Findings of fact

By Steven Martinovich
web posted November 8, 1999

They virtually own their market and have done it through occasional predatory pricing, the distortion of facts and by buying up their competitors. They are what some would consider a monopoly.

It would be natural for you to assume I was talking about Microsoft Corp., the software company who U.S. District Judge Thomas Penfield Jackson ruled on November 5 was a monopoly, a blow to the Redmond-based software giant in the antitrust suit filed against it by the U.S. Department of Justice.

"Three main facts indicate that Microsoft enjoys monopoly power," wrote Jackson in his findings of fact, citing Microsoft's large and stable market share, high barriers to market entry, and the lack of a commercially viable alternative to the Windows operating system and ignoring the resurgence of Apple Computer Inc., the grassroots open source movement and Linux, System 8, Unix, BSD, and BeOS in his statement.

But that's not the monopoly I'm discussing here. The monopoly in question is that of American Media Inc.

On November 2, AMI announced that was purchasing Globe Communications Corp. and the publishing assets of Globe International, Inc. for $105 million. Those assets include tabloid The Globe, National Examiner, Sun, Mini Mags, Lifestyle Specials, Cracked and The Detective Series titles, along with Globe Marketing Services and the firm's Boca Raton corporate headquarters.

That's hardly news except when you stop to consider that AMI already owned The National Enquirer, the Star and Weekly World News. Collectively, AMI's publishing assets reach millions of hurried housewives with tales of their favourite celebrity's sex lives or Oprah Winfrey's latest diet.

Despite AMI's dominance in a sector of the "information" market, the U.S. Department of Justice has made no moves to investigate whether it is a monopoly or engages in practices which could harm consumers. I guess tabloid shoppers just doesn't register in Janet Reno's world.

So why is AMI -- at least for now -- not facing the stern eye of government while Microsoft will find out later this year whether it will be fined, forced to change its business practices or even be split up? Knowing how antitrust is applied by government enforcers is the key to that question.

In a sector of the economy where the government does not interfere or keeps its interference to a minimum, a business must gain a monopoly by meeting the demands of the consumer, and it can only keep that monopoly but continuing to meet those demands. Once that monopoly is gained, a business cannot rest on its laurels or competitors will rise up and offer new and innovative products.

That's what happened in the 1980s and what gave Microsoft its start. Most people seem to forget that Apple Computer once had a commanding 50 per cent of market share in the desktop PC market with their Apple II system. Apple's mistake was to rest too long on the Apple II and allow IBM's PC to make inroads. Apple also charged a premium for their hardware (both the Apple II and the Lisa/Macintosh) and consequently lost share to IBM and Microsoft.

In all markets that Microsoft has succeeded, whether with their applications or their operating system, it has always been the marketplace which has given them their commanding position. Alternatives exist to every Microsoft product be it operating system or application, and in a few cases better alternatives, yet consumers overwhelmingly vote with their money to purchase Microsoft products.

What Microsoft's enemies fear is the company's supposed level of arbitrary power, free from the bounds of competition. Its opponents fear Microsoft's dominance will destroy them, and with it innovation, and leave the market with no alternatives.

But it is precisely that dominance and concentration of power that has pushed the software industry forward. Microsoft's size has allowed millions of users a common entrance into information technology by the imposition of standards. Microsoft's standards they may be, but standards they are none-the-less.

It is the natural course in economies that small companies either grow into large ones by meeting demand, or by merging with others to augment profits and possibilities.

Perhaps Microsoft has done some wrong, but by whose judgment? The same government which helped to create some of the most bloated monopolies in American history? A government which insists on rigging the field so that one group has an unfair advantage...or an undeserved "level" playing field? The jihad approach against Microsoft for continuing to improve their products and gain market share is nothing but an attack on a successful business, perhaps one of the most successful this century.

The real problem -- and the reason AMI raised no eyebrows at the DOJ while Microsoft was attacked -- is that monopoly laws are applied unevenly. They are deliberately vague and have been interpreted by the Supreme Court as pertaining to "unreasonable" restraints on trade. What's unreasonable?

The truth is that there is no definition of unreasonable. Business lawyer Robert Getman wrote recently, "its meaning is intentionally left to the discretion of government enforcers" or as Alan Greenspan once said, antitrust "is a world in which the law is so vague that business-men have no way of knowing whether specific actions will be declared illegal until they hear the judge's verdict -- after the fact."

Microsoft got a taste of that last week...will AMI? The "beauty" of antitrust is that no one knows.

Steven Martinovich is the editor in chief of Enter Stage Right and no fan of a certain U.S. District judge.

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