, so they are surprised when the implication is made evident to them. Sometimes the implication is not readily made evident, precisely to enable one to sneak it in there. That is exactly why the market has a cautionary principle associated with it: "Let the buyer beware."

It is not the seller's responsibility to point out what pitfalls may await the buyer. Or vica versa--we are capable of looking out for ourselves.

The ethics of the market is not the same as the ethics of friendship. I have no doubt that sometimes Microsoft, Inc., has tried to sneak into a sale or contract a product or service which the buyer wasn't aware of at the moment, although could have become with some careful attention or reading of the small print. OK, so people in the market place sometimes resort to sneakiness--who doesn't? Taking advantage of another's lack of full attention is something people do all the time. Where would athletic competition be without it?

But should they be protected by government against these mistakes? What will that make of government? It will become our master in all things, and free men and women have no place for such a government in their society. That is one of the main reasons so many have jumped to Microsoft's defense.

There's one other point some have already noted but bears repeating: Microsoft--in contrast to the companies that have ganged up on it--seems to be paying now for its refusal to make huge campaign contributions to politicians who might otherwise have stood in the way of the Department of Justice's actions against the company.

Notice how there is hardly anyone in government raising a finger in defense of Microsoft's free trade rights. Why? Well for several possible reasons. For one, few in government really understand free trade at all. But another reason is that Microsoft has done exactly what many of those folks in Washington preach: make no large campaign contributions and do not try to buy politicians. But since government meddles with economic affairs a great deal, not having anyone up there in one's pocket can become a major liability. Microsoft is, it appears, paying for being naively idealistic.