Linux-Advocacy Digest #822, Volume #28 Fri, 1 Sep 00 23:13:03 EDT
Contents:
Re: Sherman Act vaguery [was: Would a M$ Voluntary Split Save It?] (R.E.Ballard (
Rex Ballard ))
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From: R.E.Ballard ( Rex Ballard ) <[EMAIL PROTECTED]>
Crossposted-To:
comp.os.ms-windows.nt.advocacy,comp.os.os2.advocacy,comp.sys.mac.advocacy
Subject: Re: Sherman Act vaguery [was: Would a M$ Voluntary Split Save It?]
Date: Sat, 02 Sep 2000 02:48:33 GMT
In article <[EMAIL PROTECTED]>,
[EMAIL PROTECTED] wrote:
> Said Darin Johnson in comp.os.linux.advocacy;
> >T. Max Devlin <[EMAIL PROTECTED]> writes:
> >
> >> You'll only have the money to pay the fines if it works, and
> >> even *attempting* to monopolize is enough to convict you.
> >
> >Attempting is not illegal. In fact, just *being* a monopoly is
> >perfectly legal too. It's only when you use your monopoly power to
> >influence other market areas that anti-trust acts come into play.
Actually, the antitrust act is deliberately vague. Essentially,
the law was designed to assure an open an competitive marketplace
wherever practical and possible.
There are some monopolies which were determined, by the courts,
to be natural monopolies by virtue of limited access to a finite
resource. For example, the telephone company was a monopoly because
open competition for the right to hang telephone wires would have
resulted in a bunch of telephone poles with hundreds of wires.
Ironically, Microsoft doesn't actually have a natural monopoly.
It is techologically feasable for multiple operating systems to
share the same hard drive, even the same memory, at the same
time. We have products like lilo, boot magic, VMWare, and WINE
that show that Microsoft an Linux could co-exist.
What gives Microsoft it's monopoly status is it's business practice
of creating contract terms that force OEMs to install Microsoft
products on every machine and exclude all potential competitors.
It's certainly in Microsoft's best interests to exclude competitors,
but it is definately NOT in the best interests of the OEMs. If
Microsoft were to reduce their prices for a year or two (effectively
"Dumping" to drive out competitors), it still would not be in the
long-term interests of the OEMs who would pay higher prices once the
competitor had been driven out.
Even in the natural monopolies, the government generally gets
directly involved. The Public Utilities Commission regulates
access to finite resources. The AT&T monopoly was regulated by
several federal agencies, a number of state agencies in each state,
and in some cases by zoning boards and county commissioners at
the local level.
For AT&T this was part of having a monopoly. The power companies
had the same problem. Microsoft has adamantly refused to allow
any form of government regulation or oversight into any of it's
practices.
No company like to have 30-40 "guards" watching their every move
(through the accounting and audit process), but that's the price
of being a monopoly. Eventually, AT&T created a way to share
lines electronically. They divested the baby-bells so that each
company would have fewer state regulations to manage. The sharable
wire could be farmed out to multiple service providers.
The electric company was equally eager to get out from under
regulatory micromanagement. I knew an accountant for
an investor owned utility in Colorado who had to keep 18 sets of
books until he designed a way to perform the entries electronically.
Even then the regulations are so subjectives that the accountants
have to manually determine the coding of each part and labor related
to installing that part.
The utility companies had been "grid sharing" for years. That is,
each utility created as much energy as they could, and the power
was distributed based on demand. For example, the south would get
power from the north in the summer, and vice versa in the winter.
> >(well, that and also various unfair practices designed to maintain
> >the monopoly against encroaching competitors)
This is the most important issue. If you conspire to exclude a
competitor, and create a monopoly through sheer force of your
existing status as the dominant player in the marketplace, you
are stepping into the grey area of the Sherman Act.
When you actually make competitor exclusion (by virtue of bundling,
lock-out agreements, or exclusionary technical requirements), you
then stand squarely in the dark place.
And when you threaten to revoke contracts and take actions that both
you, and the person you are negotiating with, know would actually
create real damages to investors and/or debtors, you are way across
the line.
Finally, if you actually take actions that result in real damages
to investors, creditors, and/or customers because you did revoke
contracts and licenses, or witheld them, you are now in the realm
of criminal activities including blackmail, extortion, fraud, bribery,
and possibly even larceny.
When the FTC first started their investigation of Microsoft back
in 1987 under George Bush, they determined that Microsoft was
illegally excluding competitors, that they were engaging in fraudulent
practices (vaporware promises for 4.0 that were NEVER delivered).
And that they were illegally excluding competitors in their bundling
agreements. They decided to settle out court when Microsoft promised
to behave and alter it's business practices.
When Microsoft not only ignored their arrangement with the FTC, but
also increased their illegal activities to include explicit bundling
of Office with Windows, the FTC turned the matter over to the DOJ.
Again, the DOJ had a very substantial case against Microsoft, but
Microsoft agreed to settle the matter rather than take it to trial.
The DOJ, under the Clinton administration was so accomodating of
Microsoft that three Judges rejected early settlement attempts
because the DOJ hadn't obtained sufficient remedies.
Finally, after nearly 8 years (1987 to 1995) of stringing the
government along, they finally signed an agreement that had obvious
weasel clauses that weren't detected by the judge. Ironically,
it was Judge Jackson who approved the accord.
The ink was barely dry on the agreement before Microsoft immediately
nullified the spirit and intent of the contract by excluding Netscape
through anticompetitive bundling. At that time, the DOJ still thought
that they could handle this by litigating the settlement.
During the course of the litigation of the 1995 accord, the DOJ
began to discover that much of what they had covered when they
had first investigated Microsoft was only the tip of the iceberg.
Essentially, Microsoft's insistance on fighting the 1995 agreement
triggered a whole stream of litigations, followed by a stream of
disclosures. The most significant turn was when Microsoft, on the
verge of obstruction of Justice charges, published an announcement
that NDA parties could discuss their dealings with Federal
investigators. Suddenly, there were people coming out of the
woodwork to tell their story.
Since the Judge had limited each side to 25 primary witnesses,
only the most convincing, relevant, and credible were called
to the stand. But the DOJ also had hundreds of depositions
which told them where to look in the e-mail archives and
electronic archives for the information that would be most
effective in cross-examination.
After Microsoft's top 4 executives not only perjured themselves,
but also admitted to fraud, extortion, blackmail, theft, and
even violations of federal computer trasspassing laws, while
attempting to justify it as protection against piracy, competitors
who could "at any time take over the entire market", and then
attempted to recant their own testimony when the Judge started
asking them pointed questions which were obviously going to
put them in legal hot-water.
The irony is that the top three, Bill Gates, Steve Ballmer, and
Jim Allchin still insist that "We did nothing wrong" while openly
announcing actions that are direct violations of the law, direct
violations of the court order, and carry severe criminal penalties.
If Microsoft doesn't settle pretty soon, the DOJ or the Attorney
General might even go so far as to file criminal charges against
the top three. They wouldn't even have to call witnesses, they
could just play video tapes, file press releases, and build a
case based on published statements and a few private (but now
disclosed) e-mails.
If Microsoft is thinking that George Bush is going to let him off
the hook, keep in mind that there are 4 really big companies right
there in texas, and 3 with a big presence in Austin, who would love
to see Bill Gates wearing a pair of steel bracelets.
Bill Clinton bent over backards, forward, and sideways to give
Microsoft as much wiggle room as possible, including calling off
the FTC and pushing for a DOJ settlement. And Microsoft thanked
HIM by dedicating 25% of their web page to the first breaking of
the Lewinski tapes, and 25% of their air time (100% of their MSNBC
prime-time) to the scandal, to divert attention away from their
trial.
> Oh, Christ, don't tell me I've gotta
> start this whole damn thing again.
>
> Yes, attempting to monopolize is illegal. Its in the statute:
Essentially, it's an illegal restraint of trade. Only the
federal government is allowed to restrain trade. The exclusion
of competitors by a single vendor is a illegal.
If buyers agree to exclude a competitor, that is also a violation
of the Clayton act and also carries penalties.
When the goverment does determine that a monopoly does exist and
cannot be divested into a competitive market, they take a direct
role in limiting the scope of that monopoly. AT&T had a legitimate
exclusive use of the overhead wires (or underground wires), but
they didn't have the right to exclude other phone makers from making
telephones to be used on those wires. They didn't have the right
to exclude independent contractors or do-it-yourselfers from wiring
the inside of their house. They didn't have the right to exclude
other carriers from the switching systems that multiplexed the
the carrier wire.
Eventually, AT&T did divest, they established standards that made it
possible for competition to thrive. AT&T is still a thriving company,
and Morris County NJ (AT&T headquarters) is still home to more
millionaires per capita than any other county in the U.S. You can't
drive on a major road without passing at least a few $1 million houses.
> "Every person who shall monopolize, or attempt to monopolize, [...]
> shall be deemed guilty of a felony...."
Think of the nature of the crime. I want you to purchase all
of the X that you need from no one else but me. Furthermore,
because you must have my X, I'll also sell X to all of your
competitors who will also only get their X from me. If you
don't agree to buy ALL of your X from me, you will get NONE
of my X. And since your company needs X to survive as a
viable enterprize, you will immediately go into bankruptcy
unless you buy all of your X from me.
Plug in any substitute that applies for X. Oil, Transportation
of your products to the marketplace, communication with your
customers and suppliers, anything which your business absolutely
must have to survive, and can only get from a single source.
If you are the customer in such an arrangement, you know that
it is in your best interests to support ANY competitor, even a
bad one, just to brake this deadlock. You also know that unless
you can get all of your competitors to agree to support a competitor
to this monopoly, that you will be driven into bankruptcy by the
monopoly.
What is the one thing that the monopoly holder absolutely does not
want you to know? That there is a competitor to the monopoly that
all of your competitors could agree to support and still be profitable.
=========
> >> No, its illegal as soon as you even attempt to get it:
> >> "the Court concludes that Microsoft maintained its
> >> monopoly power by anticompetitive means
This is actually the key element of the case that cannot be
denied. The fact is that, from 1982 to 1999 there WERE viable
competitors who were systematically driven out of the market
by Microsoft's "all or nothing" position with the OEMs.
The Microsoft monopoly was created as a byproduct of the IBM
near-monopoly of corporate IT systems up until 1980. In an
effort to protect it's own Mainframe monopoly, and minicomputer
market from the Microcomputer, IBM wanted Microsoft to create
a "Personal" computer. These were to be computers that performed
a single task for a single user NOT a multitasking, multiuser
operating system that could blow EDX, OS/360, System 3x,
and VS/MVS/VM out of the market.
Ironically, when the MVS market nearly collapsed, IBM got very
interested in UNIX, which had become a very successful competitor
and had proven to be very effective. When Lou Gerstner shifted
the company from "If we make it, they will buy it", to "We will
make what the customer wants and needs", the sales reps and service
people discovered that what most of the customers wanted for most
of the new projects was UNIX. UNIX scaled from an 80386 PC (even
an 80286 if you count Xenix and Mark Williams) up to a supercluster
that can even dwarf a mainframe.
Ironically, when they stopped trying to take MVS and "shove it down
their throats", they discovered that many customers still wanted
IBM MVS and AS/400 systems for financial transactions.
> >> and attempted to monopolize the Web browser
> >> market, both in violation of § 2."
> >
> >Nope, this explicitly says that Microsoft already had ONE monopoly,
That it had a monopoly was simply a fact. Microsoft had nearly the
entire PC desktop market. It's biggest challenge was trying to
get Microsoft customers to give up their old Microsoft systems,
and replace them with new Microsoft systems.
What was relevant in the case was that Microsoft used legal clauses,
and mandated technology which was designed to exclude competitors.
Even though they didn't do the operating system for Mac, they still
controlled the desktop environment through Microsoft Office.
Microsoft used it's controll of the operating system to create
a secondary monopoly based on Office, which it used to exclude
Linux. It then used it's control of Windows and Office to continue
to exclude other Office Suites. In this way, Microsoft could force
a proprietary standard that couldn't be implemented without licences
from Microsft.
The web browser created a triple jeopardy situation.
First, because
it used a public standard, and it was implemented it source code
that was publicly available (Mosaic), Microsoft would lose control
of the presentation quality document formats. Although Microsoft
did try to create "Office Plug-ins" that could be used to view
Office documents, they were too slow and awkward for "real-world"
use.
Second, because
it could be implemented on UNIX, the Web browser threatened
Microsoft's control of the IT marketplace as a whole. Not only
did the standards make it possible to implement web browsers
on UNIX and Linux, but it also made it possible to put the
complex application logic into UNIX based servers.
Ironically, Microsoft's greatest threat was actually Windows 3.1.
It was so unreliable, that large corporations didn't want to
put real-time interactive applications on it. Instead they
created trivial front-ends for the UNIX back-ends. The web
browser eliminated the need for any Windows-specific code, since
HTML forms could be Posted to UNIX servers and processed in
a reliable environment.
To make matters worse, a version of UNIX, Microsoft's largest
competitor, was no available in versions that could affordably
be run on PCs that previously ran only Windows 3.1. These
included Linux, UnixWare, SCO Unix, and FreeBSD. Furthermore,
Linux, which was protected with an open-source license, was
gaining developer support. The whole PC-Linux market was
dwarfed by Microsoft's market (1 million UNIX/Linux COE
(Client Operating Environment) licenses shipped vs 200 million
Windows COE licenses shipped in 1995. Even in 1998, 4 million
Linux licenses was still dwarfed by Microsoft's 300 million
Windows licenses and 35 million Mac-Office licenses.
In a really bad year for Microsoft, Windows 98 sales were slow
(everybody had already upgrated if they were going to), and
Windows 2000 was slow (only 4 million licenses in 6 months),
while Linux topped 30 million licenses, which STILL amounted
to less than 10% of the market by number of COE licenses shipped.
And that was still less than 5% of the total established market
(since Windows 98 licenses are cumulative and Linux licenses include
renewals/upgrades).
It was Microsoft's response to the threat that made it illegal.
Microsoft engaged in illegal contracts. That they offered their
own browser wasn't the problem. That they bundled it with the
Operating System was a minor problem, but something that could have
been easily negotiated and settled. What made it a problem was
when Microsoft sent a letter to the third largest maker of PCs
and threatened to revoke their Windows license. At that point,
Microsoft was way into the deep and muddy waters on the wrong side
of the law.
That triggered the initial contempt citation, for revoking the
spirit and intent of the 1995 agreement. What Microsoft didn't
realise is that they were actually making their situation worse
by refusing to settle and honor the original agreement.
The contempt case triggered a whole new series of disclosures,
prompted a number of companies to come forward, and exposed a
widespread pattern used by Microsoft to extend it's monopoly
far beyond PC operating systems and PC applications.
When the DOJ decided to press the antimonopoly charges, things
really got messy. The DOJ began to uncover activities that
proved that Microsoft was using it's monopoly power to stifle
innovation, to illegally exclude competitors, to bankrupt
businesses who didn't cooperate, and to willfully cause severe
economic loss to competitors. They even misreprestented
customers to divert market share away from uncooperative
customers.
In fact, the hardest problem for the DOJ was dealing with the
pervasive culture of illegal activity. Microsoft was coercing
the press to publish false and fraudulent information, they were
publishing code that deliberately corrupted third-party software
products and releasing it as "Service Packs", they were forcing
customers to assume unneccessary risk by bundling "Netscape Killers
and Lotus Killers" into Y2K fix packs.
They were attempting to bankrupt, exclude, and destroy the code
of numerous companies who supported any form of Competition
including any form of Linux or UNIX, Java, and BEOS.
> >and was attempting to use that in order to gain a SECOND monopoly.
>
> Both were in violation. See that? Both?
Again, this was what they intended to prove with their original 25
witnesses. Today the DOJ has evidence that can prove that Microsoft
was attempting a Second (Applications), Third (Development systems),
Fourth (Web Servers), Fifth (Multimedia), Sixth (Mass Media), Seventh
(E-Commerce and Banking), and Eighth (telecommunications carriers).
Furthermore, Microsoft has deliberately exposed users to numerous
viruses to protect it's back door used to monitor/detect/prosecute
piracy.
And finally, Microsoft has shown it's willingness to leverage it's
current control of Web, Cable TV, and media enterprises for the
purpose of manipulating (overthrowing) the government.
If Microsoft insists on dragging this through both the appellate
and Supreme courts, it will only trigger MORE disclosures, more
evidence of criminal activity, and even MORE state and federal
lawsuits.
Furthermore, with state and federal watchdogs giving an open ear
to nearly any substantiated complaint, it's creating even more
pressure on Microsoft. Ironically, if Microsoft persists, it will
get exactly what it didn't want - Micromanagement and regulatory
review and publication of every contract, release, and NDA, along
with detailed investigation of nearly every line of eary new service
pack to identify "cracks" intended to damage 3rd party code.
Meanwhile, back at the ranch, the OEMs want to avoid this mess
as much as possible. Many of them are agressively going after
Linux and anything else that will weaken the threat of "All or
Nothing" should the courts dismiss all charges or remove
the remedies.
I actually don't think anyone wants to see Microsoft forced
into an involuntary divestature. It creates too many other
legal precedents. On the other hand, Microsoft has refused
to abide by the spirit and intent of any of it's previous
behavioral remedies. Even it's last two proposals for it's
own behavioral remedies were so loaded with weasel clauses
that the Judge didn't even want to go through the process
of ripping it apart publicly. It looked like something that
would come from a 3rd year Harvard drop-out.
In 1987, or even in 1995, Microsoft might have been able to
sneak that one by in a privately negotiated settlement with
only the Clinton/Reno DOJ people. But with watchdogs from
Texas, Utah, California, New York, North Carolina, Florida,
and the rest of the 19 states, there is nothing short of a
confession, an apology, and a complete shift in corporate
culture, that will get past those 19 prosecutors.
Many of them are used to dealing with Death Row inmates who
are more convincing that Bill Gates, and aren't stupid enough
to Announce their next victim on National Television the day
before a stay is granted.
Bill Gates and Steve Balmer went to Europe to announce ".NET",
because that announcement would have triggered federal marshals
into action had they announced it in the U.S.
Actually, Microsoft's BEST hope is that Linux can get a substantial
share of the COE market BEFORE they end up in front of the Supreme
Court. It may be that Microsoft's best chance at avoiding having
that prison guards in their offices (the Compliance Officer/Committee),
would be to let Linux get as much market share as possible over
the next 12-24 months. By the time the Supreme gets the case,
the OEMs would no longer be threatened by "all or nothing".
Furthermore, the issues would be resolved where they SHOULD
be resolved. In a competitive marketplace.
If we see TuxStations and TuxTops at shopping malls and CompUSA
(or, more likely, stores that are higher-end and offer service),
sitting right next to those WinStations and WinTops, and both
are available to home-PC buyers, corporate users, then the DOJ
will have done it's job and Microsoft won't need to be broken up.
This doesn't mean it will be painless. Microsoft's revenues have
already fallen due to lackluster Win2K sales, and aren't looking
for ME to cause a stampede to replace 500 million Windows 98
machines with Windows ME machines. From the reviews I've seen
and read, Windows ME will probably only trigger sales of about
100 million machines in the first year. Meanwhile, if Linux
continues it's current growth path, there will be about 40-60
million Linux licenses sold next year, and many of them, especially
the new users, will be looking seriously at factory installed Linux
on new machines.
In fact, the OEMs will probably be looking to Linux as something
"really different" to grab the attention of the Jaded user who has
reached the point where a faster CPU that waits for a slow network
and hard drive just isn't going to cut it.
The people who want more power, want to create content for the
internet, want to handle more information more quickly, or just
want to spend more time getting work done and less time fiddling
with Windows, are going to be very interested in Linux.
In two or three years, it may be Microsoft asking the OEMs to please
include Windows in a dual-boot system (so that they can keep making
market share claims).
> >That's why the first legal tactic of the DOJ was to
> > show there was an existing monopoly, and the first
> > defense of Microsoft was to try and
> >deny it.
>
> That wasn't the first legal tactic;
> that was the first conviction.
> They were convicted on three counts,
> and acquitted on a fourth.
>
> >But the whole area is a complex one, and one that even lawyers and
> >judges don't agree upon. Plus there are regulatory bodies,
> >congressional legislation, and legal precedent, that all overlap and
> >muddy the primary idea. If it was clear, easy to understand, and
> >unambiguous, there wouldn't be a need for a battery of lawyers, and
> >there wouldn't be two sides to this argument :-)
Actually, the classic solution for a natural monopoly (one in which
the monopoly cannot easily be converted into a competitive market
through behavioral remedies) is to regulate it's monopoly power.
That is, a regulatory body such as the Public Utilities Commission
reviews the rate structure, price structure, what elements are
and should be open to competition, what elements can justify rate
increases, and are in a constant tightrope between the fiscal welfare
of the company and the welfare of the subscriber/consumer.
Numerous antimonopoly cases have been settled much more easily.
The defendent often simply modifies his behavior during the
appeals process, allows a competitive market to form and
establish itself, and then uses this as evidence of good
faith in helping to establish a competitive market. This
is what happened to IBM in the early 1990s.
Ironically, many times, the competitive market actually
creates more opportunity for the former monopoly than
existed in the monopoly. For example, as a result of
competition, AT&T has more demand for more bandwidth,
and at a wider range of price/service levels than it
had under the original "voice-only" monopoly.
It's very likely that if Linux does establish a substantial
market, and it continues to evolve rich and powerful modular
components (currently there are over 2000 packages with an average
of about 200 components per package), Microsoft will be able to
reduce it's costs, leverage a few markets, and establish itself
as a nonexclusive player in a very competitive market. Ironically,
the "post competition" Microsoft could eventually be bigger than
the "monopoly" Microsoft. We probably won't see earnings that are
50% of revenue, but you might see earnings that are as high, and
possibly even dividends.
We may even see Microsoft voluntarily divest itself. Bill Gates has
always admired Warren Buffet, and between Microsoft and some of
his other holding and VC companies has created a pretty substantial
portfolio that could easily become a "Berkshire-Hathoway" model.
Microsoft also has a number of industries in which it hasn't been
successful as a monopoly trying to extend it's monopoly, but may
fore better as a cooperative player in a competitive market. Look
at the IBM Global Services unit, which is "Technology Agnostic".
They may support a particular product or technology, but they are
expected and required to support multiple non-IBM technologies
as well. There are a number of Linux users within IGS (since many
of them have to create solutions for both UNIX and Windows in their
hotel rooms).
> If you keep saying that, perhaps it will be true.
> There are two sides to every argument, that doesn't
> prevent one of them from being correct
> and the other from being mistaken.
> --
> T. Max Devlin
> -- Such is my recollection of my reconstruction
> of events at the time, as I recall. Consider it.
> Research assistance gladly accepted. --
>
> -----= Posted via Newsfeeds.Com, Uncensored Usenet News =-----
> http://www.newsfeeds.com - The #1 Newsgroup Service in the World!
> -----== Over 80,000 Newsgroups - 16 Different Servers! =-----
>
--
Rex Ballard - I/T Architect, MIS Director
Linux Advocate, Internet Pioneer
http://www.open4success.com
Linux - 42 million satisfied users worldwide
and growing at over 5%/month! (recalibrated 8/2/00)
Sent via Deja.com http://www.deja.com/
Before you buy.
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