America's antitrust policy ensures monopolies' growth

The Argument

Bill Gates is the winner if his company, Microsoft, is dismembered

January 30, 2000|By JOSEPH R. L. STERNE | JOSEPH R. L. STERNE,SPECIAL TO THE SUN

In the continuing struggle between monopolists and antitrusters, neither wins. Only technology triumphs; technology and the innovative forms of economic organization it spawns.

When the trustbusters broke up Standard Oil in 1911, John D. Rockefeller was already losing some of his dominance as oil-drilling technology and ,the advent of the auto were creating a market irresistibly luring powerful competitors. Yet it was hardly a moment for cork-popping at the Department of Justice.

For Rockefeller had it right. When a messenger brought him the supposedly bad news that his empire was about to be feudalized, his blandly advised: "Buy Standard Oil." The court's decision turned Rockefeller from a millionaire into a billionaire.

Standard Oil's component parts, ostensiblystanding alone, quintupled in value over the next 10 years.

Fred S. McChesney and WilliamF. Shughart II, in "The Causes and Consequences of Anti-Trust" (University of Chicago Press, $66), contend that the Sherman Anti-Trust Act of 1890 had the perverse effect of causing the "Great Merger Wave" 10 years later that actually increased the concentration of economic power in big combines. Why did this happen? Because aggressive, expanding firms hindered by law from crushing competition decided instead to buy it.

Another work, "Accumulation and Power," by Richard B. DuBoff (M.E. Sharpe, Inc., 223 pages, $31.95 discounted), makes the similar point that "the executive and judicial Interpretations of the Sherman Act intensified pressures to merge and consolidate." Corporation lawyers advised their clients to abandon cartels and trade associations and consolidate into "single, legally defined enterprises."

Thus the seeming paradox, seen today, of merger mania at a time of renewed anti-trust activism by the federal executive is by no means a new phenomenon. As the nation awaits a quick settlement or a long-delayed verdict in the Microsoft case, stock market analysts are figuring that Bill Gates wins no matter what the denouement. Already, he is the richest man since Rockefeller, having surpassed the likes of Jay Gould, J. P. Morgan and Samuel Insull in real dollars. And a dismembered Microsoft, like Standard Oil of yore, might be worth more in pieces (an estimated $553 billion) than its intact valuation of $460 billion.

But wait: Does that mean Assistant Attorney General Joel Klein and his trust-busters are laboring in vain? Hardly. Not only do they have Judge Thomas Penfield Jackson's finding that Microsoft is indeed a monopoly, but by bringing legal action they have induced Gates to modify his behavior toward competitors during the past two years - years in which start-up entrepreneurs are starting to look upon Microsoft with the same condescension Microsoft once looked at IBM.

Technology Is triumphant again. Microsoft's Windows operating system may now have a stranglehold on 90 percent of the personal computer market. But IBM's chairman, Louis Gerstner, has already proclaimed the end of the PC era even as his company churns out tens of thousands of ThinkPads. The most popular new high-tech item on the 1999 Christmas list? 3Com's "Palm Pilots," hand-held wireless devices that can access the Internet without having to go through Bill Gates' Windows system. While Microsoft struggles to keep up, the best it can hope for is oligopoly, not monopoly.

Because Bill Gates is the most publicized monopolist since Rockefeller, because information technology touches lives as pervasively as petroleum, because the Antitrust Division at Justice is in feisty revival, a new volume on "Monopolies In America" by economic historian Charles R. Geisst (Oxford University Press, 384 pages. $30) is opportune.

This is a needed book for the layman in a field crowded with the esoterica of professional economists. It cannot, however, be the last word, even for the short run.

Geisst's work is tantalizingly terse on the subject of Microsoft, even though the use of Bill Gates' name in the subtitle suggests otherwise. Perhaps the author anticipates an outpouring on the subject and wants to get in on the scene-setting. He makes the claim in his preface that "no one single history has ever been written touching upon the constant tug-of-war that developed between Washington and corporate America."

If this book is designed to fill such a void, it is well that the parameters are so narrow. For Professor Geisst gives only a passing glance at the interplay between antitrust and technology or between antitrust and international economics. Yet it is arguable that both factors are so decisive they cannot or should not be marginalized.

As the author makes clear, American attitudes toward monopolies is more loop-the-loop than linear. What gave rise to the landmark Sherman Anti-Trust Act of 1890 was the buccaneer attitude of so-called "robber barons" who seized control of financial markets, railroads, oil and communications.

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