MONOPOLY HOUNDS OR JUST SMART BUSINESS PEOPLE?
January 21, 1998
Return to this forum's introduction.
in this forum:
What laws are involved in this dispute? Is Microsoft's practices monopolistic? What is an "operating system"? Why doesn't the Justice Department let the market play out? Can competition and integration co-exist? What are the larger issues of this case? Viewer comments.
January 13, 1998
A background report on the Microsoft anti-trust case.
October 21, 1997
The Justice Department formally files its anti-trust complaint against Microsoft.
August 6, 1997
Microsoft takes a bite out of Apple.
June 11, 1997:
Netscape and Microsoft agreed to limit access to private information online.
September 20, 1996:
Tom Bearden reports on the cyber war between Netscape and Microsoft.
Browse the NewsHour's coverage of cyberspace and the law.
PBS's Robert Cringley muses about Microsoft. December 25, 1997 and January 15, 1998
U.S. Department of Justice
Microsoft's response to the Department of Justice's actions.
Microsoft and Netscape
Richard J. Coronado of Atchison, KS, asks:
- Which laws are involved in this case?
- Which are the specific precedents in this particular case?
- Which legal precedents?
- Which doctrine of antitrust is being used to pursue the case? (ie: monopoly power per se is illegal? Rule of reason?)
Mr. Black of the Computer & Communications Industry Association responds:
Unfortunately, there are literally volumes of documents related to this case. Far too numerous and detailed for this forum. However, I would say that this case boils down to a breach of contract dispute. The document in question is the 1995 Consent Decree, negotiated by the Justice Department and Microsoft and approved by the Court. At issue in particular, is whether Microsoft violated its agreement with Justice and the Court by bundling the Internet Explorer browser with the current Windows operating system and incorrectly forced computer manufacturers to install the IE browser -- as a condition -- to having a license to load the Windows operating system on the computers sold by those manufacturers.
I would suggest for more detailed analysis of the law and the consent decree that you visit the Justice Department's Web site to view the documents of the case. And the amicus brief submitted by CCIA to the Court is available on CCIA's Web site at www.ccianet.org
Mr. Rule, attorney for Microsoft, responds:
The case currently before the courts involves allegations by the U.S. Department of Justice (DoJ) that Microsoft has violated the consent decree that DoJ and Microsoft negotiated in 1994 and that was entered by the court in 1995. That decree (which was the result of an agreement between DoJ and Microsoft and not of a litigation victory by DoJ) was based on the federal antitrust laws, specifically section 2 of the Sherman Act (15 USC 2).
One provision of the consent decree prohibits Microsoft from requiring an OEM (e.g., Compaq, Hewlett-Packard, Dell) to license an "other product" in order to obtain a license to a "covered product" (i.e., Windows 95); however, the prohibition contains an express proviso that states that the prohibition does not prohibit Microsoft from developing "integrated products." In brief, in the current matter before the court, DoJ claims that Microsoft is in contempt because Internet Explorer (IE) (the name that Microsoft uses to identify its Internet functionality) is an "other product" separate from Windows 95; Microsoft has argued that IE is integrated into Windows 95 and so is covered by the proviso. It is important to remember that in December the court found that Microsoft was not in contempt. Subsequent hearings have clearly shown that IE is inextricably integrated into Windows 95 (which is why Windows 95 will not boot when you remove the software code that constitutes IE 3.0 as sold at retail).
2. a. As in any case, there are arguably a number of relevant precedents. This is a case of decree interpretation and those court opinions describing the rules for construing consent decrees are relevant. The leading Supreme Court case is United States v. ITT Continental Baking Co., 420 U.S. 223 (1975).
b. The DoJ has not chosen to pursue its case against Microsoft as a substantive violation of the underlying antitrust laws. Though DoJ has not explained its decision, one may presume that DoJ has doubts about its ability to prove that Microsoft's integration of Internet functionality into its operating system is a violation of the Sherman Act. Even assuming (contrary to the evidence) that DoJ could prove that Windows 95 and IE were "separate products," in order to prove that Microsoft had engaged in "tying" (a per se violation of section 1 of the Sherman Act) or "monopoly leveraging" ( a "rule of reason" violation of section 2 of the Sherman Act), DoJ would have to establish several other elements that it apparently is not prepared to prove.
For example, DoJ has never alleged (much less offered to prove) that the integration of IE into Windows 95 "excludes" or "forecloses" competing Internet browsers (e.g., Netscape Navigator) from the Windows 95 desktop (or more generally from the market). In fact, at the recent hearing before Judge Jackson, it was made clear that the integration of IE into Windows 95 does not interfere with an OEM's (or an end user's) ability to install Navigator or to choose Navigator (or any other browser for that matter) as the computer's default browser. Proof that Microsoft's conduct has excluded or foreclosed competition would be necessary (though not suffcient) to prove that Microsoft has committed a substantive antitrust violation.
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