February 1999

There are two types of criminals in America and the world today. The first kind is the obvious kind of crook. For example, a murderer or a thief or a wife-beater is obviously committing a criminal act. Nobody debates whether the act they have committed is against the law; most people accept the idea that such a person should be firmly punished for their despicable deed. The debate generally revolves around just what sort of penalty is appropriate for such a crime.

The second kind of lawbreaker is harder to categorize, because he is not breaking any of the written rules set in place by a governmental agency. This kind of person gets an edge on the competition by violating the unwritten code of conduct, by stepping outside of the bounds of polite and dignified human endeavor. In this case, we would call such a person a "moral criminal" in that they appear to be only breaking the unwritten moral codes of society instead of the more clearly delineated legal statutes. A common example of the type of excuse rendered by such a person is the infamous remark supplied by Vice President Al Gore to the charge of misappropriating government property: "There was no controlling legal authority over what I did."

While the first kind of lawbreaker is seldom declared innocent (except in cases of "jury nullification"), there is a common attitude of radical nonjudgmentalism in modern society toward the moral criminal. The scoundrel, the rebel, the desperado is sort of a folk hero who occupies the position of cultural role model. "I wish I could get away with it like he does" is a common, unspoken fantasy among many otherwise solid citizens who observe the slick wheeler-dealer's escapades. Admiration and a touch of envy are far more common than anger or any desire for punishment. Occupying the role of moral criminal is often considered a sign of bravery, as if the underdog is justified in cutting a few corners because they are really just fighting for the little guy, the regular man on the street.

And this is the position that was recently occupied by Microsoft -- the position of a company that never broke any of the "real" laws, but merely fought a little harder and maybe a little dirtier than the competition. But that was acceptable, that was not something to be judged or condemned, because Microsoft was really looking after the interests of the "little guy," the average computer user. And besides, nobody was committing any crimes because Microsoft was never caught breaking any laws.

Until now.

Read carefully the following excerpts from an internal Microsoft memo released during the ongoing federal antitrust case:



Resist <1k PC royalty price decreases firmly"


"We expect the following to happen:

1. Moderately more volume by finding new buyers who can now afford to buy PCs (This should be true for consumers as well as small biz).
2. Acceleration of replacement cycles (knowing that 80M cannot run NTW or WIN98)
3. Shortening of PC "life time" in general."

SOURCE: DT OS Pricing Strategy: Memorandum from Joachim Kempin to Bill Gates, December 16, 1997.

Well, what have we here? In order to understand just what Microsoft is doing to the PC marketplace, let us translate this memo into more mundane terms. Instead of an operating system being licensed to PC makers, we will consider the case of automobile tires being licensed to car manufacturers. Now imagine the following memorandum from the tire company's chief licensing officer to his CEO:

"Our plan is to prevent the growth of the sub-$20,000 car market. We must resist price decreases in our tire deals with these low-cost car makers, forcing them to sell expensive cars instead. That way we can charge even more for our tires! As a result of this plan, we can influence the auto makers to sell only to the upper-middle-class car buyer. In fact, growth in the market for cars will be mostly due to rich people buying second or third cars. Forget the poor saps who cannot afford a $20,000 car! Also, we will change our tire design every few months, forcing the wealthy suckers to buy new cars more often just to be able to find tires that fit. Eighty million drivers cannot use our latest tire designs, so they will have to buy a new car as soon as their tires wear out! Hahahahaha! The life cycle of a car will become shorter and shorter, so we will be able to sell more and more tires to these car makers."

Could things be any clearer than that? Microsoft is apparently engaged in a conspiracy to commit price-fixing in the market for personal computers. Note that: price fixing not merely in the O.S. marketplace, but in the P.C. marketplace itself. Note also that Microsoft is not practicing collusion with any O.S. competitors because it does not have to. Microsoft has a literal monopoly on the price of P.C. operating systems; otherwise, this scheme would require collusion with their competitors.

Microsoft has thus crossed over from a type-2 criminal who has the silent blessing of a rebellious public cheering for an industry underdog. The ruffians from Redmond now firmly occupy the position of type-1 crook practicing monopoly price-fixing in addition to their other dirty deeds. This is no longer a case of smarmy sneaks whose tactics are open for debate; this is now a clear-cut case of a full-blown monopolist engaged in price-fixing, with the public interest thrown into the dumpster. The mask is off.

Most recent revision: February 26, 1999
Copyright © 1998, Tom Nadeau
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