Hands Off Microsoft-Yahoo, Please

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Antitrust Law: Congress and federal regulators are likely to put the Microsoft-Yahoo deal through the political meat grinder. Should the government have such power over private companies?

Microsoft and Yahoo, a couple of giants of the tech world, have hopes of pooling their brain power and resources to create a Web search engine that can compete with market leader Google. Yahoo will license its Internet search technologies to Microsoft, which will apply them to its new search engine called Bing. Revenue generated by the marriage will be split.

Clearly, it's just a business deal. There's no reason to think that something remotely illegal or sinister is going on. But busybodies in Washington, always eager to exercise authority, refuse to leave the private parties alone to conduct their affairs.

The arrogance displayed by antitrust regulators and congressmen who think their job is to rule should offend any fair-minded person. There's no better example of the trustbusters' exaggerated sense of their own worth than a recent statement from David Balto.

The policy director of the Bureau of Competition at the Federal Trade Commission under the Clinton administration told Business Week: "We don't want markets to become concentrated. It is like prescribing ice cream for someone who is overweight."

Sen. Herb Kohl, chairman of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights exhibited similar hubris when he said the deal "warrants our careful scrutiny." The Democrat from Wisconsin, who seems to have a longtime obsession with telling companies how to conduct their business, threatened to sic "my subcommittee" on the agreement's participants.

Bert Foer, president of the American Antitrust Institute, doesn't have a congressional panel at his disposal. But he did expose the thinking that drives the regulators in a story about the deal that appeared Thursday in our own news pages.

"The issue," he said, "provides (the Justice Department) with an opportunity to put on their thinking caps and come forward with a vision for an appropriate competition policy."

In other words, we should all just relax while a small, elite group of remarkably wise men in Washington does what's best for everyone else.

It's hard to fathom why the regulators think it's so necessary to invade this particular process. Google, the dominant player that Microsoft and Yahoo want to catch, holds roughly 65% of the Web search engine market. Yahoo has 20%, while Microsoft owns about 8%. There's nothing about the deal that suggests that the market will be harmed by its completion.

But trustbusters really don't need a compelling reason. While they excuse their actions as efforts to ensure competitiveness and prevent monopolies from forming, what the elected and appointed regulators want is to control markets and commerce, to take every opportunity they can to manipulate the private sector and remake it so that it conforms to their standards.

It's a shame that trustbusters have a bias against the free market, because the free market is the only mechanism that can fairly and efficiently sort out commercial activities.

The record of antitrust law, though, leaves a lot to be desired. In fact, it tends to leave messes in its wake.

It nearly ruined IBM when regulators hounded the computer giant from 1969 to 1982. The case was finally dropped, but the probe was enough of a drain on IBM to topple the one-time tech leader from the top spot. And because it was the market leader, the company's legal struggles without question had an adverse effect on the evolution of computer technology.

Microsoft has had a similar experience. In 2000, a federal judge tore the company in pieces in a Justice Department case that put Microsoft's stock on a sideways slide from which it has yet to recover.

Many decades earlier, both Standard Oil and Alcoa were broken up on grounds that their efficiencies and success drove down the price of goods they made.

Washington just might let the Microsoft-Yahoo deal go through. (Maybe it will instead go after Google because of its dominant position in the market.) But in the process, both companies will have burned through precious resources and time defending themselves from the regulatory meddling. In a country where freedom is supposed to be the animating force, that should not happen.

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