From: rwh@moose.cccs.umn.edu (RICHARD HOFFBECK)
Subject: Re: FCC will proclaim Microsoft is run by Communists! :)
News-Software: VAX/VMS VNEWS 1.41    
Reply-To: rwh@moose.cccs.umn.edu
Organization: Colon Cancer Control Study, University of Minnesota, Minneapolis
Date: Mon, 28 Dec 1992 17:37:00 GMT

In article <1992Dec27.210454.5039@actrix.gen.nz>, Steve.Withers@bbs.actrix.gen.nz writes:

>  
> > At least in this case there is no shred of evidence for price-fixing.
> > But these _contemporary_ facts does not even trigger you to _question_ 
> > your historical conclusions. You take your historical conclusions
> > as _absolutes_, not as an hypothesis.
>  
> Oh dear. I can sum up my views by saying "I know what I know." I long ago gave
> wondering about whether some things are good or bad....I have reached
> conclusions in many areas based on my own experiences in business, society and
> life in general. You call them absolutes, if you like. There are just some
> issues I no longer vascillate on. 
>  
> As forthe particular case of MS: The FTC has been investigating for some time.
> They have found evidence of breaches and recommended action be taken swiftly.
> I don't think you or I are ina position to dispute the information they have
> gathered, are we?

Having spent 3 days a week sitting through the PhD sequence in industrial 
organization, having interviewed with the research and enforcement group
at FTC and the anti-trust division at DOJ, having hired several economists
from FTC and having several friends from graduate school who serve as
outside consultants to FTC, I think I am more than free to comment on the
quality of information produced by the enforcement group at FTC at least
as it existed during the mid-80's.

Historically, the FTC has been considerably more agressive than the DOJ; and
for the most part, has directed its efforts at more consumer oriented issues
than MS.  The heavyweight anti-trust work has generally been centered at
the Department of Justice.  In order to make their action against MS fly,
the FTC is going to have to get the court to accept a VERY narrow definition
of the appropriate market, i.e. OS software for IBM compatible clones. 
Strictly from an economic theory point of view, this is going to be a hard
argument to make convincingly.  Given that they are going to have to make
this argument in what is now largely a Reagan-Bush appointed Federal Court
system makes the task even more difficult.  Based on my experience of 5
years ago, I personally don't think that the FTC has the necessary 
intellectual horsepower to back up their recommendations in the present
court system.  Actually, I not sure that the argument that needs to be made
would fly if it was made by a tenured faculty member in a graduate seminar.

I think that FTC's only hope is that the final recommended penalty is 
sufficiently minor that MS settles to make the whole thing go away. The
settlement that I keep hearing about is that MS would shorten the term of
their OEM agreement.

>  
> I work for a company that sold MS-bundled PC's. I know the terms of that
> agreement. I can see where the FTC are coming from on this. Further, I agree
> with it. You can waffle about absolutes and hypotheses all day if you like.
> But the MS monopoly-being-born needs to be curbed. Period.

Perhaps you would like to inject some facts into the discussion and provide
the specifics about the agreement that you feel violate the anti-trust laws.
In particular, I'd like to know the term of the agreement, the per-unit
cost schedule; and specifically, if there were any penalty clauses that
caused your price to rise if you included other OS software on the machine.

The 'facts' as I've heard them was that the normal OEM contract was 3 years
and provided a license in the range of $10 - $15 per machine with the OEM
providing the written documentation.  I've also been told that there was 
nothing that prevented you from including a different OS, but you'd still
have to pay the licensing fee for DOS.  I've also been told that the only
thing that particularly bothers the FTC is the 3 year term of the agreement -
they feel that it should be shorter, and I can't disagree with that since
3 years is a full generation in this business.

>  
> So make room in your market thoeries for the FTC and simialr agencies. They
> exist. They will continue to exist. They are a real market force. Think of
> them as Adam Smith's "Invisible Hand".....keeping the markets in balance.
>  
> Or continue to rail against them and spew vitriol at those who recognise the
> important role they play.....

My problem is that the FTC has shown no 'fingers for the nuances' as the 
Russians say.  They are much more at home chasing down wayward mail order
firms or making used car dealers to tell buyers about known defects than
they are in dealing with the finer points of industrial organization or
anti-trust law.  That's why there is an anti-trust division at the Department
of Justice.

>  
> Steve
>  
>  
>  
> -- 
> Steve Withers - Wellington, New Zealand | On Sept. 19th, 88% of NZ voters opted
> Steve.Withers@bbs.actrix.gen.nz         | for proportional representation. It
> +64 4 478 4714                          | looks like we may get a more  
> **** Happy user of OS/2 v2!! ****       | democratic system "real soon now".


I'm afraid that I don't know your specific background, but given your .NZ
address, I'd be remiss if I didn't point out that anti-trust laws vary
greatly between countries and depend to a great extent on the particular
legal history of the specific country.

--rick

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| Richard Hoffbeck               INTERNET: rwh@moose.cccs.umn.edu |
| Colon Cancer Control Study     ATT     : (612) 627-4151         |
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