Re: POL: Reaction to Microsoft Ruling

From: Charlie Stross (
Date: Thu Apr 13 2000 - 09:37:55 MDT

On Mon, Apr 10, 2000 at 05:38:50PM -0500, Billy Brown wrote:
> Charlie Stross wrote:
> > The most important precondition that must apply before a market can
> > function properly is that the market must be _fair_. That is, it is
> > necessary for competitors to abide by contracts, obey market regulations
> > (which should admittedly be as minimal as possible), and compete on
> > the merits of their products.
> No, a free market requires that companies:
> 1) refrain from using physical force to coerce others
> 2) abide by the terms of any contracts they voluntarily agree to
> 3) refrain from committing fraud (in a narrow sense) in the course of
> business dealings
> That's it. Nothing else.
I don't agree.

A free market requires that companies don't use physical force to coerce
others; it _also_ requires that they don't maliciously try to damage
a competitor by using bribes to remove their customers. I use the term
"bribe" here in the sense of some inducement that ties the acceptor into
some form of behaviour. Classic case: Microsoft's offer (and threat)
to Vobis, that they'd supply Vobis with MS-DOS and Win 3.1 licenses
for a pittance, _and_ buy up their existing DR-DOS licenses, _if_ Vobis
signed an exclusive deal with Microsoft (to supply MS-DOS on _every_ PC
their sold). This action wasn't taken in order to make Microsoft money;
it was taken in order to remove a major customer from Digital Research
and _prevent_ them selling back into that market.

One might argue that as the authors of MS-DOS, Microsoft could charge
whatever price they like for it. However, in this case they offered Vobis
a deal with strings attached -- a huge discount, _if_ they promised never
to deal with a competitor. The goal was long-term, to trade short-term
profits against the possibilities arising from excluding a competitor from
the market.

A second point: you didn't ask what the consequences of allowing cartels
might be. For example: personnel costs are a major overhead for all
companies. Assume a cartel forms; the members can all agree to cut
their wages by 50%. The usual employee response -- walk to someone who
pays a sensible wage -- is no longer valid in this scenario because
there is a conspiracy to set prices between the companies in their market.

> Exactly what companies compete on is up to their customers.

Not really. The _final_ consumers probably never get a say, if there's
a supply chain. I don't get a choice in the products on sale in my local
supermarket; the supermarket decides what it's willing to stock, and all
I get to do is choose between brands.

>In some markets
> technical features may be the dominant consideration, but in others it may
> be price, simplicity, reliability, company reputation, service and support,
> or just about anything else imaginable. There is no place in a free market
> system for self-appointed 'experts' who debate what criteria they think
> consumers *ought* to use, and second-guess the decisions of the market by
> government fiat.
Like it or not, such people exist -- inside companies, as often as not.

One of my co-workers used to work next to the Censor for Scotland. The
censor was simply the buyer for all videos, computer games, and books
at the largest distributor chain in Scotland, one with 30% of the market.
If he chose not to stock something, the _other_ distributors would avoid
it on the assumption that the something wouldn't be profitable -- thus
locking the something out of 90% of the retail market.

This guy had no legal standing, was not a government employee, and
officially didn't exist. Nevertheless, he kept videos he disapproved of
out of a national-level market, and there was no market feedback to let
his employers know that what he was doing was 'wrong'. (After all,
if nobody sells it, its sales potential is zip. Right?)

> The best known way of running an economy is to establish a rule of law which
> constrains force and fraud and enforces contracts, and then do *nothing else
> whatsoever*. The resulting market will not always produce the best results
> imaginable, but it *will* always produce better results than any other
> system that has ever been tried.

Please point me at a controlled crossover experiment that verifies this
experimentally. Until you can do so, I'm going to take this as just more
libertarian polemic.

Clue: your solution to the economic problems that bedevil us is
bewitchingly simplistic -- much like the core meme behind Christianity.
Show me a miracle, _then_ I'll believe. Until then, I believe the real
world is a much more complex place than you seem to realise.

-- Charlie

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