Subject: M$ Monitor: Justice Stops Short
Audrie Krause (audrie@netaction.org)
Date: Mon, 18 May 1998 22:26:04 -0700 (PDT)
Date: Mon, 18 May 1998 22:26:04 -0700 (PDT) Message-Id: <2.2.16.19980518222840.123fb218@pop.igc.org> To: roundtable@cni.org From: Audrie Krause <audrie@netaction.org> Subject: M$ Monitor: Justice Stops Short
The Micro$oft Monitor
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Published by NetAction Issue No. 30 May 19, 1998
Repost where appropriate. Copyright and subscription info at end of message.
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In This Issue:
Justice Stops Short
Software Action Alert
About the Micro$oft Monitor
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Justice Stops Short:
-- Justice Department Files Limited Antitrust Suit Against Microsoft
-- State Attorneys General Lay Out A More Comprehensive Complaint
On Monday, May 18, the Justice Department announced it was filing a
rather limited antitrust suit against Microsoft. State attorneys
general 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.
This report was prepared by Nathan Newman, NetAction Project Director.
Contact Nathan at <nathan@netaction.org> or <mailto:nathan@netaction.org>
with questions or comments.
To understand how limited the Justice Department's demands are, even if
the Justice Department wins every point in court, Microsoft can still
configure its operating system exactly the way Bill Gates wants it.
Although Microsoft claims otherwise, nothing in the lawsuit would
require the company to bundle Netscape, or any other piece of software,
in the system that consumers receive.
All the Justice Department's lawsuit demands is that computer sellers
(Original Equipment Manufacturers, or OEM's 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.
The lawsuit also demands that Microsoft stop controlling what software
manufacturers are allowed to install on the computers they distribute to
consumers. This is also intended to further expand options for
consumers and enhance competition with Microsoft competitors.
Currently, Microsoft's licenses for Windows rigidly control the
"boot-up" sequence for Windows and the placement of software on the
desktop, giving Microsoft an anticompetitive ability to promote use of
its own software and services (such as Internet Service Providers) with
which it has special deals.
Again to emphasize the lawsuit's limit, manufacturers would still be
free to configure Windows exactly as Microsoft demands. But if the
Justice Department wins its case, consumers would be able to order
alternative desktop configurations, as well.
The limited reforms demanded by the Justice Department contrast sharply
with the dramatic evidence of Microsoft's anticompetitive intent and
actions, as revealed in the government's antitrust filing. In comment
after comment, Microsoft executives' statements reveal an overwhelming
pattern of monopoly abuse. Some examples 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, 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, the states 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 described how Microsoft's anticompetitive
practices 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 about 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 promote 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 white paper, at
<http://www.netaction.org/msoft/world/>.
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Software Action Alert
Consumer action is urgently needed to prevent the adoption of commercial
law changes that will exempt software purchases from traditional
consumer protection laws, enable the software industry to dictate the
terms of software purchases by validating "shrinkwrap" licenses, and
threaten the rights of software developers to make competing programs.
NetAction is urging consumers and software developers to immediately
contact the American Law Institute (ALI) and the National Conference of
Commissioners on Uniform State Laws (NCCUSL) and demand that adoption of
UCC Article 2B be delayed until the language can be revised to address
consumer concerns.
Consumers can fax the request for a delay to ALI and NCCUSL from
NetAction's fax server, at: <http://www.netaction.org/fax/>, or write to
them at the addresses listed below. Faxes and letters should be sent to
the two organizations through July 31, 1998.
For additional background on this issue, see NetAction Notes No. 37, at:
<http://www.netaction.org/notes/notes37.html>.
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About The Micro$oft Monitor
The Micro$oft Monitor is a free electronic newsletter, published as part
of the Consumer Choice Campaign <http://www.netaction.org/msoft/ccc.html>.
NetAction is a national, non-profit organization dedicated to educating
the public, policy makers, and the media about technology-based social
and political issues, and to teaching activists how to use the Internet
for organizing, outreach, and advocacy.
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Micro$oft Monitor, contact Audrie Krause by phone: (415) 775-8674, by
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Copyright 1998 by NetAction/The Tides Center. All rights reserved.
Material may be reposted or reproduced for non-commercial use provided
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