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Michael Perelman
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California State University
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Tel. 530-898-5321
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Tue, 19 May 1998 02:38:13 -0400 (EDT)
Date: Tue, 19 May 1998 02:38:13 -0400 (EDT)
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From: Audrie Krause <[EMAIL PROTECTED]>
Subject: M$ Monitor: Justice Stops Short
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The Micro$oft Monitor
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Published by NetAction Issue No. 30 May 19, 1998
Repost where appropriate. Copyright and subscription info at end of message.
* * * * * * *
In This Issue:
Justice Stops Short
Software Action Alert
About the Micro$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 <[EMAIL PROTECTED]> or <mailto:[EMAIL PROTECTED]>
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 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.
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.
To subscribe to The Micro$oft Monitor, write to: <[EMAIL PROTECTED]>.
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NetAction is seeking sponsors to provide financial support for the continued
publication of the Micro$oft Monitor. Sponsors will be acknowledged in the
newsletter and on NetAction's Web site. NetAction is supported by
individual contributions, membership dues and grants.
For more information about contributing to NetAction, or sponsoring the
Micro$oft Monitor, contact Audrie Krause by phone: (415) 775-8674, by
E-mail: <mailto:[EMAIL PROTECTED]>, visit the NetAction Web site at:
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NetAction * 601 Van Ness Ave., No. 631 * San Francisco, CA 94102
To learn more about how activists can use the Internet for grassroots
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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
NetAction is cited as the source. NetAction is a project of The Tides
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