The latest dispute between the Microsoft Corporation and the Department of Justice illustrates the strange perversity of U.S. antitrust law. The Department of Justice contends that Microsoft licenses its Windows 95 operating system to makers of personal computers on condition that they also take Microsoft's Internet browser, called Explorer. This arrangement is termed a "tying agreement," and it may violate a consent decree that Microsoft signed with the Justice Department in 1995. (Tying agreements can be illegal under the Sherman Act and under Section III of the Clayton Act.) Microsoft claims, adversely, that the consent decree explicitly allows it to sell "integrated" products and that the browser function has now been fully integrated into its Windows 95 platform. A federal judge will have to sort out the semantic difficulties.
The larger public policy issue, of course, is why antitrust regulators should determine whether products are sold, tied, or integrated. Tied products and integrated products are equivalent as far as consumers are concerned. Why, then, should antitrust attorneys are judges decide which particular marketing technique is permissible?
The general public impression is that antitrust law protects consumers against monopoly and serves to make the economy more competitive. Nothing could be further from the truth. Antitrust regulation has had an embarrassing history of restraining and restricting competition and penalizing firms that innovate successfully. To "believe" in antitrust law is never to have read an antitrust case.
Some of the most celebrated legal cases expose the antitrust charade. For example, in the most important early case, Standard Oil Company was broken up in 1911 even though it had expanded outputs of refined oil and lowered prices to consumers for decades. The government's claim that it was a "monopoly" was easily refuted by the fact that there were more than 100 rival refinery companies at the time of the trial. In addition, Standard's market share had steadily declined in the decade prior to the antitrust case. Nonetheless, a federal court and the Supreme Court concluded that Standard Oil "restricted trade" in violation of the Sherman Act.
Another example of antitrust irrationality was the decision against the Aluminum Company of America in 1945. In 1939, a federal district court had found Alcoa innocent of 150 separate antitrust charges. Alcoa had not raised prices, had not restricted production, was an outstanding innovator, and was economically efficient by any relevant measure. Moreover, it was by no means a "monopoly" since several hundred "scrap" producers had captured almost 33 percent of total aluminum ingot sales. The district court concluded, correctly, that Alcoa's 50-year success was strictly the result of its economic performance and that there was no violation of antitrust law.
But an appeals court in 1945 concluded that Alcoa's overall economic efficiency "illegally excluded" potential competitors in the production of primary aluminum and that Alcoa's high market share in primary ingot (excluding scrap) was evidence of illegal monopolization. Alcoa is the classic antitrust case in which a successful firm is punished for its virtues, not its faults. Similarly perverse analysis was echoed in cases such as United Shoe Machinery (1953) and Brown Shoe (1962).
Clearly, then, the recent attack on Microsoft is not some aberration; it is entirely consistent with much of antitrust history. Business organizations that innovate rapidly and lower prices have borne the brunt of the trustbuster fury. Antitrust has not served to protect consumers from monopoly, but has instead served to hamper and control the competitive process itself. But what of the case against Microsoft? Does not tying one product to another, or integrating several products into one, serve to lessen competition and harm consumers? Not at all. Consumers of computer services want Microsoft's Internet browser Explorer with Windows 95, especially since the browser is offered free of charge to PC makers. Any PC maker that did not provide Explorer with Windows would be severely punished by PC consumers. Clearly consumers are better off with Windows 95 and a free browser than they would be without the browser or with a browser at extra cost.
Netscape Communications Corporation, the largest Internet browser maker, has complained that Microsoft's tying (or integration) hurts the sales of its own Internet browser and hence restrains trade and competition in the marketplace. Again, this is simply not so. Overall trade is not restrained simply because consumers (or PC makers standing in for consumers) decide to substitute one browser (Explorer) for another (Netscape). In addition, there is no lessening of competition in the overall market simply because Netscape does less business and Microsoft does more. Microsoft may well have some marketing advantages over rivals, but business competition is never played out on some imaginary level playing field. Consumers want all of the "advantages" that firms can provide, and they reward the companies that provide them. To call this process a "lessening of competition" is to pervert the language and the law.
The current skirmish with Microsoft is only the latest in a five-year harassment of the company by government trustbusters. And the pattern is now only too clear. The antitrust attorneys in Washington aim to control several key aspects of technological change within the computer and telecommunications marketplace. To anyone who takes both freedom and economic efficiency seriously, this trend must be strongly resisted.
The New American / January 5, 1998
Immediately after President Clinton and top Republicans in Congress agreed to the budget deal for fiscal 1998, Time magazine commented with uncharacteristic candor: "The whole episode exhibits an enormous contempt for the public's intelligence and integrity." Those words from the Establishment's premier news magazine are apt, even though they were not expressed for the most compelling of reasons.
The budget for fiscal 1998 totals $1.692 trillion, up a whopping $70 billion from the previous year. In typical fashion, President Clinton enthused that he had "set the nation's fiscal house in order." House Budget Chairman John Kasich (R-OH) chimed in, "Cooperation between Congress and the President is resulting in smaller government." Senate Majority Leader Trent Lott (R-MS) chirped, "Today we celebrate the beginning of a new era of freedom." And House Speaker Newt Gingrich (R-GA) called the deal "a great victory for all Americans."
Fiscal house in order? Smaller government? A new era of freedom? This budget, championed by the leaders of both parties, exceeds by $5 billion the amount sought by the President in his first budget proposal last February. Why does anyone still refer to the GOP's leaders as "conservatives?" The budget's most highly touted feature is its declaration that there will be no more annual red ink by 2002. A nice projection to consider, but it is based on a continued economic boom and annual revisions over the next five years. The enthusiastic bi-partisans also claimed a mere $34 billion deficit for the year just ended, the lowest amount of red ink since 1974 and quite a drop from the 1996 deficit of $107 billion. They insisted that by the year 2001 there will be no deficit at all.
No less a critic than Senator Ernest Hollings (D-SC) threw cold water on the budgeteers' euphoria when he scornfully pointed out that the numbers being tossed around were the product of "beltway accounting." Hollings explained that the deficits seem smaller because they don't take into account the raiding of Social Security and other trust (?????) funds. If the government wasn't using Social Security receipts to pay for its wild spending sprees, said Hollings, the deficit would be $177 billion for the fiscal year just ended and at least $161 billion by 2002. Hollings based his claims on the authoritative numbers supplied by the Congressional Budget Office. Along with his sobering assessment, the senator from South Carolina pointed out that each higher annual deficit means more borrowing, and more borrowing means more interest must be paid to the holders of the national debt. He estimates that this debt will soar to more than $7 trillion by 2008. America's taxpayers are already paying the enormous sum of $358 billion per year for interest on debt, the second largest item in the entire budget.
The modest reduction in the deficit, however, has nothing to do with less spending and everything to do with more tax revenue generated by a robust economy. Tax receipts are actually 33 percent higher than projections made four years ago. So, have our leaders passed on this windfall to the taxpayers? Not on your life! Leaders of both parties look at increased revenue as their personal bonanza, money they can use to buy more votes through special interest spending and pork barrel projects for their own districts.
The absurdities offered by Kasich, Lott, Gingrich, and other GOP stalwarts do amount to contempt for the public. Consider: This new budget includes a hefty increase of 12 percent for the Department of Education. Remember claims by the Republicans in 1995 that they would do away completely with this monstrosity?
Bilingual education programs, opposed by most immigrant parents as a horrendous drag on the education of their youngsters, gets a 33 percent boost. Funding for federal housing will more than double this year. And funding for the Internal Revenue Service, the target of dramatic revelations showing widespread abuse of citizen's rights only months ago, will rise nine percent.
Partisans for this budget insist that it will save as much as $950 billion over the next ten years. But syndicated columnist James Glassman correctly noted that all it really means is that "the government is now planning to spend about $1 trillion less than it was planning to spend the last time it made plans." All of these bi-partisan budgeteers -- including President Clinton -- swore an oath to abide by the Constitution, the document that severely limits the federal government's powers. In it, no authorization exists for expenditures for foreign aid, education, welfare, housing, medical care, or a host of other enormously expensive programs that now soak taxpayers for hundreds of billions annually.
If the Constitution were enforced, the cost of the federal government would shrink by at least three-quarters, the national debt could be paid off, interest charges would evaporate, and America would reverse its rapid slide into totalitarian socialism. Our nation obviously needs new leaders committed to Americanist ideals, but it won't get them until the slumbering citizenry is awakened.
We can all expect a special surprise in our Christmas stockings from Big Brother this year. But gifts from Big Brother are generally analogous to the one Christmas present you get that you definitely want to return. Unfortunately, Big Brother wont accept it.
This year its a 5 percent increase in our telephone rates that will come in the form of a tax and its being imposed on us in order to pay for the government programs that wouldn't otherwise happen unless taxpayers foot the bill.
What programs are they talking about? Well, the main one is the Internet-in-every-classroom-and-library scheme that President Clinton and Vice President Al Gore have been touting for the past year and a half. The program would require that two million classrooms and 16,000 libraries throughout the United States be equipped with Internet access at the total cost to the taxpayer of $4.9 billion.
Don't get me wrong, I am a huge Internet fan but lets get our priorities straight. What's important is getting our kids to be able to read, write and perform basic mathematics skills, that will prepare them for their futures, not to spend their days experiencing life through a computer screen. Nonetheless, Clinton and Gore claim that the Internet will be the savior of our nations schools and somehow make our children competitive in the next century.
But that's only part of the equation. Its bad enough that were being forced to pay a tax which, in reality, is nothing more than a Gore 2000 campaign scheme but even worse is it wasn't imposed on us by Congress. This time the Federal Communications Commission, a federal agency, has taken it upon itself to act as tax imposer. That's right. By interpreting the Telecommunications Act passed by Congress last year, the agency claims that it has the right to impose taxes on services provided by the industry which it regulates.
While a federal agency obviously has the right to interpret the law, it doesn't have the right to invent the law. There's very good reason why Congress is the branch to levy taxes and not government bureaucrats because the latter are unelected and therefore, unaccountable for their actions. But in typical Clinton fashion, the Constitution has been discarded. Despite the fact that the Constitution states very clearly that only Congress, has the ability to levy taxes, Clinton and his bureaucrats have, once again, trumped the Constitution to further their own political agenda. Instead of relegating its authority to unelected bureaucrats, Congress should give the American people a real Christmas present by holding immediate hearings on the constitutionality of this act of arrogance and then introduce immediate legislation to repeal it. And although Saturday is St. Nicholas Day, I wouldn't hold my breath waiting for this in your stocking. [RightNow Comment: Does it occur to anyone else that one reason the administration is pushing for the Internet in the classroom is that they can thereby bypass local controls on what is taught there? We can foresee the day when the federal government or the NEA will send around teaching guides containing "approved" URL's for the kids to go to in the course of their studies. Naturally, these URL's will be entirely "politically correct" (what do you want to bet that the RightNow web site doesn't make the list?) and will promote all those things that concerned parents object to. And the best part is that there will be no incriminating textbooks or handouts that might fall into the hands of a parent or school board member. The kids will surf Web sites that promote whatever point of view that Washington wishes to promote, while parents and everyone else will be blissfully ignorant of what's being taught, even as the government steals your money to pay for this brainwashing of our kids.
We'd also like to make one other point. Some folks have asserted for a long time that taxation is theft; that it's really the government stealing your money, money that you worked to earn and then the government comes along and just takes some of it. A lot of folks consider that a "radical fringe" idea - they simply don't like to think about the possibility that their government is stealing from them. Well, okay, but what do you call it when a federal bureaucracy that has no constitutional authority to levy a tax does so anyway? You may be comfortable with the idea that the government can tax you legally, but doesn't it bother anyone that now federal agencies think that they can ignore the Constitution and impose taxes (and that Congress utters not even a whimper of protest)?
To put this in perspective, consider what would happen if local agencies did this. Your library board thinks they need more books? Well, forget trying to convince the voters or county officials to increase library funding, just print up and send tax bills to everyone in the local area. Or maybe the fire department needs a new truck, well why not just let the fire chief create a "hydrant tax" on everyone living within 500 feet of a fire hydrant. The obvious problem is that there is no accountability to the taxpayers in this situation, and that's exactly the problem with this new telephone tax.
Will 1998 be the year that the sleeping taxpayer finally wakes up and tells Washington that "enough is enough"?]
WASHINGTON - After President Clinton praised a $15.7 billion Japanese tax relief plan but refused to commit to similar tax relief here at home, Republican National Committee Chairman Jim Nicholson sharply criticized his priorities.
"The President has come a long way," Nicholson said. "He finally grasps that taxes are a burden which force us to spend more time at work and less with our families. The problem is, he's talking about families in Japan. If tax relief is good for Tokyo, it ought to be good enough for Topeka."
"Ironically, President Clinton praised Japanese Prime Minister Hashimoto for cutting taxes for Japanese families on the same day he refused to promise the same relief for American families," Nicholson said.
During his news conference this week, the President said, "I can't say at this time that I will have anything to say about tax cuts in the State of the Union" message. Meanwhile, to support the Japanese tax cut, the Clinton Administration launched a "top- secret lobbying effort" with "a flurry of communications... and a hand-delivered appeal" to Prime Minister Hashimoto, according to today's Washington Post.
Last month Clinton called Virginia taxpayers 'selfish' for supporting Governor-elect Jim Gilmore's plan to cut taxes. Yesterday's Washington Post reported that the President supports Japanese tax cuts to "serve as a 'locomotive' for the region by spurring growth." Nicholson noted, "The President seems to understand the economics. Maybe it's geography that confuses him." (Visit http://www.rnc.org for the latest news and information)
"Warning signs"
Readiness is a measure the Pentagon uses to judge the combat fitness of its forces. In Washington, the official line on readiness is that "we believe our forces are highly ready," according to Pentagon spokesman Ken Bacon, though he and others admit strain around the edges. That differs from the field's view for one key reason.
The Pentagon's machinery for reporting readiness from the field to top Pentagon generals and admirals is spring-loaded to prefer good news over bad. It's like any other bureaucracy. When bad news travels from non-commissioned officers to the Chairman of the Joint Chiefs of Staff, it gets stopped at each level, checked, polished and cleaned up a little. Nothing dishonest is done in each step. It's just can-do officers putting the best face on their individual commands. The dishonesty comes in the aggregate, when bad news has been polished so many times.
Take, for example, the following anecdotal pieces of evidence. Perhaps they qualify as merely some of the signs of strain around edges that do reach top Pentagon echelons. The anecdotes are drawn from only one branch of one of the four military services.
On May 22nd, Navy Carrier Air Wing 3, a unit with about 2,000 sailors and fliers and about 75 warplanes, returned to the United States after a six-month cruise to Europe aboard the aircraft carrier USS Theodore Roosevelt. Though the unit has been home for six months now, it recently reported a C-4 readiness rating. C-1 is the best score, meaning a unit is at peak readiness for battle. C-5 is the worst, used for disbanding units. Normally, Navy air wings coming off a cruise sink to a C-4 for about one month. That's when the unit "stands down." After the month-long stand-down, such units begin declined back toward peak skill and strength for the next cruise. This up-and-down strategy is called "tiered readiness." In past years, an air wing home for six months should already be climbing through a C-3 or C-2 readiness level toward a C-1, which means ready to deploy. But fleet fliers say it's a bad sign that an air wing still reports a C-4 six months after returning home. They save the "tiered readiness" ladder is getting more steep.
Last summer of the money crunch was so bad that the commander of Atlantic Naval Air Forces, which owns Air Wing 3 and others, almost shut down three wings for three months each. The move was averted when Navy headquarters in the Pentagon found money elsewhere. "It's bad", said one Navy wing commander. "Pilots are getting their minimum [flight training] but it's painful." The flier said it is not yet as bad as the "hollow military" of the 1970s. But with no more money for the military in sight, he calls the outlook "bleak."
Commander Bud Warfield was so displeased with what he saw when he commanded and F/A-18 Hornet squadron that he wrote a stinging article in Naval Institute Proceedings, the Navy's professional journal. "We've cut away all the fat. We're well into the meat and close to the bone", he wrote. While today's military isn't the "hollow military" of the 1970s, it seems the tight military budget offers no roads elsewhere.
The force went hollow 20 years ago because each of the services held onto building block force structure with not enough supporting money. Today in the Army's case, it's 10 divisions. In the Air Force's case, it's 19 fighter wing equivalents. In the Navy's case, it's 12 aircraft carriers. And to some folks in the field, in this case the Navy, it looks like the past threatens a repeat.
WASHINGTON -- The American Civil Liberties Union today urged the Federal Communications Commission to delay implementation of a massive law enforcement wiretapping scheme, saying that the FBI was attempting to strong-arm the telecommunications industry into adopting surveillance capabilities well beyond what the law allows.
The 1994 Communications Assistance for Law Enforcement Act -- also known as CALEA or "digital telephony" -- requires telecommunications carriers and manufacturers to build wiretap capabilities into the nation's communication systems. Under the law, industry is required to implement this plan by October 24, 1998. But in comments submitted to the FCC today, the ACLU, the Electronic Privacy Information Center and the Electronic Frontier Foundation urged the Commission to use its authority to delay implementation until October 24, 2000.
"We believe that the FBI has placed a choke hold on the industry process and as a result pressured industry into devising technical standards that exceed CALEA's scope by providing unprecedented FBI surveillance capabilities not contemplated by the Congress," the comments assert.
The groups said that the FBI has devised a "wish list" of capabilities for surveillance that go far beyond what current law allows. For instance, in October the FBI called for standards that require every cell phone to provide location information of users to police -- in effect, turning the telephone into a homing device.
"The FBI should not be in the business of drawing up the blueprints for our nation's telecommunications systems," said ACLU Associate Director Barry Steinhardt. "That's like getting a Peeping Tom to design window shades."
While the FCC request for public comment addressed only narrow and largely procedural issues, the ACLU said in its comments today that the agency must force the FBI to spell out its capacity requirements and thoroughly review all of the proposed technical standards before any discussion can proceed about implementing the law.
At present, Steinhardt said, "neither the public, nor the telecommunications industry are in a position to comprehend the scope of the capacity and surveillance requirements sought by the FBI."
In the three years since CALEA was passed, Steinhardt noted, the FBI has repeatedly failed to clarify the actual and maximum capacity technical needs, including an accurate estimate of the number of anticipated communications interceptions. The Bureau has now said that it intends to divulge its capacity requirements in a "final" notice in January 1998.
But, even assuming that the requirements will be realistically and accurately spelled out, the information comes too late in the process, said David Sobel, Legal Counsel for EPIC. "The Bureau's refusal to provide the actual capacity requirements denies any possibility of meaningful public oversight by Congress, the industry and the public. In addition, it will be impossible for industry to adopt technical standards under the current deadline of October 25, 1998."
"Civil liberties groups vigorously opposed enactment of CALEA in 1994 as an unprecedented expansion of government surveillance authority," Sobel added. "Developments since the law was passed have only confirmed those fears."
The comments filed with the FCC can be found at http://www.aclu.org/congress/lg121297a.html
Copyright 1997, The American Civil Liberties Union
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