[WSJ] The Ahabs of Antitrust.

I Find Karma (adam@cs.caltech.edu)
Wed, 13 May 1998 13:24:59 -0700

As if we needed another reason not to trust the antitrust boys in DC...
The info in this article is a little stale at this point (in two days
everything can change), but I liked their image of the antitrust dept
chasing white whales. Also the term "predatory innovation"...

> What could be weirder than Justice cobbling together a notion of
> "predatory innovation" to justify punishing Microsoft for being too
> good to consumers?

That's what I like about the Wall Street Journal. They wear their
hearts on their wallets...

[Aside: Time magazine has a writeup of the IMAC in this week's issue
[cancer is on the cover], and I gotta admit, it looks and sounds pretty
cool. I really hope that people buying a computer for the first time
(and educators) will buy it. Only two things about it bother me: no
floppy disk, and only a 33.6 modem. But it still seems cool. Gosh,
remember when the $1299 price point would get you an Apple ][? Or,
later, an Amiga?]

WSJ's antitrust op-ed piece follows...

> The Ahabs of Antitrust
> Wall Street Journal editorial, May 11, 1998
> We don't imagine Bill Clinton takes much interest in antitrust, and
> the last thing we could conscientiously suggest is that he start
> exercising some oversight of the antitrust division. The performance of
> those corners of Justice that do interest him, such as Public Integrity,
> doesn't cry out for additional laying on of the Presidential hands.
> But a weird situation has been created. Nowadays the real "independent
> counsel," as that creature is generally portrayed in Beltway legend--a
> bumptious, uncontrolled, feckless pursuer of white whales--is not
> Kenneth Starr. It's the Clinton antitrust establishment.
> It comes down as a credible rumor that Justice is actually
> entertaining the thought of trying to break up Microsoft; the case would
> of course turn out to be a shambles on the scale of the IBM lawsuit of
> the 1970s, but wouldn't it be fun? In the meantime, Justice will try
> collect a scalp by threatening to block this week's release of Windows
> 98, which half the PC industry has been counting on. Meanwhile over at
> the Federal Trade Commission, folks are amassing a dossier on Intel,
> only the most successful and important chipmaker in the world.
> Hold up a picture of the world in front of anyone else and they'd see
> dynamism, competition and companies being savagely disciplined by market
> forces. Chrysler, with the lowest costs per car of the Big Three and
> some of the hottest models, feels enough under threat to seek the
> capital cushion and marketing support of a global powerhouse like
> Daimler-Benz.
> The business pages are wet with the tears of CEOs bewailing their loss
> of power to dictate prices to consumers or to shelter in protected
> niches and watch the world go by. Even Bill Gates runs scared,
> constantly spending billions on research to add new features to what is,
> momentarily, a monopoly product, the Windows operating system. Mr. Gates
> understands that in this economy to rest is to be overtaken.
> We call attention to examples particularly where companies seemingly
> atop their industries find the world most frightening of all.
> Intel, rather than lolling in monopoly money because of its dominance
> as the maker of PC brains, frets about the terrible challenge of trying
> to recoup the cost of building $10 billion chip plants for tomorrow in a
> world of $800 PCs. Andy Grove has dropped out of day-to-day management
> so he can concentrate on spreading around seed money among start-ups.
> The only way Intel can stay ahead of the relentless cost curve, he
> thinks, is if new entrepreneurs invent enough new uses for
> semiconductors to pay for the vast production runs he needs to deliver
> chips at an affordable unit cost.
> In short, the mergers we're seeing, and the vast capital being laid
> out to bring us new goods and services, aren't happening because the
> world is so void of competitive risk that we need the antitrusters with
> their armful of theories to keep business honest. It's happening for
> that old Chinese reason that danger and opportunity are two sides of the
> same coin, and businesses are adapting out of an urgent need to master
> change rather than be buried by it.
> Now hold up the world as it appears in the mind of the antitrust
> bureaucrats and you would think companies throw these billions of
> dollars on the table and undertake excruciating mergers not to survive
> but to screw consumers.
> We don't imagine Daimler-Chrysler will face much danger, because under
> the Iacocca tutelage Chrysler learned how to buy up enough Beltway
> friends (even the UAW called the deal "win-win," delivering the
> Democrats). But corporate souls without a long history of paying
> protection money and establishing "relationships" in the capital
> constitute an antitruster's free-fire zone. Bill Gates has finally
> started delivering soft money to the Repubocrats, but he finds Netscape
> has already bought up a Washington army of full-time opinion shapers and
> glad-handers.
> Random House, which wants to sell itself to Germany's Bertelsmann AG,
> has run into trouble at the FTC. The only real issue there is that
> nobody in Washington with any clout has stood up and said, "No, bad dog"
> to the FTC. WorldCom, the Mississippi upstart that had the nerve to
> strike a deal for MCI, has become the subject of determined scrutiny by
> trustbusters at Justice and the Federal Communications Commission.
> Bernie Ebbers has already conceded that the deal will be monkeyed with
> as a matter of course.
> Looking at the world through its backward, upside-down lens,
> Washington engineers stasis in the name of engineering "competition." In
> holding up WorldCom, it gives all other "competitors" a chance to
> sandbag their sinecures, just as it did when it shot down Bell
> Atlantic's merger with cable giant TCI, then AT&T's trial balloon about
> linking up with the Southwestern and Pacific Bells. The information age
> would be three years ahead of schedule if those deals had been allowed.
> Judge Bork's latest forays notwithstanding, antitrust law is far less
> lawful than it is a theory-du-jour looking for a chance to extract
> tribute from the private sector. What could be weirder than Justice
> cobbling together a notion of "predatory innovation" to justify
> punishing Microsoft for being too good to consumers? Mr. Starr, the
> independent but not unaccountable counsel, answers to a three-judge
> panel in Washington before he can even start his investigations. The
> only reality check on the antitrust bureaucracy lies at the end, not the
> beginning, of a long road of litigation and politicking.
> With so many corporate whales swirling the waters around them, this
> Administration's antitrust harpoonists are relishing their moment at the
> commanding heights of our changing economy. The situation desperately
> cries out for the political oversight that Mr. Clinton's self-inflicted
> wounds won't allow. Here's one more reason why the question of character
> in the executive matters in our democracy beyond the sex scandal of the
> moment.


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