7/28/2019 Wayne Crews - Sherman's March Across the Globe - EU Reporter

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Plenary Edition 13 - 17 September, 2004, EU Reporter 3

Photo:The

European

CommissionPhotoLibrary

BY CLYDE WAYNE CREWS JR.

President Bushs biparti-san Antitrust Moderniza-tion Commission held itsfirst meeting in July. But af-ter 114 years, Americas an-titrust regulatory regime isoverdue for burial, not bo-tox. This comes on the heelsof Europes antitrust regu-lators nailing Microsoftssuccess, to the tune of497million ($612 million), for adominance assailed as im-

permissible and constitut-ing market abuse.

Antitrust regulations werefirst enacted as a way to pre-vent monopolization andrestraint of trade. But, byelevating government inter-vention above the marketscompetitive discipline, anti-trust has allowed disgruntledfirms to mount legal attacksagainst their more successfulcompetitors. Particularly giv-en todays global economy isthat other governments arenow emulating U.S. antitrustregulations to protect theirown industries.

The Sherman AntitrustAct of 1890 was brought to usby John Sherman, the broth-er of the Civil Wars GeneralWilliam Tecumseh Sherman.Ive heard it joked that Sher-ma ns M a rch a cro s s t heSouth did far less economicdamage than his brotherscentury-plus march throughthe greater economy. NowJohn Sherman is marchingacross the globe.

Hurting us all

Today, antitrust enforc-ers see monopoly or unfaircompetition throughout the

technology sector: compu-ter operating systems, busi-ness accounting software,databases, Internet routers,chips, online instant mes-saging, broadband services,cable, telephony. Purvey-ors of all these technologieshave been called anti-com-petitive. Antitrust empow-ers protectionists, allowingoverseas competitors andgovernments to target U.S.firms like Microsoft to pre-vent bundling of serviceslike security and media play-er software. This global one-upsmanship will hurt us all.

No one can predict when

the antitrust hammer willfall, but it gets every indus-try eventually. In the U.S., re-cent antitrust investigationshave hit the Orbitz travelsite, the Oracle-PeopleSoftmerger, and MusicNet-Press-play. The EchoStar-DirecTVmerger was blocked outright.

Even Google was accused ofunfairly prioritizing linksas if consumers cant migrateto another search engine.

In its most extreme appli-cationslike proposals tobreak up Microsoftanti-trust regulation doesnt sim-ply pick winners and losers,it dictates entire businessmodels by reorganizing in-dustry itself.

Nixing mergers

Despite earlier attempts tomodernize, smokestack-era antitrust law is aliveand kicking in non-technol-ogy sectors too. Washingtonregulators halted the Heinz-Beechnut baby food mergerto prevent the monopoliza-tion of pureed fruits and veg-etables. The Staples-OfficeDepot business supply su-perstore merger was nixed.The Philip Morris-Nabiscomerger required selling offthe intense mints business.(Ice Breakers breath freshen-ers were apparently poised totake over the economy.) The

U.S. Federal Trade Commis-sion (FTC) has even consid-ered whether premium icecream and jarred pickles aremonopolizable markets!

No economy can affordthe antitrust albatross, espe-cially in an age of advancedglobal trade. But too many

bureaucrats make their liv-ing at antitrust to be recep-tive to the kill it message.Denigrating antitrust is to-day what arguing for SocialSecurity privatization was 20years ago: Those who knowbetter look at you like youhave two heads. But thecase must be made, much asthe Washington-based Ca-to Institute, among too-fewothers, advocated Social Se-curity privatization when

the idea was considered ex-treme. Fortunately, the ex-ample of Chiles remarkablesuccess means that at leastthat model of liberalizationstands a chance at broaderadoption. Is an antitrust an-alog possible?

The actual extreme notionis the idea that governmentcoercion can replace com-petitive market discipline.Consider the Lens Crafters-Pearle eyewear merger: Itis now on hold because theU.S. regulators think eye-glass prices might rise inthe chain store market.Yet price increases, if they

happen, create new tiers ofeconomic activity that com-petitors rush to fill. They areimportant signals. It seemslike socialism must fail cat-astrophically in every singleniche before people finallylet go of it.

Antitrust activism in a glo-

EUROPEAN Legislation

bal information economywill cost decades in lost pro-ductivity and market evolu-tion. For example, in frontierindustries like nanotech-nology, bioengineering, andspace science, cooperationamong competitors can becrucial in coping with un-certainties, sharing researchand product ideas. But anti-trust regards most coopera-tion among competitors asillegal collusion.

Voluntarism

Yet that cooperation cancreate a rising tide of re-source and wealth creation,just as coordination betweenindividuals confers bene-fits (marriages, tandem ca-noes). Government researchand development is oftenpraised, but market col-lusion might work betterthan todays alternative ofhaving governments spreadresearch across dozens ofuniversities, national labs,and bureaucracies.

Competition, properly un-

derstood, has little to do withthe number of competitorsand industry concentrationratios that bewitch govern-ment commissions. Its properexpression is simply volun-tarism. Markets are the sumof competition and volun-tary agreements betweenfirms. Suppliers, business cus-tomers, and consumers haveample incentive to monitorand discipline abusive preda-tory efforts without antitrustregulations. Unlike voluntar-

ism, antitrust entails confis-cation, restraint, and forcedaid of competitors. Antitrustdoesnt create or assure com-petitive outcomes; it pre-vents them.

Bushs Antitrust Modern-ization Commission -- and,ho p e fu lly , Eu ro p e a n re -formers -- can ask fundamen-tal questions rethinking thewisdom of antitrust, or theycan tinker. The presump-tion that trustbuster activ-ism improves upon marketprocesses deserves reexam-ination. The agenda shouldnot be to recast and polish

antitrust, but to prevent thefurther global spread of a co-lossal mistake.

The American commis-sions most immediate goalmust be to encourage ouroverseas trading partnersnot to embrace the antitrustactivism that weve perpet-uatedand seek a similaragenda at home. Given thecurrent focus on antitrustboth in the U.S. and EU, allregulators face historic op-portunity to start us on the

road to ending a century-old campaign that squan-ders so much of the worldswealth creation. Most reg-ulators probably wont sayit outright, but the antitrustlaws are an anticompetitiveinterest-group luxury theworld cannotand nevercouldafford. Maybe, final-ly, we will see John Sher-mans march turned back.

Wayne Crews is vice president for poli-

cy and director of technology studies at the

Competitive Enterprise Institute, and co-au-

thor of Whats Yours Is Mine: Open Access

and the Rise of Infrastructure Socialism (Ca-

to Institute (USA), 2003).

Antitrust:Shermans March Across The Globe

Photo:Courtesyofwww.t

hevaleogroup.com

Putting business on the beach

American spelling and style applies to our US sourced articles

New EU Iron Lady:Gates Friend or Foe?

BY AOIFE DREW

Nellie Kroes, the newly appointed

EU Competition Commissioner, is

set to have her hands full as she

takes the reins of arguably the most

difficult and powerful job in the Brus-

sels executive. Although not officially

taking up this position until Novem-

ber 1st, she has already gained her

fair share of media coverage. Thisis thanks not only to her reputation

as the Netherlands Nickel Nellie, a

pragmatic and determined politician

in the mould of Margaret Thatcher,

but also to her close links to the pri-

vate sector. She will be faced with

numerous challenges from day one

in the post.

Kroes is the Netherlands former

minister of Transport and Public

Works and a member of the liberal-

conservative VVD party. She has a

reputation for being tough and dur-

ing her tenure as minister she drove

forward an ambitious liberalisation

and privatisation agenda. She

has extraordinary experience as a

member of government, comment-

ed Commission President Jos Bar-roso at a recent press conference.

She knows business and the private

sector. Indeed, in addition to her po-

litical experience she has been very

active in both the academic and cor-

porate worlds, serving as president

of Nijenrode University and holding

directorships at several high-profile

public companies such as Volvo,

Thales, MM02, Lucent Technologies

and P&O Nedloyd. She was identi-

fied as the Netherlands most pow-

erful woman by the Financial Times

in 1988.

So what is expected of Ms Kroes?

Due to her corporate connections,

political commentators predict she

may not follow the lead of her pred-

ecessor Mario Monti. Monti was

a tough enforcer of merger, anti-

trust and State Aid laws, banning

a merger between General Electric

and Honeywell. He also fined Micro-soft 497 million in March of this y ear

and said that it had to disclose soft-

ware secrets. Microsoft has since

appealed this decision and the le-

gal proceedings are expected to be

lengthy. A European court is expect-

ed to make a ruling on the case close

to the time that Kroes takes over.

Kroes awarded Gates an honorary

degree from the Nijenrode Business

School in 1996, but may now have

to change track as her role requires.

She will be responsible for monitor-

ing any anti-competitive behaviour

and tackling reform of the law on

dominant companies. Futhermore,

two of the key issues the new Com-

missioner will face are the balance of

power between member states rede-fining the way the commission deals

with powerful, dominant companies,

said Alec Burnside, Head of the EU

and Competition group at Linklaters

in Brussels. States and companies

alike will have to be vigilant about

their behaviour if she lives up to her

reputation.

Will she succeed in her new role?

If her career so far is anything to go

by, the answer is a resounding yes.

An ex-colleague of hers, Kar el Van

Miert, EU Transport Commissioner

in the early 1990s, believes she will

do her utmost in the job. She is a

tough lady who will behave in an in-

dependent and coherent way.

Kroes next challenge will be to

present her programme to the Eu-ropean Parliament in October. She

must obtain its approval before she

can officially direct and enforce

competition law for the five years to

come. If Nickel Nellie performs in

her future career as she has up to

now, interesting times are certain-

ly ahead.

Nellie Kroes, EU Competition

Commissioner appointee