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Update: Judge Thomas Jackson Ruling, 11/5/99 Update: Judge Thomas Jackson Ruling, 6/7/00 Update: Washington Post: U.S. vs Microsoft: 2/01
Update:
Revised Proposed Final Judgment: 11/01 Microsoft's claim that the Internet Explorer browser is an integral and integrated component of the Windows OS is certainly valid when one likes at current incarnations of Internet Explorer and associated components /applications (Windows 98, Java, ActiveX, Exchange, Outlook, etc.). Even Netscape's stated or implied direction to replace all operating system UIs with their "browser" helps bolster the legitimacy of this goal, as does the increasing use of Sun's cross platform Java technology. After all, if its a reasonable goal for Netscape/Sun, then certainly it is understandable that Microsoft would have a similar target (with however a significantly different ulterior motive). Perhaps the issue is whether earlier incarnations of Explorer such as versions 1, 2 and 3 with associated components were an integral and integrated part of the Windows OS. At least from a functional user standpoint the answer is clearly no. Whether the Microsoft software design team was building hooks and component technology back in 1993-1995 to allow a gradual and smooth merging of browser/OS technology is unclear. Even if this was the case, it is doubly unclear whether this early "primordial" technology was integral to the Windows OS. In any case I believe Microsoft never prevented a hardware manufacturer from bundling Netscape Navigator with their products. If they in fact attempted to coerce hardware vendors to not bundle their products with Navigator, then Microsoft clearly acted illegally. Of course, forcing hardware vendors to offer their (Microsoft) products while at the same time essentially giving away their browser to the public is obviously a predatory marketing practice and seeks to gain an unfair advantage by leveraging their operating system dominance. In 1993/1994/1995, browsers were not the monolithic applications they no are now. Even by hard drive space limits of three years ago, Netscape Navigator and Internet Explorer were small, "baby" applications. Hence it was not prohibitive for a hardware manufacturer to offer both alternatives to customers. Many, not only offered Navigator and/or Internet Explorer, but also Mosaic, Cello and others. In fact, an informed consumer might want multiple browsers on their systems to take advantage of the unique functionality each offers. Certainly web designers have this requirement as they must design for compatibility across browsers. However, it is true that by forcing vendors to offer Internet Explorer 1/2/3 with Windows, Microsoft gained a "testing lab" for their browser technology among the broad computing public. A "special window of opportunity" if you will that their technology did not necessarily warrant at the time. This helped them improve Internet Explorer to the point where it is today- the most feature rich browser/UI alternative for the Windows 95/NT environment. Coupled with the give-a-way of their browser product- it also formed the basis of what was clearly a predatory marketing strategy. Recently the DOJ has claimed that Microsoft has effectively not complied with the original court order since they offered hardware vendors either a debilitated version of Windows 95 or an outdated version if the vendor choose not to offer IE 3.X functionality. Microsoft has retorted that they are complying with the exact terms of the court order. While Microsoft may be technically correct and has the right to seek legal clarification, the bottom line is that Microsoft can offer an up-to-date version of Windows 95 minus the option to install the IE 3.X/4 browser. This product would have IE 3/4 compatible DLLs and other software components but would not offer the user the option to install the browser. My question however is this: "How many hardware vendors will actually not offer the browser install option?" However much some of them may hate or be jealous of Microsoft- the end user will not accept a solution that does not offer them the choice of installing IE 3/4. Hence the DOJ's efforts in this particular area are a waste of taxpayers' money- protecting the taxpayer from what they want. My belief is that that Microsoft should have the right to offer whatever features and/or products it wants to as long as in the process it does not prevent or make it unreasonably difficult for a competitor, large or small, to offer comparable or superior technology. Perhaps Microsoft's pricing, distribution and corporate acquisition strategy does just that- unfairly attempts to nullify or limit competition. For a perspective on Microsoft, probably shared by the DOJ and others, see the NetAction web site and applicable "cyber action issues." At least in Intel's view, Microsoft does limit the competitive playing field. Quoting from a 1996 article in Fortune Magazine entitled, "A Conversation with the Lords of Wintel," Gates and Andy Grove (CEO of Intel) had the following interchange: Gates said, "Intel deserves a lot of credit for stepping back [from development of NSP/multimedia technology]." Grove replied, "We didn't have much of a choice. We basically caved." Gates objected to that characterization, but Grove stuck to his line. "We caved," the Intel chairman said. "Introducing a Windows-based software initiative that Microsoft doesn't support . . . well, life is too short for that." Of course, Intel itself faces anti-trust charges. Note: While it is evident Microsoft has cleared a major hurdle with IE 4/5 (now integral to Windows 98/2000) and should gain dominant market share in the Windows browser arena, they have by no means established that the Windows OS is the most desirable OS to access the Internet with. As such they have not neutralized the Netscape/Sun/IBM/Intel future threat/long term goal of essentially trivializing the choice of an OS/UI. Perhaps it is Microsoft's thinking (hope) that by the time the desktop is "trivialized" (no longer a profitable market segment), they will have mid to large companies hooked on their back office products. Of course, along with Microsoft's traditional adversaries, the Linux OS and compatible open source applications provide strong competition in this arena. Finally, Microsoft, despite its investments in some telecommunications and web portal players (including its own MSN), still is unable to control or completely shape the direction of the Internet. The merger of AOL, Time Warner and Netscape further underscores this. However, a few key Microsoft acquisitions or mergers could significantly change the landscape- increasing the threat of Microsoft being able to control and dominate the future of computing.
UNITED STATES OF AMERICA, Plaintiff, v. Civil Action No. 98-1232 (TPJ) MICROSOFT CORPORATION, Defendant. STATE OF NEW YORK, ex rel.
Excerpts: 33. Microsoft enjoys so much power in the market for Intel-compatible PC operating systems that if it wished to exercise this power solely in terms of price, it could charge a price for Windows substantially above that which could be charged in a competitive market. Moreover, it could do so for a significant period of time without losing an unacceptable amount of business to competitors. In other words, Microsoft enjoys monopoly power in the relevant market. 34. Viewed together, three main facts indicate that Microsoft enjoys monopoly power. First, Microsoft’s share of the market for Intel-compatible PC operating systems is extremely large and stable. Second, Microsoft’s dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft’s customers lack a commercially viable alternative to Windows. 409. To the detriment of consumers, however, Microsoft has done much more than develop innovative browsing software of commendable quality and offer it bundled with Windows at no additional charge. As has been shown, Microsoft also engaged in a concerted series of actions designed to protect the applications barrier to entry, and hence its monopoly power, from a variety of middleware threats, including Netscape’s Web browser and Sun’s implementation of Java. Many of these actions have harmed consumers in ways that are immediate and easily discernible. They have also caused less direct, but nevertheless serious and far-reaching, consumer harm by distorting competition. 410. By refusing to offer those OEMs who requested it a version of Windows without Web browsing software, and by preventing OEMs from removing Internet Explorer — or even the most obvious means of invoking it — prior to shipment, Microsoft forced OEMs to ignore consumer demand for a browserless version of Windows. The same actions forced OEMs either to ignore consumer preferences for Navigator or to give them a Hobson’s choice of both browser products at the cost of increased confusion, degraded system performance, and restricted memory. By ensuring that Internet Explorer would launch in certain circumstances in Windows 98 even if Navigator were set as the default, and even if the consumer had removed all conspicuous means of invoking Internet Explorer, Microsoft created confusion and frustration for consumers, and increased technical support costs for business customers. Those Windows purchasers who did not want browsing software — businesses, or parents and teachers, for example, concerned with the potential for irresponsible Web browsing on PC systems — not only had to undertake the effort necessary to remove the visible means of invoking Internet Explorer and then contend with the fact that Internet Explorer would nevertheless launch in certain cases; they also had to (assuming they needed new, non-browsing features not available in earlier versions of Windows) content themselves with a PC system that ran slower and provided less available memory than if the newest version of Windows came without browsing software. By constraining the freedom of OEMs to implement certain software programs in the Windows boot sequence, Microsoft foreclosed an opportunity for OEMs to make Windows PC systems less confusing and more user-friendly, as consumers desired. By taking the actions listed above, and by enticing firms into exclusivity arrangements with valuable inducements that only Microsoft could offer and that the firms reasonably believed they could not do without, Microsoft forced those consumers who otherwise would have elected Navigator as their browser to either pay a substantial price (in the forms of downloading, installation, confusion, degraded system performance, and diminished memory capacity) or content themselves with Internet Explorer. Finally, by pressuring Intel to drop the development of platform-level NSP software, and otherwise to cut back on its software development efforts, Microsoft deprived consumers of software innovation that they very well may have found valuable, had the innovation been allowed to reach the marketplace. None of these actions had pro-competitive justifications. 411. Many of the tactics that Microsoft has employed have also harmed consumers indirectly by unjustifiably distorting competition. The actions that Microsoft took against Navigator hobbled a form of innovation that had shown the potential to depress the applications barrier to entry sufficiently to enable other firms to compete effectively against Microsoft in the market for Intel-compatible PC operating systems. That competition would have conduced to consumer choice and nurtured innovation. The campaign against Navigator also retarded widespread acceptance of Sun’s Java implementation. This campaign, together with actions that Microsoft took with the sole purpose of making it difficult for developers to write Java applications with technologies that would allow them to be ported between Windows and other platforms, impeded another form of innovation that bore the potential to diminish the applications barrier to entry. There is insufficient evidence to find that, absent Microsoft’s actions, Navigator and Java already would have ignited genuine competition in the market for Intel-compatible PC operating systems. It is clear, however, that Microsoft has retarded, and perhaps altogether extinguished, the process by which these two middleware technologies could have facilitated the introduction of competition into an important market. 412. Most harmful of all is the message that Microsoft’s actions have conveyed to every enterprise with the potential to innovate in the computer industry. Through its conduct toward Netscape, IBM, Compaq, Intel, and others, Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft’s core products. Microsoft’s past success in hurting such companies and stifling innovation deters investment in technologies and businesses that exhibit the potential to threaten Microsoft. The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft’s self-interest.
Microsoft claims, in effect,
to have been surprised by the "draconian" and
"unprecedented" remedy the plaintiffs recommend. What it
proposes is yet another round of discovery, to be followed by a
second trial - in essence an ex post and de facto bifurcation of the
case already considered and rejected by the Court.
Microsoft's profession of surprise is not credible
- despite their surprise, compounded no doubt by the Court's refusal
on May 24th to allow discovery and take testimony on the issue,
Microsoft's attorneys were promptly able to tender a 35-page
"Offer of Proof," summarizing in detail the testimony 16
witnesses would give to explain why plaintiffs' proposed remedy, in
its entirety, is a bad idea. Within a week they added seven more. From the inception of this case Microsoft knew,
from well-established Supreme Court precedents dating from the
beginning of the last century, that a mandated divestiture was a
possibility, if not a probability, in the event of an adverse result
at trial. These cases have been before the Court, and have
occupied much of its attention, for the past two years, not counting
the antecedent proceedings?. The Court is convinced for several
reasons that a final - and appealable - judgment should be entered
quickly. Despite the Court's Findings of Fact and
Conclusions of Law, Microsoft does not yet concede that any of its
business practices violated the Sherman Act. Microsoft officials
have recently been quoted publicly to the effect that the company
has "done nothing wrong" and that it will be vindicated on
appeal. The Court is well aware that there is a substantial body of
public opinion, some of it rational, that holds to a similar view.
It is time to put that assertion to the test. If true, then an
appellate tribunal should be given early opportunity to confirm it
as promptly as possible, and to abort any remedial measures before
they have become irreversible as a practical matter. There is credible evidence in the record to
suggest that Microsoft, convinced of its innocence, continues to do
business as it has in the past, and may yet do to other markets what
it has already done in the PC operating system and browser markets.
Microsoft has shown no disposition to voluntarily alter its business
protocol in any significant respect. Indeed, it has announced its
intention to appeal even the imposition of the modest conduct
remedies it has itself proposed as an alternative to the
non-structural remedies sought by the plaintiffs. The proposed final judgment is represented to the
Court as incorporating provisions employed successfully in the past,
and it appears to the Court to address all the principal objectives
of relief in such cases, namely, to terminate the unlawful conduct,
to prevent its repetition in the future, and to revive competition
in the relevant markets. Microsoft's alternative decree is plainly
inadequate in all three respects. |