Robert Bork has taken again to his high horse and to his Olympian intonation to defend the crazy antitrust prosecution of Microsoft. In a recent letter to the Wall Street Journal (March 9), Bork castigates severely those economists who doubt his claim that Microsoft employed "predatory" pricing in the browser wars to drive Netscape from the market and thereby misallocate economic resources.
Predatory pricing assumes that a larger firm can lower market prices to drive out rivals and then raise prices to consumers and thus enjoy a monopoly return. But there are two important problems with this notion. The first is that the theory makes little economic sense, as Robert Bork once acknowledged himself in his intelligent classic, The Antitrust Paradox (1978). But, unfortunately, the current Robert Bork – a hired gun for ProComp, a group of Microsoft's severest critics – now swallows this flaky theory entirely and wants Microsoft dismembered for lowering prices to consumers.
Predation in economics is a complete misnomer, designed by antitrust enthusiasts to make business rivalry equivalent to some jungle tiger pulling down the weakest wart-hog. Total nonsense. So-called predatory pricing is just competitive pricing, plain and simple, and consumers benefit from it enormously. Relevant to the current litigation, Netscape held a near-monopoly in Net browsers and charged PC users for their use. Microsoft entered the market and effectively lowered the market price of browsers to zero, conferring great benefits on Net users. And that is where we are today. ( And the Netscape browser, far from disappearing, is still downloaded by millions of PC users.) Is there anyone on the planet, aside from Robert Bork and Pro Com, that believes that the current situation "misallocates resources" or that it is credible to believe that Microsoft could somehow raise prices and wipe out all past and current consumer benefits? Yet the entire antitrust rationale for prosecuting Microsoft rests on this shabby impossibility. Shame, shame.
The second problem with the predation notion is the absolute dearth of historical examples. Bork implies in his letter to the WSJ that there are many examples in business history that support his position. But aside from mentioning sham litigation, he cites exactly NONE. Yet if there are nearly none, the clear implication is that while prices may be competed downward during the so-called predatory process, they are almost NEVER increased to consumers to recoup any lost profits. And if "predators" don't raise prices, if prices stay low due to open markets and competition, then the entire rationale for antitrust enforcement evaporates into the Borkian ether. Indeed, if antitrust itself stifles the process by legally attacking low prices, then antitrust itself becomes part of the monopoly problem and not part of any solution. Again, shame, shame.
Does Robert Bork know all of this? I dare say that he does. He says as much and more about phony predatory notions and ill-advised antitrust enforcement in his 1978 book. Why, then, his sudden love affair with a discredited pricing theory, his unrelenting attack on Microsoft, and his selective amnesia over the predatory nature of antitrust enforcement itself? I can't know for sure but as an economist I'm programmed to speculate that incentives, monetary and otherwise, tend to explain behavior.
March 15, 2000
Dom Armentano is professor emeritus in economics at the University of Hartford and author of Antitrust: The Case for Repeal (Mises Institute, 1999). He lives in Vero Beach, Florida.
