Trust on Trial By Richard McKenzie Perseus Books 288 pp., $26
At the start of the classic 1957 movie, "12 Angry Men," 11 jurors inside a room stand poised to post a guilty verdict in response to what seems overwhelming evidence against an accused murderer. That is until the 12th jury member, played by Henry Fonda, calmly and systematically unravels the prosecution's case by questioning the soundness of their assumptions.
In the Justice Department's antitrust suit against the Microsoft corporation, the role of the Henry Fonda skeptic is ably played by Richard McKenzie. The author, an economist from the University of California at Irvine who has no ties to Microsoft, has penned "Trust on Trial" simply because he is mortified by what he perceives to be the Justice Department's fallacious reasoning. Moreover, the author uses this case as an opportunity to reassess modern antitrust laws.
Like Henry Fonda's character, McKenzie has a lot of animosity to overcome. Journalists, cartoonists, academics, politicians, and the Justice Department have vilified the corporation, which, they contend, is a monopoly that has suppressed competition at consumers' expense.
McKenzie observes that if Bill Gates's corporation isn't a monopoly, then "Microsoft's actions can't be in violation of the antitrust law, and the government's antitrust case totally falls apart." The Justice Department antitrust suit claims that Microsoft is a de facto monopoly because there is little incentive for consumers to move to alternative products that are not as widely used, or have as many applications as Microsoft Windows. The consumers are thus, theoretically, "locked in" to Windows, making it impossible for competitors to gain entry.
Yet, in the very next breath, the prosecution claims that Microsoft used anticompetitive measures to stifle competition.
Competition? Why would an impenetrable monopoly need to quash competition? McKenzie notes that the Justice Department can't have it both ways. If there are competitors knocking at Microsoft's door, then consumers must have an easier time switching products than the Justice Department alleges. Indeed, McKenzie counts at least 19 viable and prospering competitors to Microsoft.
So much for Microsoft being a monopoly; it hasn't even restricted the output of its products or raised prices. To the contrary, Microsoft prices have fallen in real terms over the past decade, and the corporation invests billions of dollars in research and development because of the very real threat to its market.
McKenzie isn't always partisan toward Microsoft's business practices, and he finds them wanting in a few instances. Yet, in addressing each allegation in depth, he reveals overlooked and under-reported details that, more often than not, exonerate the corporation. "The antitrust laws were never intended to ensure good business manners," he observes dryly.
What of the incriminating e-mail messages that showed Microsoft executives talking about "killing" Netscape? If this aggressive language upsets Microsoft's detractors, they'd best not listen to a team huddle on an NBA court. Or read Netscape founder Jim Clark's book in which he candidly talks about developing the Netscape browser to "kill" the original Mosaic browser.
Though Mr. Gates was shrewd enough to foresee market opportunities that others were blind to, he failed to see how the threat of competitors' lobbyists in Washington, D.C., might derail his corporation.
"Trust on Trial" is a worthy companion piece to works on monopoly by economists such as Dominic Armentano and Murray Rothbard. One only hopes that this book won't encounter high "switching costs" of its own as many will be content to settle for Judge Jackson's "findings of fact" instead of researching the matter further.
*Stephen Humphries is on the Monitor staff.
(c) Copyright 2000. The Christian Science Publishing Society