Two weeks ago, Michael Kinsley compared Robert Bork's arguments as a paid Netscape consultant in the Microsoft case with the book he wrote on antitrust 20 years ago. Bork responds to Kinsley's article here, and Kinsley returns the volley.
Michael Kinsley seeks to find a contradiction between the book I wrote in 1978, The Antitrust Paradox, and my representation of Netscape and other firms that support the government's antitrust case against Microsoft. He goes on to suggest that I have become a "disingenuous cynic" and have endangered, if not lost, my scholarly reputation. Though he reveals his own conflict of interest, which hardly requires confession, since everyone knows that Microsoft owns Slate, his attack follows the Microsoft line. That company's minions are masters of the ad hominem.
Let us begin with my motivation, which Mr. Kinsley questions. When Netscape first approached me, I said I thought I was on the other side. All I knew then came from newspaper accounts that described the case as an attack on tie-ins. I continue to think tie-in law mistaken, but this was not a case of extending a monopoly to a competitive market. Rather, Microsoft, as its own internal documents show, was trying to stamp out a product, the Netscape browser, that might compete with its monopoly operating system. Netscape sent not only the reference to my book, The Antitrust Paradox, but an explanation of why predation would work in this market. At about that time, a lawyer for Microsoft called and, in conversation and by letter, tried to convince me that the company's practices created efficiency. He offered me a retainer. I have no idea how large that might have been because I did not ask or try to negotiate with him. I said that if he convinced me, I would simply stay out of the case. He did not persuade me, and I went with Netscape, charging the same hourly rate I charge all clients, no more, no less. There was no reason why I should make that choice except that I thought, and continue to think, Netscape is right. The government seems to be proving that in the courtroom.
Mr. Kinsley's economic analysis fares no better than his personal attack. The key question is whether predation, including price predation, can be an effective monopolizing technique. As I recall Mr. Kinsley's review of my book, it was one of the less comprehending assessments. The ensuing 20 years have not improved his comprehension, and it is too much to expect that he will reread the work now. My belief that Netscape has the better of the argument with Microsoft rests on much more than the Lorain Journal case. To refresh Mr. Kinsley's memory, the relevant passage begins at Page 148, where I wrote that "The technique of predation, rather than the question of reserves, is likely to be decisive in the success of the tactic, and the law should focus upon this issue."
Price cutting will usually not be a successful technique, I wrote, because it requires the predator to expand his rate of output in order to drive prices down. In the case I posited, an expansion of output imposes increasing costs upon the predator because his marginal costs will rise and the victim's will not. That will be true in almost all industries. It follows from the argument that price cutting can be a successful predatory tactic if marginal costs are not rising. I did not make the point explicit because it seemed obvious and a rare case.
Microsoft's representatives have made it clear that, after development costs, the production and distribution of software displays a flat marginal cost. The predator is at no disadvantage. If his financial reserves are larger than the victim's (in proportion to their market shares), the predator can destroy the victim's business. This is especially true where the predator is spending only a small fraction of its monopoly profits while the victim has no such profits. Nor will outsiders put up the capital to resist the predator, for they will know the victim is at a disadvantage in the fight.
That, in essence, is the case against Microsoft's attempted destruction of the Netscape browser in order to defend its monopoly in operating systems. I trust the matter is now clear to Microsoft, Slate, and Mr. Kinsley, but it is too much to hope that any of them will concede.
Michael Kinsley responds:
First of all, thanks to Judge Bork for the above response. Next, a few points in reply:
1. I consulted no one at Microsoft, outside of Slate, in writing my piece. The company's "minions" didn't even know I was writing it until it appeared. I did read a document or two off the company's publicly available antitrust suit propaganda page, as well as a similar page sponsored by the Justice Department.
2. One of the striking things about the Microsoft trial, so far, is the extent to which the Justice Department and its lawyer, David Boies, have built their case around personal vilification of Bill Gates. This may be justified or not--we like him well enough around here!--but it does seem unreasonable for a supporter of the DOJ to suggest that ad hominen attacks are a Microsoft specialty.