[Congressional Record (Bound Edition), Volume 145 (1999), Part 5]
[Senate]
[Pages 7470-7472]
[From the U.S. Government Publishing Office, www.gpo.gov]



                   ANTITRUST SUITS AND SMALL BUSINESS

  Mr. ABRAHAM. Mr. President, I ask unanimous consent that articles 
written by Karen Kerrigan and Raymond J. Keating of the Small Business 
Survival Committee, along with a letter addressed from Karen Kerrigan 
to certain Members of Congress, be printed in the Record at the 
conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. ABRAHAM. The Small Business Survival Committee, or SBSC, is a 
nonpartisan, nonprofit small business advocacy group with more than 
50,000 members. These materials give a small business perspective on 
recent actions of the Department of Justice's Antitrust division, and 
of the action against Microsoft in particular.
  As the SBSC point out, we are in an era of renewed activism on the 
part of the Antitrust Division. Since 1994 that Division has pursued 
more than 274 antitrust cases. The Antitrust Division was set up to 
protect consumers and our free enterprise system. But these materials 
demonstrate that it is questionable whether this new activism is in 
fact helpful to small businesses and entrepreneurs.
  In particular, the SBSC questions whether the government's action 
against Microsoft, along with the concomitant actions of the state 
attorneys general, will not actually hurt small businesses and 
entrepreneurs who have profited from Microsoft's innovative practice. 
Worse, significant harm may be done to our ability to compete and to 
our very system of free enterprise, by the draconian measures being put 
forward in these talks.
  Breaking up Microsoft or worse yet subjecting it and its suppliers to 
government approved contracting procedures will destroy business 
flexibility and substitute bureaucratic empire-building for free market 
competition as the force behind new initiatives. This would be tragic 
for all Americans as it would deny us the economic growth, innovation 
and freedom that open competition has provided for so long.
  I hope my colleagues will study these and other materials as we 
consider the proper course for antitrust law in our political and 
economic systems.

             [From the Business Journal, January 18, 1999]

              Big Antitrust Cases Will Hurt `Little Guys'

                           (By Karen Kenigan)

       Small-business owners seldom go running to the federal 
     government for protection when competition threatens their 
     market position.
       But that, unfortunately, has become the strategy for some 
     big businesses who see their market share eroding due to 
     aggressive competition from a rival.
       The Antitrust Division of the Department of Justice is 
     currently being used by America's top CEOs who give up on the 
     marketplace, essentially using the government as a temporary 
     cushion against bleeding market share.
       But make no mistake, due to the desperate pleadings of such 
     big corporations, small businesses as consumers, suppliers--
     and even competitors--of successful big companies under 
     attack will suffer from this excessive meddling in the 
     marketplace.
       Headed by Joel Klein, the antitrust division is operating 
     with renewed vigor. If you care to take a look at Justice's 
     web site, it proudly lists more than 274 antitrust cases 
     brought by the U.S. government since December 1994 (along 
     with amicus curiae briefs in 31 other cases).
       ``The criteria for antitrust investigations or lawsuits 
     seems to be if a company merges or wildly succeeds, then it 
     may be ripe for antitrust action. When government moves 
     against successful businesses, the entrepreneurial sector of 
     the economy pays a price, too,'' said Small Business Survival 
     Committee chief economist Raymond Keating.
       Keating argues that antitrust actions generally seek to 
     supplant the wisdom of consumers with government regulators 
     as the final arbiter to protect politically connected 
     businesses that fail to adequately compete. He says small 
     businesses that have gained from the success and innovation 
     of companies under attack--Microsoft Corp. being a good 
     example--will ultimately lose from aggressive antitrust 
     action.
       Most troublesome is the permanent damage inflicted on the 
     company under attack and the impact on its small-business 
     suppliers.
       Nobel Prize-winning economist Milton Friedman recently said 
     that the companies of Silicon Valley that encouraged Justice 
     action against Microsoft are displaying ``suicidal'' 
     behavior. The door has been opened for new regulations in an 
     ``industry relatively free from government intrusions,'' he 
     warned the industry at a CATO-sponsored event.
       A new period has dawned in corporate America where some 
     feel safe running to the government for protection and solace 
     rather than responding to competition with better ways to 
     serve consumers.
       An activist antitrust division has helped to fuel this 
     rather co-dependent behavior. Its doors are thrust open to 
     all pleaders who wish to use the government to sideline or 
     district the competition. A costly government investigation 
     is one way to put the best brains of a business competitor 
     into nonproductive status, warding off potential bad press 
     and other fallouts that often accompany an antitrust 
     challenge.
       The government's pursuit of Microsoft is a bogus venture, 
     according to Citizens Against Government Waste. In October, 
     the group released a survey that showed 83 percent of the 
     public views the case against Microsoft as a waste of federal 
     and state taxpayer funds.
       ``With new evidence every day of the weakness in the 
     government's case, it's only a matter of whether the 
     government wants to wait 13 years, as it did in the IBM 
     case,'' said CAGW president Tom Schatz.
       According to the antitrust division's own literature, its 
     work is supposed to be focused on protecting consumers and 
     our system of free enterprise. What's becoming more clear is 
     that its work is doing much more to thwart competition by 
     protecting whiny competitors at the expense of free 
     enterprise.
                                  ____


             [From Small Business Reg Watch, December 1998]

                    Is Antitrust Anti-Entrepreneur?

                        (By Raymond J. Keating)

       Once again, merger activity in the U.S. economy has 
     accelerated. Among the proposed or consummated corporate 
     marriages of 1998 are Chrysler Corporation and Daimler-Benz, 
     American Online Inc. and Netscape Communications Corp., 
     Deutsche Bank AG and Bankers Trust Co., Unum Corp, and 
     Provident Cos., Tyco International Ltd. and AMP Inc., MCI 
     Communications Corp. and WorldCom Inc., Cargill Inc. and 
     Continental Grain Co., Bell Atlantic Corp. and GTE Corp., 
     Wells Fargo & Co. and Northwest Corp., AT&T Corp. and 
     TeleCommunications Inc., Exxon Corp and Mobil Corp., along 
     with a host of others.
       Of course, such mergers raise the antennae of government 
     antitrust regulations at the U.S. Department of Justice (DoJ) 
     and the Federal Trade Commission (FTC). These days, however, 
     it does not seem to take very much to get the attention of 
     the rather activist antitrust division headed by Joel Klein 
     at the DoJ. Indeed, at the DoJ's website, the antitrust 
     division lists 274 antitrust cases brought by the U.S. 
     government since December 1994, along with Amicus Curiae 
     briefs in 31 other cases.
       And a proposed merger certainly is not required to warrant 
     antitrust attention. For example, an antitrust case was filed 
     in early October 1998 against Visa USA and Master-Card 
     International. The FTC has filed suit against Intel Corp. And 
     of course, DoJ is now in court against Microsoft Corp.
       The criteria for antitrust investigations or lawsuits seems 
     to be if a company merges or wildly succeeds, then it may be 
     ripe for antitrust action. Of course, this problem springs 
     from the combination of vague legislation (i.e., primarily 
     the Sherman Act of 1890 and the Clayton Act of 1914) with 
     zealous government lawyers and regulators.
       While at first glance the issue of antitrust may seem 
     remote to most small businesses and entrepreneurs, it does 
     have an impact on and should be a concern to the 
     entrepreneurial sector of our economy. In general, antitrust 
     actions are anti-entrepreneur, and the reasons go far beyond 
     the basic idea that the next Microsoft lurks among today's 
     small or start-up firms, and will some day have to face the 
     wrath of antitrust regulators.
       Entrepreneurs as Consumers. Perhaps most obviously, small 
     businesses are affected by antitrust regulation in their role 
     as consumers. For example, small businesses are customers in 
     almost every industry touched by antitrust actions--from 
     telecommunications to computers to gasoline to grain to the 
     Internet.
       Any time our most successful businesses come under 
     regulatory assault, consumers

[[Page 7471]]

     are bound to lose. Entangle companies in antitrust litigation 
     and resources are diverted away from serving consumers, and 
     instead put toward battling the government. Just ask IBM. The 
     increased costs of government arrogantly overruling decisions 
     made in the marketplace ultimately fall on the backs of 
     consumers. After all, the consumer acts as final judge and 
     jury in the marketplace. They ultimately decide the success 
     or failure of mergers, who gains market share, and who loses 
     market share. Transfer this power to government bureaucrats, 
     and consumers--including small businesses--obviously suffer.
       Entrepreneurs as Suppliers. In addition, government 
     overriding the wisdom of millions of individuals in the 
     marketplace directly hurts small business and entrepreneurs 
     who supply goods and services to the firm under antitrust 
     assault. Businesses who serve customers well and gain market 
     share as a result, or those pulling off successful mergers, 
     create new opportunities for entrepreneurs and small 
     enterprises. Consultants, construction businesses, food 
     services, dry cleaners, retail stores, and seemingly 
     countless other suppliers grow up around these larger 
     businesses. These smaller businesses inevitably get hit with 
     the fallout from an antitrust attack on the larger companies.
       Entrepreneurs as Competitors. Some might believe that 
     smaller enterprises favor antitrust action as a means to 
     hobble a dominant competitor. In fact, an overwhelming number 
     of antitrust assaults begin with a faltering or less 
     efficient firm trying to get the government to impede their 
     successful competitor.
       However, this most certainly is a case against antitrust 
     action, not for it. The only possible beneficiary would be 
     the firm seeking government protection, and any resulting 
     advantage for that business would at best be temporary as the 
     market would still be working to weed out inefficiencies and 
     reveal their shortcomings--and justifiably so.
       In general, the entrepreneurial sector of the economy gains 
     nothing by having government step in and punish success, or 
     dictate which companies are allowed to merge.
       Entrepreneurs vs. Regulators. Indeed, any further 
     empowerment of regulators does not serve the over-regulated 
     entrepreneur at all. Government stepping in and dictating 
     business practices, assaulting efforts to gain market share, 
     and punishing success goes far in shaking the confidence in 
     and of business. Under such circumstances, the business 
     environment becomes inclement for all. And one can easily 
     envision robust antitrust regulation spilling into other 
     regulatory arenas.
       Entrepreneurs and Economics. The fundamental problem with 
     antitrust regulation is that it rests on unsound economics. 
     In reality, the economy is not the sterile, neat model of 
     perfect competition taught in economics textbooks and desired 
     by government lawyers. Instead, it is a tumultuous, ongoing 
     struggle among enterprises to create temporary monopolies 
     through innovation, invention and efficiencies. Those 
     temporary monopolies are subsequently attacked and surpassed 
     by competitors. Entrepreneurs, unlike many in government, 
     understand this rivalry between current and future 
     competitors.
       Indeed, it is difficult, if not impossible, to think of a 
     true monopoly--i.e., one supplier in an industry with no real 
     or close substitutes--ever emerging from the competitive 
     marketplace. Where true monopolies have existed, it was the 
     government that either created, aided, or protected it (e.g., 
     telephony, electricity, and education). The vaunted idea of 
     predatory pricing--whereby a business lowers it prices below 
     cost in order to destroy competitors, monopolize the market, 
     and then hike prices dramatically--fails the reality test. 
     It's never happened. The potential losses such a strategy 
     would have to incur would be enormous and unpredictable. And 
     even if it were to eventually succeed, consumers would have 
     benefited enormously, and subsequent price increases would 
     bring competitors back into the market.
       Antitrust regulation at its core is contradictory. It 
     purports to protect consumers from evil monopolies and so-
     called ``anti-competitive activity,'' but it is, in fact, 
     consumers who make the final decisions in the market. In this 
     light, antitrust regulation is revealed to be little more 
     than another elitist government effort to protect us from 
     ourselves. Antitrust actions generally seek to supplant the 
     consumer with the government regulator as final arbiter in 
     order to protect politically connected businesses who fail to 
     adequately compete.
       In the end, small businesses and entrepreneurs are not 
     immune to the costs of government antitrust activism. None of 
     us are.

                               Exhibit 1.


                            Small Business Survival Committee,

                                   Washington, DC, April 13, 1999.
     Hon. Dennis Hastert,
     Speaker of the House,
     U.S. House of Representative, Washington, DC.
     Hon. Trent Lott,
     Majority Leader,
     U.S. Senate, Washington, DC.
       Dear Speaker Hastert and Senator Lott: The Small Business 
     Survival Committee (SBSC), a nonpartisan, nonprofit small 
     business advocacy group with more than 50,000 members, is 
     very concerned about the growing antitrust activism exhibited 
     by the U.S. Department of Justice. It often seems that an 
     antitrust regulatory assault is launched simply because a 
     business has served consumers well, become successful, and/or 
     frustrated its competitors who now seek political remedies to 
     their own economic challenges.
       SBSC believes this is the case with the current antitrust 
     assault against the Microsoft Corporation. Microsoft is the 
     most successful U.S. company in recent memory. The firm 
     gained market share by serving consumers well, not, for 
     example, through any kind of government assistance. One would 
     think that such a U.S. business exhibiting such global 
     leadership would be praised, not punished.
       You may be wondering, why should small business be 
     concerned about the welfare of corporate giants and their 
     battles with DoJ? As the attached report points out, what 
     eventually happens with these various antitrust cases will 
     have a dramatic impact on small businesses both as consumers 
     and as entrepreneurs. I would even argue that renewed DoJ 
     activism has helped to embolden the regulatory spirit, 
     across-the-board, within the federal government.
       What eventually happens with the Microsoft case-Whether it 
     be more regulation, or one or more of the various 
     ``remedies'' that have been publicly floated and discussed 
     (most recently by the state AG's)--will have a deep and long-
     lasting impact on the high-tech industry. Small businesses, 
     entrepreneurs and their workforce will be the ultimate 
     losers--not to mention the economy and all consumers. The 
     ``remedies'' being discussed by opponents of Microsoft, as 
     well as the wish-list drawn up by the attorneys general who 
     have joined the federal government's lawsuit are draconian-
     plain and simple. As a country whose free enterprise system 
     has made the United States the envy of the world, SBSC is 
     both ashamed and disturbed that these ``remedies'' are even 
     being discussed.
       The very notion of monopoly or monopoly power in today's 
     dynamic, extremely fluid computer market is rather 
     preposterous. Make no mistake, Microsoft competes against 
     current, emerging and future competitors. Does anyone 
     seriously doubt that it Microsoft slips and does not stay at 
     the cutting edge. It will falter just like any business in a 
     highly competitive industry?
       In the accompanying materials, SBSC discusses many of these 
     antitrust issues, as well as others. I particularly draw your 
     attention to the report by our chief economist Raymond J. 
     Keating which asks the question ``Is Antitrust Anti-
     Entrepreneur?'' The answer, as you shall see, is ``yes.''
       Finally, I would like to mention two recent articles in the 
     Seattle Times and New York Times which report on a wish list 
     of punishments against Microsoft contemplated by the state 
     attorneys general. I say the least, these are quite 
     disturbing.
       The 19 state attorneys general who joined the federal 
     government's misguided antitrust lawsuit against Microsoft 
     are considering several punishments if the government's 
     lawsuit succeeds, including breaking the company into two or 
     three parts based on product lines, breaking the company into 
     three equal parts with each possessing Microsoft's source 
     code and intellectual property, or forcing the company to 
     license or auction off its Windows trademark and source code 
     to other companies. Other proposals reportedly under 
     consideration include extensive fines, giving government 
     regulators ongoing access to the company's e-mail and 
     documents, that Microsoft seek government approval before 
     acquiring any software company, and forced standardization of 
     Microsoft contracts.
       These would be outrageous governmental intrusions into one 
     of the top U.S. businesses in the world. If carried out, the 
     precedents set for current and future businesses would be 
     quite dangerous.
       Unfrotunately, Microsoft has been cornered into a quagmire 
     that no American company should be forced into by its own 
     government. From our perspective the ``settlement talks'' now 
     taking place are a bogus set up against Microsoft. Having 
     approached ``settlement'' with reasonable alternatives to the 
     draconian regulations and ``remedies'' sought by those 
     hounding the company, the federal government and attorneys 
     general will undoubtedly portray Microsoft as 
     ``unreasonable'' and ``greedy'' because they will not forsake 
     principles that could cause long-term damage to the industry. 
     Of course, they owe their biggest competitors nothing since 
     they are the ones who instigated the suit and prodded the DoJ 
     in the first place.
       This good-old boy gang up by the government and 
     participating AG's is a farce and a waste of tax dollars. 
     They have lost perspective, and their law-enforcement 
     priorities are horribly misplaced.
       I urge Members of Congress to review the following 
     materials, and take a close look at current antitrust 
     policies, which work against entrepreneurship, business, U.S. 
     economic leadership and consumers. We believe the Congress 
     has the obligation to ask why the DoJ is placing such a 
     priority on the ``get Microsoft'' effort when more important

[[Page 7472]]

     law enforcement issues appear to be in the greater national 
     interest.
           Sincerely,
                                                   Karen Kerrigan,
     President.

                          ____________________