Sunday, May 03, 2009


A discussion at the Irish Liberty Forum:

The monopoly concept is seriously misunderstood. Rather than sticking to the classical definition; “an exclusive grant to sell given by government”, some believe that it’s something to do with market share.
The lesson [of the Standard Oil case]: monopoly has nothing to do with market share as the definition of “market” can be whatever the hell you want it to be.
A month ago, the European Committee on Standards and Interoperability released its report (pdf) into Microsoft's history of anti-competitive behaviour. Its conclusion:
Microsoft’s conduct over the last two decades has demonstrated Microsoft’s willingness and ability to engage in unlawful conduct to protect and extend its core monopolies. This conduct has caused real harm to consumers, who continue to pay high prices and use lower quality products than would have prevailed in a competitive market.
One case looked at was that of DR DOS, a popular rival to MS DOS that was put out of business by Microsoft. When Windows 3.1 was released it had encrypted code hidden away, designed to display a completely false and misleading error message if anyone tried to install it on top of DR DOS. In a memo, Phillip Barrett, a senior Microsoft employee, explained the strategy:
The approach we will take is to detect dr [DOS] 6 and refuse to load. The error message should be something like ‘Invalid device driver interface.
By the mid 1990s DR DOS was effectively out of business, bought up by Novell and used for the boot partition of their servers. In 2000 the damages suit finally came to court, with DR DOS now represented by its new owners, Caldera. In an out of court settlement, made after Caldera's lawyers showed their evidence in preliminary hearings, Microsoft paid an undisclosed sum to Caldera. Looking at transactions between members of the Canopy Group, Caldera's venture capital provider and, at that time, parent, I reckoned this might have been as much as three quarters of a billion dollars, the BBC said it was "several hundreds of millions of dollars".

Whichever, it was fraction of the profits Microsoft had earned through this deliberate fraud on consumers. It was also a fraction of the potential revenues open to DR DOS throughout the 1990s. Consumers were also robbed of the use of a far more advanced and innovative operating system than MS DOS. I ran a DR DOS machine for a while, out of interest, around 2000 and it boasted UNIX shell-like command history and tab completion, a graphical web browser and a graphical email client - on DOS.

So, does the case of Microsoft suggest there should be governmental action to prevent the formation of commercial monopolies? ECSI say they hope their paper will:
... help developers, consumer groups, and government authorities better to understand Microsoft's history of anticompetitive conduct and to recognise its current and future misconduct at an early stage in order to intervene to prevent Microsoft from using tactics other than competition on the merits.
Nothing would do more to further this idea of competition on merits than the streamlining of legal process, and the reduction of the costs involved. Microsoft were at legal fault under existing legislation but they could drag litigation out for years, all the time financially crippling their opponent with the very tactics being complained of.

No new legislation is suggested by the case of Microsoft, but it does show how our legal system is corrupted by the power a rich litigant wields. An imbalance in wealth between parties in a case is sufficient to deny justice. This is a scandalous reality.

And monopolies? Monopolies are bad. But do they really ever arise without the imposition of inequity by the state, either in the person of a monarch granting exclusive rights to a merchant, or in the form of a legal system that favours the wealthy?

1 comment:

Trooper Thompson said...

I think monopolies can ideed arise without any state interference. Any person or company that develops something new will have the market cornered, for a time at least.

I guess with things that are already in existence, you are generally right, the great John Lilburne was a victim of Charles Stuart's propensity to sell monopolies if I remember correctly, but your reference to the state concerns me for the following reason:

The nation state is on its way out, it is being gradually eclipsed by transnational corporations and supranational institutions. That monopoly power, so often used for tyranny, is not in the hands of politicians in Parliament.