Klein: DOJ action is "essential"

SANTA CLARA, California--As government attorneys argued in Washington, D.C. today that Microsoft should be fined $1 million per day for the way it bundles and markets its software, the man spearheading the effort told an audience in California that such policing actions--when carried out with restraint--are good for the economy.

Assistant Attorney General Joel Klein,

1.6M Assistant attorney general Joel Klein's guidelines for bundling software

speaking before software industry representatives, said that the government's antitrust laws are as important and effective in today's economy as they were in policing the oil and sugar industries 100 years ago. With an abundance of quotes from economic theorists that spanned the political spectrum, an erudite-sounding Klein claimed that protecting open competition is crucial in a global economy.

"Active domestic rivalry is strongly associated with international success," said Klein, quoting from the Harvard business professor Michael Porter. On the other hand, "creating a dominant domestic competitor rarely results in international competitive advantage," he added.

While avoiding discussion of the Microsoft case specifically, Klein's hourlong keynote address at a Software Publisher's Association conference seemed to respond to a number of criticisms leveled at the Justice Department since it took action against the software giant for its bundling of Internet browser with the Windows operating system.

In court briefs and in the court of public opinion, Microsoft has argued that the DOJ's action threatens not only companies' rights to design products as they see fit but also the very economy itself. Citing from Adam Smith's The Wealth of Nations, which became the seminal manifesto on the free market system, Klein agreed that government should tread lightly but nonetheless said a "bare minimum" of intervention was "absolutely essential" sometimes.

"I don't want to be the Better Business Bureau for this [software] industry," Klein said. "Our concern is to maximize innovation for consumers."

He added that upstarts would be reluctant to design innovative new offerings in a market that allows large competitors to copy and bundle them with monopoly products.

Klein also rejected criticisms leveled by some theorists that the Sherman Act--the 19th century legislation that still governs antitrust law today--is outdated for today's software and computer industry.

"Antitrust law is every bit as relevant today," noted Klein, who prior to working for the White House argued cases before the Supreme Court. "It is not a set of rigid descriptions designed to regulate, but rather two or three broad generalizations embodied in core principles."

He said that antitrust law, which he called an "economic constitution" of sorts, has the elasticity to adapt to different markets.

In addition to quoting Adam Smith, Klein freely cited writings of Thurmond Arnold, who headed the government's antitrust division in the early 1940s and established a permanent role for the Justice Department in policing the competitive practices of private companies. The tone of Klein's talk and its mention of both conservative and not-so-conservative thinkers was not surprising to William Kovacic, a professor specializing in antitrust issues at George Mason School of Law.

"Klein is trying to show two things," said Kovacic. "One is his sensitivity to the benefits of a largely unfettered market process, that the basic engine of economic growth is private initiative. The other is to convince the audience about the legitimacy of selective measures to ensure that the market process is not distorted by private economic actors."

He added that past actions by Klein in the short time he has been headed the Justice Department's antitrust unit bear out his characterization as a moderate. In April, he approved the $23 billion merger between Bell Atlantic and Nynex despite fierce opposition from many who said the deal would hurt competition in the telecommunications industry.

"I think he genuinely believes that it is every bit as important for the government not to intervene in some instances as it is to intervene in others," noted Kovacic.