Old Anti-Trust Laws Hobble New Technology

Intel’s recent settlement with the Federal Trade Commission and Microsoft’s ongoing legal battle with the Justice Department serve to underscore the conflict between law and technology. The issue in these cases is the same: Are these companies monopolies and, if so, what limits, if any, should be placed upon them in order to make their industries more competitive, which benefits the consumer?

The problem here is that the federal government is operating on principles ill-suited to an information-age economy and on practices that can jeopardize both economic liberty and technological progress.

The first problem comes from the very narrow and arcane view of the Sherman Anti-Trust Act, which was enacted more than 100 years ago and specifically designed to protect consumers against costly rail travel and other impediments to their daily life. The law is based upon the premise that monopolies are antithetical to American democratic capitalism.

This reasoning may have held in an era when railroads and telegraph lines were the only means of travel and long-distance communication, and the companies that controlled them needed to be forced into fair business practices.

Today, however, the problems facing American high-tech businesses are vastly different. In the Microsoft case, for instance, the company does not control hardware or the means of production. Rather, it has developed a vastly superior software product that is the standard of computer users the world over. And it is doing so with a product that decreases in price almost by the day.

For consumers this is a winning situation, especially because the barriers to entry for new products are lower than ever. New languages, new ideas, new approaches are being adopted daily--look no further than the current boomlet for Linux, an alternative to Microsoft operating systems that is available free, to prove the point.

The larger issue here, however, is a misguided notion of the law that too often has been at play both in the federal courts for several decades and during the Clinton administration. It is a concept that turns the ideas of founders James Madison and Alexander Hamilton on their heads seeking to create in the federal courts a higher degree of power than was contemplated by those who wrote the Constitution.

Many of us have complained that a “runaway” judiciary has usurped legislative and executive functions. But when overzealous government lawyers initiate major cases and seek extensive remedies that can transform the structure of an entire industry, they create the opportunity for judicial overreaching.

By attacking companies like Intel and Microsoft, the federal government threatens to impede the growth of an American software and Internet industry, where innovation and imagination have provided the stimuli to competition.

It is not that the government should be impotent to render justice against corporations or individuals that are in clear violation of the law. It is rather that both law and common sense dictate a “do no harm” approach to the economy by choosing the least intrusive and destructive remedy to those problems that do exist. Massive judicial interference and restructuring in the Microsoft case would wreak havoc on the software, hardware and Internet industries, not to mention Microsoft’s 26,000 employees and millions of shareholders as well as the countless consumers who have benefited from the company’s products.

Judicial restraint and common sense should be combined with an appreciation of the new conditions of the information age, so that legal remedies promote and don’t obstruct technological progress.