Justice Department Files Limited Antitrust Suit Against Microsoft, States Lay Out More Comprehensive Complaint
Today, May 18th, the Justice Department announced it was filing a rather limited antitrust suit against Microsoft. State attorney generals from 20 states and the District of Columbia filed a parallel antitrust lawsuit that addressed a broader set of complaints against Microsoft but still stopped short of demanding a comprehensive solution to Microsoft's monopoly position in the computing world.
To emphasize how limited the Justice Department's demands on Microsoft are in its lawsuit, consider that even if the Justice Department wins every point in court, consumers will still be able to order a computer with Windows 98 configured exactly as Bill Gates wants. Despite Microsoft statements to the contrary, nothing in the lawsuit would require that consumers receive a copy of Netscape or any other piece of software bundled with Windows 98.
All that the Justice Department lawsuit demands is that sellers of computers (Original Equipment Manufacturers, or OEMs in industry parlance) be given the option of bundling Windows 98 without Internet Explorer in order to expand consumer choice. The Justice Department lawsuit also demands that Microsoft "deducts from that OEM’s Windows 98 royalty an amount equal to the OEM’s reasonable cost" of deleting Internet Explorer from systems if Microsoft insists on bundling it with Windows 98.
Further expanding options for consumers and enhancing competition with Microsoft competitors, the lawsuit demands that Microsoft end its controls on what software manufacturers are allowed to install on computers they distribute to consumers. Currently, Microsoft licenses for Windows rigidly control the "boot-up" sequence for Windows and how software is placed on the desktop, giving Microsoft an anticompetitive ability to enhance use of its own software and services (such as Internet Service Providers) with which it has special deals.
Again to emphasize, manufacturers would still be free to configure Windows exactly as Microsoft currently demands, but if the Justice Department wins its case, consumers would also be able to order alternative desktop configurations as well.
The limited reforms demanded by the Justice Department contrasts with the dramatic evidence of Microsoft's anticompetitive intent and actions revealed in the government's antitrust filing. In comment after comment, Microsoft executives quotations reveal an overwhelming pattern of monopoly abuse. Some samples from the filing include:
** "We are going to cut off [Netscape's] air supply. Everything they're selling, we're going to give away for free. "(Bill Gates, June 1996)
** "I do not feel we are going to win on our current path. We are not leveraging Windows from a marketing perspective…We do not use our strength – which is that we have an installed base of Windows and we have a strong OEM shipment channel for Windows."(MS Senior Vice President James Alchin, January 1997)
** "It seems clear that it will be very hard to increase browser market share on the merits of IE 4 alone. It will be more important to leverage the OS asset to make people use IE instead of Navigator."(Microsoft's Christian Wildfeuer, February 24, 1997)
Most damning is the allegation that back in 1995, Microsoft met privately with Netscape executives and offered to refrain from competing against the Netscape browser if Netscape in turn would do nothing that undermined Microsoft's operating system monopoly. While Netscape refused the offer, the proposal itself clearly shows Microsoft's monopolistic intent and its willingness to engage in collusion and threat to maintain and expand its monopoly.
It is unfortunate that despite the damning evidence detailed in its court filing, the Justice Department filed such a limited lawsuit.
The antitrust lawsuit filed by the 20 state attorneys general shows more promise. In their filing, they emphasized not just Microsoft's obviously abusive practices but the broader structural reasons for its monopoly. In their brief, the attorneys general argued:
"Substantial barriers prevent entry and establishment in the PC operating system market. These include large ‘sunk’ costs, network effects, the ‘lock-in’ effect, and high switching costs. Microsoft's anticompetitive practices described below significantly increase the already high barriers to entry and establishment facing competitors in the PC operating system market. These and similar practices, as well as the enumerated entry barriers, have resulted in Microsoft’ s retention of a durable operating system monopoly. Through the practices listed below, Microsoft threatens to extend its monopoly once again indefinitely into the future. "
The attorneys general then enumerated a good history of Microsoft's anticompetitive practices that expanded its monopoly in office software and Internet applications. By raising the broader issue of business software, Java and applications like email readers, the attorneys general will hopefully move the current political debate on Microsoft beyond the narrow focus on browser software onto the much broader threats of Microsoft control of business computing and electronic commerce.
Unfortunately, the attorneys general did not follow up their strong analysis with demands for equally strong remedies, but we can hope that new filings in the future will push forward to those more comprehensive solutions.
For those interested in such broad approaches, NetAction gave a detailed view of these issues and proposed comprehensive solutions to the Microsoft monopoly problem in its November white paper available at http://www.netaction.org/msoft/world/.