Monday, March 12, 2012


Obedience Training

The software company Microsoft was founded in 1975 by nineteen and a twenty-two year-old kids in Albuquerque where their first customer was. It incorporated in June 25, 1981, moving to Bellevue, Washington, the kids’ hometown. It performed an initial public offering of its securities on March 13, 1986. Almost exactly twenty-six years ago! Its 1986 revenues were $197,514,000 with 1,153 people. Driving force Bill Gates was brilliantly innovative, yet business savvy enough to take advantage of circumstances as they came up. He built the company the old-fashioned way, by creating something he thought customers would want or need. By grindingly hard, disciplined work. By a cadre of equally dedicated mostly young people.

He was a successful young businessman in a free enterprise society. Or was he?

On May 18, 1998 the United States Department of Justice (DOJ) of William J. Clinton’s Administration and some states filed a set of civil actions against Microsoft Corporation pursuant to Sections 1 and 2 of the Sherman Antitrust Act of 1890. The government alleged that Microsoft abused monopoly power on Intel-based personal computers with operating system and Internet World Wide Web browser sales.

The trial started on October 19, 1998. On November 5, 1999, Judge Thomas Penfield Jackson found that Microsoft's dominance of the x86 based personal computer operating systems market constituted a monopoly. The judgment was split in two parts. On April 3, 2000, he issued his conclusions of law that the company committed monopolization, attempted monopolization, and tying, all violations of the Sherman Act. On June 7, 2000, the court ordered Microsoft broken in two. One part would make operating systems and the other to produce other software components.

The D.C. Circuit Court of Appeals overturned Judge Jackson's rulings on Microsoft’s appeal.

Judge Jackson had given interviews to the news media while hearing the case, a violation of the Code of Conduct for U.S. judges; the appeals court accused him of unethical conduct for not accusing himself from the case.

George W. Bush became the Forty-third president of the United States on January 21, 2001.

The DOJ announced on September 6, 2001 that it was no longer seeking to break up Microsoft and would instead seek a lesser antitrust penalty. Microsoft decided to draft a settlement proposal allowing PC manufacturers to adopt non-Microsoft software. Two month later the DOJ reached an agreement with Microsoft to settle the case; some critics called it a slap on the wrist in that the DOJ did not require Microsoft to change any of its code nor prevent Microsoft from tying other software with Windows in the future, much less break it up. On June 30, 2004, the U.S. appeals court unanimously approved the settlement rejecting objections that the sanctions were inadequate.

So began the obedience training of Microsoft and the entire high-technology industry.

In 1995, Microsoft had but a single lobbyist; seven years later it had one of the largest Political Action Committees (PAC) in history. The software giant's budget for its PAC increased from about $16,000 in 1995 to $1.6 million in 2000. Total donations to political donations from Microsoft and its employees to political parties, candidates and PACs in the 2000 election cycle amounted to more than $6.1 million.

Fast forward to today: this is all very funny to Democratic senator Patrick Leahy (D-Vt) chairman of the committee leading an antitrust investigation of Google Inc. According to the Huffington Post, he smirked, "I consider myself a public works project right here…My colleagues call it the Leahy Full Employment Act." But there is something more ominous with the ascension of the present central control of business by Washington, D. C.. Virtually every business action in the United States of America requires approval from one or more federal government bureaucracy or entity headquartered in Washington, D. C. and many times part and parcel of approval is vigorish in the form of lobbying, campaign and other contributions.

In 2011, Google hired eighteen lobbying shops and around year end had over ninety separate individual human lobbyists and its reported $9.7 million spend beat Microsoft’s $7.3 million and its employing around eighty lobbyists.

A recent The Wall Street Journal article (Mar. 1, 2012, on page B2, “FTC Attorney to Join Microsoft”) said that Microsoft hired a senior Federal Trade Commission attorney who led several of the agency's antitrust investigations into Google Inc. It seems clear from these two bitter rivals that competition is as or more intense in our nation’s capital as it is in the commercial marketplace.

Subscribers to The Wall Street Journal typically read of at least one article a day describing an investigation, indictment, charge, inquiry, target. (Here’s a smattering: “Banks May Face Charges From SEC”; “Inquiry Targets Goldman Official”; Fund Company in Valuation Inquiry”; “Watchdog Targets Overdraft Charges”; “Insider Targets Expanding”; “SEC Charges Noble Ex-CEO In Nigeria Bribe Investigation”; “Regulators Scrutinize Ties With Exchanges”; “Investigators Probe a Rush At MF Global to Move Cash”; “Watchdog Aims to Put Focus on Credit Bureaus”; “SEC Opens An Inquiry Of Wynn Resorts”; “Sites Are Accused Of Privacy Failings”;”Foreign Bribe Case at Avon Presented To Grand Jury”; “Lawmakers Target Google’s Tracking”; “Ex-Bond Highflier Is Warned by SEC”; “Red Flags Ignored, DEA Says”; “Criminal Charges Are Prepared in BP Spill”; “Banks Sweat as Tax Net Tightens”; “SEC Ups Game to Find Rogue Firms”; Deutsche Telekom Settles Charges”; “BofA Settles Lending Case”; “CEO Takes Leave After Suit by SEC”; “Fed Raises Bar For Bank Deals”;”Fed Writes Sweeping Rules From Behind Closed Doors”; “New Old Media Battle Over Net Rules”)

One of the most enlightening is: “After AT&T: The New Antitrust Era” announcing not only the killing of a $39 billion merger agreed to by AT&T and T-MobileUSA but that hereafter few corporate transactions will be allowed without central control by the U. S. Government.

And in today’s Journal was “U. S. Warns Apple, Publishers” about Apple changing the business model of book publishing after accomplishing the same in recorded music with its $.99 per song which unbundled a song from a CD at a low price.

I call all of this “obedience training” mandating that companies “heel” on a short leash held by the politicians and bureaucrats in Washington, D. C. That is the future of the United States governed by the Democratic political party.

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