Micro$oft Monitor

Published by NetAction Issue No. 30 May 18, 1998
Repost where appropriate. See copyright information at end of message.


Justice Stops Short
Software Action Alert
About Micro$oft Monitor

Justice Stops Short

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 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 OEMs Windows 98 royalty an amount equal to the OEMs 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:

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 Microsofts 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/.

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.

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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