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United States v. Microsoft 87 F. Supp. 2d 30 (D.D.C. 2000) was a court case filed against Microsoft Corporation on May 18, 1998 by the United States Department of Justice (DOJ) and twenty U.S. states. Joel I. Klein was the lead prosecutor. The plaintiffs alleged that Microsoft abused monopoly power in its handling of operating system sales and web browser sales. The issue central to the case was whether Microsoft was allowed to bundle its flagship Internet Explorer (IE) web browser software with its Microsoft Windows operating system. Bundling them together is alleged to have been responsible for Microsoft's victory in the browser wars as every Windows user had a copy of Internet Explorer. It was further alleged that this unfairly restricted the market for competing web browsers (such as Netscape Navigator) that were slow to download over a modem or had to be purchased at a store. Underlying these disputes were questions over whether Microsoft altered or manipulated its application programming interfaces (APIs) to favor Internet Explorer over third party web browsers, Microsoft's conduct in forming restrictive licensing agreements with OEM computer manufacturers, and Microsoft's intent in its course of conduct. Microsoft stated that the merging of Microsoft Windows and Internet Explorer was the result of innovation and competition, and that the two were now the same product and were inextricably linked together and that consumers were now getting all the benefits of IE for free. Those who opposed Microsoft's position countered that the browser was still a distinct and separate product which didn't need to be tied to the operating system, since a separate version of Internet Explorer was available for Mac OS. They also asserted that IE was not really free, because its development and marketing costs may have kept the price of Windows higher than it might otherwise have been. The case was tried before U.S. District Court Judge Thomas Penfield Jackson. The DOJ was initially represented by David Boies.
History Government interest in Microsoft's affairs had begun in 1991 with an inquiry by the Federal Trade Commission over whether Microsoft was abusing its monopoly on the PC operating system market. The FTC commissioners deadlocked with a 2-2 vote in 1993 and closed the investigation, but the DOJ opened its own investigation on August 21 of that year, resulting in a settlement on July 15, 1994 in which Microsoft consented not to tie other Microsoft products to the sale of Windows but remained free to integrate additional features into the operating system. In the years that followed, Microsoft insisted that Internet Explorer (which first appeared in the Plus! Pack sold separately from Windows 95) was not a product but a feature which it was allowed to add to Windows, although the DOJ did not agree with this definition. Trial
Appeal On September 26 2000, after Judge Jackson issued his findings of fact, in order to save time the plaintiffs attempted to send Microsoft's appeal directly to the Supreme Court. However, the Supreme Court declined to hear the appeal and sent the case to a federal appeals court. The D.C. Circuit Court of Appeals unanimously overturned Judge Jackson's rulings against Microsoft on browser tying and attempted monopolization on grounds, that he gave off-the-record, but nevertheless disclosed, interviews to the news media during the case, and that Judge Jackson having opinions about the defendant was improper. Judge Jackson's response to this was that Microsoft's conduct itself was the cause of any "perceived bias"; Microsoft executives had "proved, time and time again, to be inaccurate, misleading, evasive, and transparently false. ... Microsoft is a company with an institutional disdain for both the truth and for rules of law that lesser entities must respect. It is also a company whose senior management is not averse to offering specious testimony to support spurious defenses to claims of its wrongdoing." * However, the appeals court did affirm in part Judge Jackson's ruling on monopolization. The D.C. Circuit remanded the case for consideration of a proper remedy for "drastically altered scope of liability" that the court had upheld, under Judge Colleen Kollar-Kotelly. The DOJ, now under the administration of U.S. President George W. Bush, announced on September 6, 2001 that it was no longer seeking to break up Microsoft and would instead seek a lesser antitrust penalty. Settlement On November 2, 2001, the DOJ reached an agreement with Microsoft to settle the case. The proposed settlement required Microsoft to share its application programming interfaces with third-party companies and appoint a panel of three people who will have full access to Microsoft's systems, records, and source code for five years in order to ensure compliance. However, the DOJ did not require Microsoft to change any of its code nor prevent Microsoft from tying other software with Windows in the future. On August 5, 2002, Microsoft announced that it would make some concessions towards the proposed final settlement ahead of the judge's verdict. On November 1, 2002, Judge Kollar-Kotelly released a judgment accepting most of the proposed DOJ settlement. Nine States (California, Connecticut, Iowa, Florida, Kansas, Minnesota, Utah, Virginia and Massachusetts) and the District of Columbia (which had been pursuing the case together with the DOJ) did not agree with the settlement, arguing that it did not go far enough to curb Microsoft's anti-competitive business practices. On June 30 2004, the U.S. appeals court unanimously approved the settlement with Justice Department, rejecting objections from Massachusetts that the sanctions are inadequate. The dissenting States regarded the settlement as merely a slap on the wrist. Some people in the computer industry agreed with dissenting States, especially those who advocated open source and alternatives to Microsoft. Many believed that free market competition can only be restored by government intervention to break up the Microsoft monopoly. Others believe that government intervention is antithetical to free market principles, maintaining that Microsoft was not, and is not, a coercive monopoly. Industry pundit Robert X. Cringely believes a breakup is not possible, and that "now the only way Microsoft can die is by suicide." * Andrew Chin, an antitrust law professor at the University of North Carolina at Chapel Hill who assisted Judge Jackson in drafting the findings of fact, wrote that the settlement gave Microsoft "a special antitrust immunity to license Windows and other 'platform software' under contractual terms that destroy freedom of competition." * Microsoft's obligations under the settlement, as originally drafted, expire on November 12 2007. * However, Microsoft later "agreed to consent to a two-year extension of part of the Final Judgments" dealing with communications protocol licensing, and that if the plaintiffs later wished to extend those aspects of the settlement even as far as 2012, it would not object. The plaintiffs made clear that the extension was intended to serve only to give the relevant part of the settlement "the opportunity to succeed for the period of time it was intended to cover", rather than being due to any "pattern of willful and systematic violations". The court has yet to approve the change in terms as of May 2006.* Criticisms of the case Some critics of the antitrust proceedings against Microsoft assert that they were an unjustified assault on a business that held a large market share merely by outcompeting its rivals. Some hold that the case against Microsoft was the result of collusion between government and Microsoft's competitors in an attempt to gain an unfair advantage by thwarting the free market through government coercion. Nobel economist Milton Friedman believes that the antitrust case against Microsoft set a dangerous precedent that foreshadowed increasing government regulation of what was formerly an industry that was relatively free of "government intrusion" and that future technological progress in the industry will be impeded as a result. Moreover, Friedman says that antitrust laws do more harm than good and should not exist. Strict free market advocates believe that the only type of monopolies that should be dismantled are coercive monopolies and reject the claim that Microsoft falls in this category. Jean-Louis Gassée, CEO of Be Inc., which at the time made a competing operating system which eventually folded in the face of Microsoft's dominance, provided a series of criticisms against the antitrust suit. These criticisms were levelled at the overemphasis on the "packaging problem". Microsoft wasn't really making any money off the "sales" of Internet Explorer, and its reason for incorporating it into the operating system was because the consumer expected to have a browser packaged with the operating system. Indeed, BeOS came packaged with its web browser, NetPositive. Instead, he argued, Microsoft's true anticompetitive clout was in the rebates it offered to OEMs preventing other operating systems from getting a foothold in the market. The lobby group Association for Competitive Technology (ACT) was founded in response to the case, though some claim that the organization is mainly a front for Microsoft. | ||||||||||
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