TCS Daily


The Justice Department's Silliest Case

By James Freeman - March 13, 2000 12:00 AM

What is the Justice Department's silliest case? No, it's not the Microsoft lawsuit, but you're getting warm. Think of another successful technology company. Anyone care to guess?

Time's up. The Clinton Administration is now investigating EBAY, the popular Internet auction site. You may know EBAY as the place where you found that treasured Tammy Wynette LP or as the place where some pranksters once tried to auction off a human kidney.

It's sort of an online flea market where anyone can offer or bid for just about anything under the sun. And Justice thinks that EBAY may be violating anti-trust laws. The Feds are investigating whether the company is using monopolistic practices against competitors.

This begs the question of why Justice fears a monopoly on second-hand collectibles. What's EBAY going to do, corner the market on Winnie the Pooh cookie cutters and used Ginsu knives? By definition, this is all junk that people don't want. Who would care if one company controlled all of it? While EBAY is at it, I'll give them a monopoly on my wife's collection of Backstreet Boys CDs if they'll take them out of the house.

I can't wait to see this trial unfold. As in the Microsoft case, Justice will pay some economist $300 per hour to come down to DC and testify that consumers will - at some undetermined future date - suffer at the hands of this brutal monopolist. And the economist will paint a frightening portrait: Imagine if only one company dominated the market for naked-lady golf tees and Don King wigs, and then leveraged that dominance to capture the market for easy chairs fashioned to look like Snoopy.

We can all guess where EBAY would go next -- they'd put a stranglehold on the booming trade in Ike Turner memorabilia.

The specific details of this case are just as silly. Justice is concerned that EBAY is blocking competing auction sites from recording EBAY's data and using it for themselves.

For example, a competitor who wants to show every auction on the web when a person types in "beanie babies" would like to include specific links to beanie baby auctions on the EBAY site. To do that, the competitor has to gather all the data from EBAY's site so it knows where to send the customer. EBAY, which created this market, doesn't want to let another company become an auction middleman, so it thwarts the so-called "search bots" that try to harvest data from the EBAY site.

Simply because EBAY has sought to use technical means to prevent competitors from using its data, the Feds have begun an investigation.

This unlikely trigger for a Federal inquiry is revealing because it shows the mindset of lawyers at the Justice Department. Just as in the Microsoft case, the government attorneys appear to have no concept of property. They have no concept that many people have worked very hard and very creatively to make EBAY the center of the online auction universe.

To government lawyers, the huge numbers of listings on EBAY aren't the result of EBAY's sweat and innovation, but an accident of the marketplace. So why should EBAY control the data? Similarly, in the eyes of a Justice bureaucrat, Microsoft's dominant Windows software is not the product of successful design and marketing, but some kind of scam to force people to buy other Microsoft products.

The fact is that EBAY and Microsoft earned their success, and they own their products. They built them. The listings on EBAY and the real estate on the Windows desktop are not public assets to be divided up by politicians. They belong to the shareholders of EBAY and Microsoft.

Even if you aren't one of these shareholders, you should be appalled when the Justice Department tries to re-allocate somebody's property based on some bizarre concept of competition. Because your property could be next.

Check out James Freeman's weekly column for Forbes.com. Click here!
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