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The Antitrust Absurdity

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The Federal Trade Commission has aimed its antitrust cannon at Intel Corp., maker of the microprocessor used in 90 percent of personal computers. The FTC charges Intel with refusing to provide information about its chips to certain computer makers with which it has legal disputes. At first, it may look as though Intel’s “offense” is its discrimination against those computer makers. (Why should that be the government’s business?) But that is not really what’s at issue. If Intel were an insignificant maker of computer chips, hardly anyone would care that it refused to release technical information.

The reason that someone does care is that Intel is very successful at what it does. People like its products enough to give it an overwhelming share of the market. Intel is the other half of the Microsoft Windows, or Wintel, standard. Antitrust creates a dual legal system in the United States: one for the very successful and one for everyone else. In this respect at least, the rule of law is kaput. “Equal justice for all” is an inoperable slogan at the FTC and the Antitrust Division. If Intel and Microsoft are eventually crushed by the federal government, it will be a big day for the lawyers in those agencies. But it will be a sad day indeed for the rest of us, even for the companies egging the government on, because the principles it will have helped cement in place could well come back to haunt them someday.

Antitrust law is founded on a host of silly ideas. But one of the silliest is that government officials can foretell the future. In the world occupied by antitrust lawyers, Intel and Microsoft are threats because they can use their market power to squash competition that would threaten their dominance. But there is no way to make that prediction without knowing what new ideas imaginative people will think up tomorrow or the next day or next year. And no one can know that.

Try telling Christopher Galvin that the future is predictable. Galvin is CEO of Motorola. Just a short time ago, Motorola was on top of the high-tech world. It made most of the wireless telephones. It was a top manufacturer of memory chips. It was the king of pagers. Today the company is fighting for its life. Galvin has been given a deadline for turning the company around. If he misses it, he’ll be history.

What happened? The world changed. First, the wireless-telephone market began shifting from analog to digital technology. Digital telephony permits clearer, more secure wireless communications. But big Motorola missed the change! While QualComm, Ericsson, and other companies were bringing out new digital telephones, Motorola was still making analog phones. Now it’s playing catch-up.

What’s the lesson here? No market leader can rest on its laurels. New ideas are always coming along, and consumers are fickle. As the old Sinatra song “That’s Life” had it, you can be “riding high in April, shot down in May.” No one can predict what someone will discover tomorrow or how we will react to it. Some unforeseen discovery could come out of left field and dethrone a company that just yesterday looked as secure as anything could be.

Motorola has also been buffeted by the economic problems in Asia. As their economies have gone south, thanks to government inflationary policies and other intervention, people are buying fewer pagers and memory chips. In this case, it is not a better idea that has hurt Motorola. Nevertheless, an unforeseen (if not unforeseeable) set of events has hit a leading company where it hurts.

The upshot is that no company, no matter how powerful it looks today, is safe from the winds of change–as long as the government doesn’t protect it. Ultimately, if someone wants to stay on top, he has to do it by satisfying consumers. Contracts and dealmaking that offend competitors will come to naught if they do not make consumers better off.

Antitrust enforcement is premised on the idea that the government has to keep the competitive process going. That is wrong. The competitive process is what there is when government abstains from interfering with people’s peaceful pursuits. When it tries to do more than that, it doesn’t protect competition or consumers. It merely protects special interests at the expense of everyone else. The best thing the government can do to protect competition is repeal the antitrust laws.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.