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Thursday, September 16, 2004

The Anti-Trustworthy Stephen Moore

Sometimes I feel like I should write more often about economics, a subject I supposedly know a little something about, according to my college degree. So with Matt Yglesias linking some hackery by Stephen Moore, I guess I can do a bit of that.

Moore's subject is the recent court decision overruling the Justice Department's objections to the hostile takeover of PeopleSoft by Oracle. He writes:

Oracle now controls 7 percent of the business software market. PeopleSoft roughly another 8 percent. The merger would bring Oracle's share to 15 percent.

Anyone who has ever studied antitrust merger review knows the whole ballgame is the definition of the relevant market, and obviously the DOJ defined the market more narrowly in this case, so it had higher percentage market shares in its analysis. The Economist (sub. req.) noted this a little while back:

The DOJ says that the merger would reduce competition from three firms--Oracle, PeopleSoft and SAP, the market leader--to two. But this conclusion stems entirely from the DOJ's absurdly narrow definition of the relevant market as software "that can be integrated into suites of associated functions from a single vendor with performance characteristics that meet the demands of multifaceted organisations with high-level functional needs". In other words, to the DOJ, the market is that served by companies that sell complete suites of business software to big firms.

That's fine if you want to quibble with the DOJ's market definition, as the Economist piece does, but Moore is so far gone that he doesn't even honestly acknowledge the baseline argument made by the regulators.

The article is full of historical inaccuracies and faulty analysis of general antitrust matters. Moore says, "antitrust is nothing more than a devious form of corporate welfare where the aggrieved who can't compete in the open market rush to Uncle Sam for aid." That's a peculiar stance, considering how one of the axioms of US antitrust enforcement is that such regulations exist to "protect competition, not competitors." It is a bedrock principle that ruinous competition is a losing argument for industry rivals to try to make to the DOJ or FTC.

Then there's this gem:

The issue is who should regulate the advisability of merger activities: investors who put up their own money, or government lawyers? Which group is more likely to safeguard shareholder value?

This passage assumes that "shareholder value" is the ultimate concern of antitrust, and that's wrong. The goal is the protection of consumers.

My personal favorite quote: "scholars at the American Enterprise Institute have argued that the Microsoft antitrust action helped precipitate the market meltdown of all technology stocks that began in 1999." This is just ridiculous on its face--personally, I like to think that the fact that tech companies had no profits and were propped up on hype is more to blame--and it points to the curious omission of any discussion of Microsoft in the part of the article when Moore argues that the Bush administration has been overly tough in rejecting mergers. That's a difficult case to make when the Bushies have called the dogs off with regard to the Microsoft matter, which is only, you know, the most significant antitrust action of this generation.

I could go on, but that's my seriousness quota for now, plus you're probably bored too.