[Pages S4247-S4249]
From the Congressional Record Online through the 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.

[[Page S4248]]

(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 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

[[Page S4249]]

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

____________________