the Immorality of Antitrust Law; D. T. Armentano

But those same economists rarely acknowl edge that Smith immediately went on to assert that "it is impossible, indeed, to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice." Smith, a professor of moral phi losophy,was opposed to antitrust law on prac tical and ethical grounds. How do antitrust laws interfere with liber ty? All the important antitrust statutes (SherD. T. Armentano is professor emeritus in economics at the University of Hartford and the author of Antitrust: The Case for Repeal (Mises Institute, 1999). 23 man Act, Clayton Act, Federal Trade Com mission Act) regulate or prohibit purely vol untary or consensual business activity. For example, freemarket monopolization implies that consumers choose freely to support only one supplier of some product or service. Free market prices-whether they are described as discriminatory, or predatory, or collusive are all determined through voluntary agree ment and exchange. Mergers involve volun tary acquisitions of stock or assets. Tying con tracts or exclusive dealing agreements are voluntary arrangements to purchase one good and forgo the purchase of another. Since lib erty (in a business context) implies the natur al right to make any agreement to trade legit imately owned property on any terms mutual ly acceptable, then antitrust law must interfere with liberty.

Microsoft Case Consider the recent Microsoft antitrust case. The software company clearly has a property right to its software. It has a proper ty right to license (or not license) its software to any PC manufacturers on any terms mutu ally agreeable. It has a property right to inte grate its Web browser, Internet Explorer, into its Windows 98 operating system. And it has a property right to prohibit any licensee's deleting any part of its Windows operating code. The federal government's and the states' attempts to regulate all these peaceful activi ties (and more) are not only irrational but 24 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 clearly invasive of liberty and property rights as well. The antitrust suit against Microsoft is also absurdly unjust. Microsoft is the world's pre mier software corporation. It earned its mar ket position by innovating a user-friendly operating system at minimal cost to the con sumer. And rather than "restrain" trade, it has licensed its operating system to hundreds of PC manufacturers here and abroad. That it competed vigorously for market share cannot be doubted; but more important, it committed neither force nor fraud in its commercial activities. Yet for all this, it was rewarded with massive competitor envy and a decade of legal harassment from both the Federal Trade Commission and the Antitrust Division of the Justice Department.

Antitrust and the Rule of Law Substantive abuses of liberty and justice occur with antitrust enforcement because owners of property (or trustees standing in for owners) are prevented from engaging in peaceful trade and exchange. But there are also "procedural" difficulties with antitrust regulation. For example, antitrust case law is so inconsistent that it is almost impossible to know from one case to the next which busi ness practices are illegal and which are not. "Predatory prices" are illegal, but how low must prices go (and for how long) before they become predatory? In a "monopoly" case, how will the relevant market share be deter mined and what percentage of the relevant market will the court determine is monopoly? Mergers and tying agreements are illegal if they "substantially reduce competition," but no Congress or court has ever clearly defined that expression with any precision-nor could they. Corporations and businesspeople indict ed under antitrust regulation can only discov er after the fact if they have violated antitrust law. This legal subjectivity is the major reason why those accused of antitrust violations set tle their cases pretrial or with a consent decree.

The laws are also inherently discriminatory. In the Microsoft case, for example, the com pany was accused of entering into exclusive dealing agreements with PC manufacturers; it was also accused of. refusing to allow. PC manufacturers to delete the Web browser from Windows 98. Yet many of Microsoft's com petitors employ similar exclusive agreements with manufacturers, and many refuse to allow a licensee to delete any part of their propri etary software code. If the court rules against Microsoft, the company will have to change those practices-but its competitors will not. They will be perfectly free to engage in the very activity explicitly forbidden to Microsoft. If you think that this is unfair (as you should), remember that this is antitrust. As the judge in the 1953 United Shoe Machinery case put it: it was morally accept able for the court to impose discriminatory requirements on the defendant, United Shoe Machinery Corporation, and not on its com petitors since United's unique efficiency already put it in a class by itself.

Over 100 years of experience with antitrust regulation confirms Adam Smith's predic tion that the laws are inherently abusive of liberty and justice. When our legislators gain the moral courage to repeal the vast antitrust apparatus, both economic perfor mance and individual liberty will be expand ed greatly. D The apple icon , identifies Freeman articles that are appropriate for teaching stu dents several major subjects-including economics, history, government, philosophy, and current issues. We also provide sample lesson plans for these articles on our Web site www.fee.org and in written form. Professors, teachers, and homeschooling parents need only to visit our Web site or request written lesson plans to take advantage of this unique service.