(For all the reasons I shouldn't write this article, and why I'm doing it anyway, click.)
"The problem is Microsoft's tactics in maintaining their [monopoly], which included an attempt to crush Netscape. You recall in that meeting ... they were pretty rough and they threatened. Marc Andreessen, the technical man from Netscape, said later that it was like a visit from Don Corleone. He expected to find a bloody computer screen in his bed in the morning."--Robert Bork, interviewed on CNN (1998)
"Unsophisticated theories of predation abound, leading to drastic overestimations of its likelihood. The most common 'theory' views firms in the market as if they were thugs in a dark alley; evidently a large firm has more muscle and can beat smaller firms to death. ... Such remarks, though they represent popular 'learning' on the subject, do not reflect theory but are only foolishly inapposite metaphors that ignore the constraints the market places upon firm behavior."--Robert Bork, The Antitrust Paradox (1978)
My college freshman roommate thought he was trapped with a madman when I asked, the first day, where you went to pick up the free light bulbs. He had never heard of free light bulbs. Growing up in Detroit, I had never heard of paying for them. Detroit Edison gave away free light bulbs until 1978, when an antitrust lawsuit forced them to stop.
That same year, Robert Bork published The Antitrust Paradox, asking again and again questions such as why the law should stop a company from doing consumers the favor of giving them something for free. Conservative commentators--permanently embittered, like Bork himself, by the 1987 battle that kept him off the Supreme Court--often describe Bork as the towering constitutional philosopher of our century. That is unlikely. Except for a published lecture series, he has never written a scholarly book on constitutional law. On antitrust law, though, he wrote the book.
The antitrust statutes are very short--just a few vague and badly worded sentences. But mountains of doctrine had been built on them over the decades by judges, most of whom were innocent of economics. Bork's book argued that much, if not most, antitrust law was economic nonsense. The law protected competitors rather than protecting competition. It punished behavior that was economically efficient and good for consumers.
When I graduated from law school, also in 1978, every firm on my job hunt had a big antitrust department. But thanks largely to Bork's book--plus 12 years of Republican judicial appointments and Justice Departments--antitrust law melted away. Huge companies merged without a peep of complaint. Judges trained in economics (or with clerks who were trained in economics) reversed, ridiculed, or simply ignored long-established antitrust doctrines.
With the return of a Democratic administration in 1992, antitrust began to return as well. But one reason the Microsoft case is so contentious and confusing is that the law remains uncertain. The edifice was torn down and now it's being rebuilt, and no one can say for sure what it's going to look like. But the government is arguing that giving away an Internet browser, like giving away light bulbs, is or ought to be illegal. And Bork is on the government's side. He doesn't renounce his influential book. He insists he is being perfectly consistent.
I t's not utterly impossible to reconcile Bork's current position (call it Browser Bork) with what he wrote in 1978 (call it Book Bork), but it's almost utterly impossible. What is utterly impossible is to imagine that Bork himself would ever have threaded through this maze of rationalization if he weren't being paid by Netscape. Bork told the Washington Post, somewhat amazingly, that when Netscape first approached him, he said, "I'm not sure my philosophy fits your case." Then, the Post reports, "the company pointed him to Pages 344 and 345 of his seminal book," which discuss a case so important to his theory that he'd apparently forgotten all about it. The Post also reports, "Bork rejects the notion that Netscape is trading on his reputation," which if correct will do nothing good for that reputation. Obviously Netscape is trading on his reputation, just as. No one needed his analytical expertise. By Bork's own account, after all, Netscape's supplicants had to point out his key argument to him.
The case on Pages 344 and 345 of The Antitrust Paradox is indeed the only thing in Bork's 462 page book that even faintly supports his current position. It is called Lorain Journal v. U.S. and dates from 1951. The monopoly newspaper in a small town refused to sell advertising to anyone who also advertised on a newly arrived radio station. The court ruled that was predatory and illegal. Bork argues that various Microsoft practices amount to the same thing. These include things like requiring computer makers who license Windows to make the Windows desktop the first thing users see, or insisting that online services must make Internet Explorer their "default" browser if they want to customize it for their users. He also includes here the bundling of Internet Explorer with Windows 98.
Problem No. 1 for Browser Bork is that Book Bork is not all that enthusiastic for the Lorain case. He says that it "seem[s] clearly correct, and yet it is rather difficult to articulate the distinction" between Lorain and another case he also endorses that reaches the opposite conclusion. The distinction, he wanly suggests, "probably lies in the fact that the court was offered what was essentially an efficiency defense" in the other case. By contrast, "There was no apparent efficiency justification" for the newspaper's refusal to sell ads. The central theme of The Antitrust Paradox is that economic efficiency is key.
Problem No. 2 for Browser Bork is that the Microsoft case differs from Lorain in obvious ways. First, the Microsoft tactics that leverage Windows into this or that advantage for Internet Explorer fall short of a classic "refusal to deal." The direct analogy to Lorain would be if Microsoft refused to sell Windows to any computer maker that installed Netscape--which it has never done. (The computer I write this on, like most, came with Netscape.) Second, I'll leave to Microsoft's lawyers the challenging argument that Windows does not have a monopoly on operating systems. But Internet Explorer certainly doesn't have a monopoly on browsers--it isn't even No. 1--so the policies that attempt to impose conditions on the use of Internet Explorer, as opposed to Windows, do not qualify as monopolistic behavior at all.
Problem No. 3 is efficiency. Microsoft certainly has "offered" an efficiency defense for making its browser part of the operating system and for the other challenged practices. And several possible defenses are "apparent" just from reading Bork's book on pages other than 344 and 345. Book Bork touts the economies in the marketing and distribution of one product rather than two. And he explains the importance of "technological interdependence." ("If the essential component did not conform to exact specifications, it might impair the operation or usefulness of the principal product.") He repeats and repeats his point that any even plausible efficiency argument should trump overblown concerns about the dangers of monopolization. "The truth appears to be that there has never been a case in which exclusive dealing or requirements contracts were shown to injure competition," he writes.
T he most "apparent" efficiency of a monopoly in operating systems or a would-be monopoly in browsers is the notorious "network effect." The more people who use a complicated piece of software, the more useful it is to each user. Browser Bork strangely classifies the network effect as an artificial barrier to competition imposed by Microsoft, rather than a genuine benefit to consumers (for which Microsoft deserves neither credit nor blame). Book Bork is contemptuous of arguments against "tying arrangements" (making the customer buy two products together) and against "predatory pricing" (lowering your price in order to drive rivals out of business). How would the Bork of The Antitrust Paradox have solved the great metaphysical riddle of our time: Is Windows with Internet Explorer one product or two? "Every product or service could be broken down into smaller components capable of being sold separately. ... There is no way to state the 'inherent' scope of a product." Browser Bork does have an explanation of why tying arrangements, a practice he considered harmless if not metaphysically impossible in 1978, became dangerous in 1998. He says his 1978 argument concerned the extension of a monopoly from one product to another--which classical economics--whereas Microsoft is using a tying arrangement to preserve the monopoly it's already got. This is puzzling. It will be news to Bork's Netscape clients that the case isn't about Microsoft attempting to use its monopoly in operating systems to achieve a monopoly in browsers. Or is Bork suggesting that they're actually one undifferentiable product--which is Microsoft's position? Or is it that Microsoft is somehow leveraging its nonmonopoly on browsers backward into the monopoly it already has on operating systems?
Bork is so famous for believing that predatory pricing is almost impossible that he doesn't explicitly say, in his "white paper" for Netscape, that selling an Internet browser for zero dollars is predatory. He does say Microsoft's "clear intent" in giving away Internet Explorer is "to drive Netscape out of the market" and that the "effect upon the much smaller Netscape was devastating." He also makes the truly bizarre argument that imposing conditions on suppliers and customers "is a form of predatory pricing" because if the company didn't impose these conditions it presumably could charge more. And he even repeats the single argument that he is best known for demolishing: that a rich company can sustain losses longer than a poor company, drive it under, and then raise prices.
The Antitrust Paradox called predatory pricing "a phenomenon that probably does not exist." An aspiring predator, Bork pointed out, would have to be willing to lose more money than its victim for as long as the game went on. (Reason: It would be selling more units, and losing money on each sale. And if it wasn't losing money on each sale, the pricing would be efficient, not predatory.) The predator could not count on the advantage of a larger war chest, Bork argued, because if the victim were a going concern apart from the predator's misbehavior, the capital markets should be willing to bankroll its side of the battle. And predation would only pay off if the survivor could and did raise prices enough afterward to make up the enormous losses of the fight. Between one thing and another, Bork concluded back then, alleged victims of predatory pricing were almost surely financial hypochondriacs.
So how come "a phenomenon that probably does not exist" does exist in this case? Browser Bork's explanation is that Book Bork didn't know from software. The marginal cost of software (cost for one additional unit) is just about zero, therefore you can start a price war without much expense. That is an unfortunate argument for Browser Bork, since Book Bork makes clear that pricing must be "below marginal cost" to be considered predatory at all. Browser Bork also fails to note that the victim would enjoy the same low marginal cost as the predator. So Book Bork's argument that predatory pricing never works and therefore never happens is just as true as ever--or possibly just as false as ever, but at any rate its validity is unchanged.
The above discussion has very little to do with the Justice Department's case against Microsoft. The DOJ never took the position that tying arrangements, restrictive contracts, and predatory pricing are harmless figments of the imagination, so it is free to argue that they are dangerous monopolistic practices. The DOJ never insisted that almost any plausible claim of economic efficiency ought to outweigh concerns about the dangers of monopoly, so the DOJ is free to say that in Microsoft's case they do not.
Robert Bork is not free to say these things. Or he is not free to say them and expect to keep his scholarly reputation. Did his confirmation trauma turn a sprightly hard-truths ideologue into a disingenuous cynic? If so, that's a shame. But it's no excuse.
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