Bill Gates — Another Rockefeller or Another Ford?
by Richard Jensen on Jun 23, 2000
Federal Judge Thomas Penfield Jackson has ordered Microsoft broken in two, and
the appeal has gone to the Supreme Court. Why is Microsoft in so much trouble?
Because for two centuries Americans have hated political and economic bullies.
"Free competition" has always been our rallying cry and the Sherman Antitrust Act
has been the law of the land since it passed 110 years ago this month.
That "charter of freedom" was designed to protect the core American value of free
enterprise. A century later, Bill Gates is trying to redefine free enterprise by shifting
attention from producers' rights to consumers' rights. The public seems willing to go
along with him, but will the courts?
Microsoft beat out such rivals as WordStar, Word Perfect, and 1-2-3 because its
software worked better. The legal issue now is whether it illegally tried to destroy
the Netscape browser. Yet beneath this case simmers the issue of consumers
The "trusts" were large conglomerates that suddenly emerged in the 1880s and
1890s to monopolize entire industries. The country was filled with thousands of
small, locally-owned factories; the trusts tried to buy them out. Those factories have
all rusted away, or have been converted into boutique malls, but a century ago they
were as vibrant as software startups today. Their owners worried, could they thrive
alongside the trusts? Would their entrepreneurship survive in the face of ruthless
Free competition meant the opportunity for all Americans to build their own
businesses without being forced to sell out. As Ohio Senator John Sherman put it,
"If we will not endure a king as a political power we should not endure a king over
the production, transportation, and sale of any of the necessaries of life." The
Sherman Act gave the government the authority to ask courts to break up
Corporate consolidation roared along in the 1890s and 1900s. As a result the
Progressive Era put antitrust high on its agenda. President Theodore Roosevelt
approved of "good" trusts–which built the world's greatest economy–and sued 40
"bad" ones that preyed on smaller fry. The most notorious was the Standard Oil
Company. John D. Rockefeller had used his financial power to destroy and buy out
his competitors and made secret rebate deals with railroads to build his monopoly
in the oil business.
Rockefeller was the richest man in the world. Under attack he hired the first public
relations agents, and donated huge sums to churches, universities and rural
African-American schools. His PR campaign failed as newspapers and clergymen
denounced the gifts of "tainted wealth."
In 1911 the government won in the Supreme Court. Rockefeller's monopoly was
broken into 38 entirely independent companies, including Standard Oil companies
of New Jersey (later known as Exxon), of Indiana (Amoco), of New York
(Mobil), and of California (Chevron). Eventually they began to compete against one
After 1911 the nation's mood changed; America accepted bigness. Henry Ford
was as much a monopolist as Rockefeller, but he built millions of cheap cars that
put America on wheels, and at the same time lowered prices, raised wages and
promoted efficiency. Ford became the greatest hero of the day because he
empowered the consumer. The government never tried to break up his company;
talk of trust-busting faded away.
In the Great Depression the threat to free enterprise seemed to come from too
much "cutthroat" competition, which drove down prices and slashed profits for
entrepreneurs. One law in 1936 sought to protect local retailers against competition
from the new, more efficient chain stores, by making it illegal to discount prices.
By the 1980s America was confident that a fully competitive marketplace produced
fair returns to everyone, entrepreneurs and consumers alike. Yet some argued that
monopoly was bad not because it hurt entrepreneurs but because it hurt consumers
in terms of higher prices, poorer service, less innovation and restricted choice.
In 1982 the Reagan administration used the Sherman Act to break up the AT&T
monopoly into one long-distance company and seven regional "Baby Bells." The
pace of business takeovers speeded up in the 1990s, but whenever one large
corporation sought to acquire another it first had to obtain the government's
approval. The success of the AT&T breakup emboldened President Bill Clinton to
move against Microsoft. In 1995 Clinton's Justice Department refused to allow
Microsoft to buy out Quicken, which would have given it a monopoly of the home
financial software market. Quicken survives today and is one of the few software
products Microsoft has been unable to buy out, elbow out, or out-perform.
In 1999 Clinton's Justice Department sued Microsoft and demonstrated it had
illegally strong-armed PC companies in order to squelch the competitive threat
posed by Netscape. Gates–the new Rockefeller–responded with a blitz of
publicity and a massive dose of philanthropy.
Gates wants to redefine free enterprise to give Microsoft much more freedom in its
business decisions, as long as it benefits consumers. He believes that Windows is
always best for the consumer, and that splitting Microsoft would diminish efficiency
and slow down the torrid pace of software innovation.
Is Gates more like Ford or Rockefeller? In Silicon Valley Gates is feared and hated
by entrepreneurs who know he can destroy their business with the click of a
mouse. But consumers love Windows as much as they loved their Model T's.
Gates has lost the first round. Next year the Supreme Court will either repeat the
busting up of Standard Oil, or the toleration of Ford.
Richard Jensen is professor of history emeritus, University of Illinois, and a writer for the History News Service.