POV: Have Gun, Will Nudge
by Ayn Rand | March 1962
It's Not the Unions — It's the Labor Laws
by Doug Altner | March 19, 2014
Regulatory Strangulation
by Steve Simpson | March 13, 2014
Obamacare creates a new class of free riders
by Rituparna Basu | January 23, 2014
Obamacare Is Suffocating An Already Sick Health Insurance Patient
by Rituparna Basu | January 22, 2014
The Broken State of American Health Insurance Prior to the Affordable Care Act: A Market Rife with Government Distortion
by Rituparna Basu | January 21, 2014
Obamacare is Really, Really Bad for You, Especially If You're Young
by Rituparna Basu | August 21, 2013
Justice Department should let US Airways & American Airlines merger proceed
by Tom Bowden | August 16, 2013
Why Is Apple Inc. On Trial? For Good Behavior, It Turns Out
by Tom Bowden | June 20, 2013
The Forgotten Man of the Minimum-Wage Debate
by Doug Altner | June 19, 2013
Why Delivering Beer Isn’t Easy
by Doug Altner | June 11, 2013
What Explains GM’s Problems With The UAW?
by Doug Altner | May 20, 2013
What Are The Search Results When You Google ‘Antitrust’?
by Tom Bowden | April 18, 2013
To Protect the Defenseless, We Must Abolish the Minimum Wage
by Don Watkins | March 27, 2013
I’ll Buy My Own Contraception, Thanks
by Rituparna Basu | November 13, 2012
Why The Glass-Steagall Myth Persists
by Yaron Brook | November 12, 2012
Why Ayn Rand’s Absence From Last Thursday’s Debate Benefits Big Government
by Yaron Brook | October 15, 2012
Changing the Debate: How to Move from an Entitlement State to a Free Market
by Don Watkins | July 02, 2012
3 Things Everyone Needs to Know About the Apple Antitrust Case
by Don Watkins | April 10, 2012
What's Really Wrong with Entitlements
by Don Watkins | February 21, 2012
The Entitlement State Is Morally Bankrupt
by Don Watkins | September 13, 2011
How Important Is the Obamacare Litigation?
by Tom Bowden | August 12, 2011
Atlas Shrugged: With America on the Brink, Should You “Go Galt” and Strike?
by Onkar Ghate | April 29, 2011
The Road to Socialized Medicine Is Paved With Pre-existing Conditions (Part 3)
by Yaron Brook | April 06, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions (Part 2)
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by Yaron Brook | February 15, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions
by Yaron Brook | February 10, 2011
The Avastin Travesty
by Tom Bowden | December 12, 2010
Apple Now Targeted for Success Like Microsoft Was in the 1990s
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The Un-American Dream
by Don Watkins | August 27, 2010
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Apple vs. GM: Ayn Rand Knew the Difference. Do You?
by Don Watkins | March 02, 2010
Smash the Labor Monopolies!
by Tom Bowden | September 15, 2009
America’s Unfree Market
by Yaron Brook | May 2009
Atlas Shrugged and the Housing Crisis that Government Built
by Yaron Brook | March 2009
The Green Energy Fantasy
by Keith Lockitch | February 25, 2009
Stop Blaming Capitalism for Government Failures
by Yaron Brook | November 13, 2008
The Resurgence of Big Government
by Yaron Brook | Fall 2008
The Government Did It
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From Flat World To Free World
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War On Free Political Speech
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Exploiters vs. Victims in the Grocery Strike
by Elan Journo | January 30, 2004
Prescription Drug Benefits Violate the Rights of Drug Companies
by Onkar Ghate | July 24, 2002
Drop the Antitrust Case Against Microsoft
by Onkar Ghate | March 17, 2002


Government And Business in Voice for Reason
Government & BusinessRegulations

Why Is Apple Inc. On Trial? For Good Behavior, It Turns Out

by Tom Bowden | June 20, 2013 |

Apple Inc., #1 on Fortune magazine’s list of the World’s Most Admired Companies, is currently on trial in Manhattan federal court, defending against antitrust charges. Question: How many other businesses in Fortune’s top ten have been recently subjected to some kind of antitrust enforcement? Answer: all of them.

Surely, some would say, if the nation’s top companies are getting caught in antitrust’s grip with clockwork regularity, they must be doing something wrong. But what if they’re not? What if America’s best companies are being targeted not for bad behavior but for good? What if they’re being punished not for their sins but for their virtues? It’s hard to imagine, but consider the evidence.

Here are key facts underlying the Department of Justice case against Apple: In late 2009, Steve Jobs was ready to launch the new iPad and wanted to offer an e-bookstore, similar to Apple’s highly successful iTunes and App Stores. Jobs was confident that readers would value the iPad’s easy and colorful interface enough to pay $13 – $15 per e-book, price levels that the nation’s largest publishers eagerly sought. Five of those publishers agreed to let Apple retail their products at those preferred prices.

Under the Sherman Act of 1890, government lawyers charged Apple with acting as the “ringmaster” in a “price-fixing conspiracy” that imposed “restraint of trade.” Sounds bad, right? The terms evoke images of criminality and physical coercion. But contrary to the law’s pejorative language, Apple was simply trying to make profits through voluntary, win/win transactions with publishers and readers.

Was the economic wisdom of this strategy foreordained? Not at all. If antitrust authorities had not intervened (fining the publishers a total of $170 million and voiding their agreements), the market would have decided whether Apple’s e-book program succeeded or failed. As Jobs himself said in an email, “Heck, Amazon is selling these books at $9.99, and who knows maybe they are right and we will fail even at $12.99.”

Apple’s pursuit of growth and profits in the e-book industry deserved admiration, not legal persecution. Another “most admired” company, Google, is also known for offering products that people really like — and it, too, wears an antitrust target on its back these days.

Over the past fifteen years, Google’s legendary search engine has attracted users en masse, leaving competitors like Bing and Yahoo! in the dust. Leveraging that popularity, Google chose to display its own services (like Google Maps, Shopping, and Travel) more prominently than results for its competitors. So what? Every businessman in America understands that you paint your own company’s name on the side of your truck, not your rival’s name.

While Google’s ingenuity keeps birthing products that engage the 21st-century imagination, vague and elastic antitrust laws empower regulators, here and in Europe, to demonize Google’s business practices as “unfair” competition. By means of grinding, years-long investigations coupled with threats of massive fines, government agencies have recently forced Google to modify business practices that sought nothing but enhanced profits through voluntary transactions.

Antitrust has always worked this way. Go back to the late 1990s, when Microsoft was riding high on the phenomenal success of its Windows operating system. By adding a web browser (Internet Explorer) to every copy of Windows, Microsoft offered customers more value for the same price, leaving purchasers free to adopt competing browsers if they chose. By any rational business standard, Microsoft was pursuing a growth-oriented strategy whose success or failure should have been determined on a free market.

But under the Sherman Act, the Department of Justice had the power to charge Microsoft with “monopolization” and “tying” offenses. The very words evoke scary 19th-century images of a bug-eyed octopus gripping a far-flung economy in its tentacles. After years of litigation and unsuccessful appeals, culminating in a finding that Microsoft had violated the Sherman Act, the company lost whatever innovative edge it had and sank into doldrums from which it has yet to recover.

Precisely what are the bad acts for which America’s best companies — Apple, Google, Microsoft, and hundreds of others — are punished by antitrust laws? If you look closely, you’ll find they’re not bad acts at all. On the contrary, they belong in the same category as all the other growth-oriented, profit-driven strategies by which start-up firms survive, small firms become large, and large firms rise to new heights, flooding our economy with life-enhancing goods and services.

The scandalous truth is that antitrust laws penalize America’s best companies for their virtues, for business practices that generate growth and profit through voluntary trade. Such practices deserve legal protection, not prohibition. Antitrust stands exposed as something quite vicious: a legal regime that punishes good behavior.

About The Author

Tom Bowden

Analyst and Outreach Liaison, Ayn Rand Institute