Excerpts of Judge’s Finding in Microsoft Antitrust Case
Excerpts from U.S. District Judge Thomas Penfield Jackson’s decision on findings of fact in the Microsoft antitrust case:
* On Microsoft’s power in the market:
“Microsoft enjoys so much power in the market for Intel-compatible PC operating systems that if it wished to exercise this power solely in terms of price, it could charge a price for Windows substantially above that which could be charged in a competitive market. Moreover, it could do so for a significant period of time without losing an unacceptable amount of business to competitors. In other words, Microsoft enjoys monopoly power in the relevant market.
“Viewed together, three main facts indicate that Microsoft enjoys monopoly power. First, Microsoft’s share of the market for Intel-compatible PC operating systems is extremely large and stable. Second, Microsoft’s dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft’s customers lack a commercially viable alternative to Windows. . . .
* On evidence of competitors’ inability to compete:
“The experiences of IBM and Apple, Microsoft’s most significant operating system rivals in the mid- and late 1990s, confirm the strength of the applications barrier to entry. . . .
“IBM’s inability to gain widespread developer support for its OS/2 Warp operating system illustrates how the massive Windows installed base makes it prohibitively costly for a rival operating system to attract enough developer support to challenge Windows. . . .
“The inability of Apple to compete effectively with Windows provides another example of the applications barrier to entry in operation.”
* On why the judge says Microsoft is a monopoly:
“The company’s decision not to consider the prices of other vendors’ Intel-compatible PC operating systems when setting the price of Windows 98, for example, is probative of monopoly power. One would expect a firm in a competitive market to pay much closer attention to the prices charged by other firms in the market. Another indication of monopoly power is the fact that Microsoft raised the price that it charged OEMs (original equipment manufacturers) for Windows 95, with trivial exceptions, to the same level as the price it charged for Windows 98 just prior to releasing the newer product. In a competitive market, one would expect the price of an older operating system to stay the same or decrease upon the release of a newer, more attractive version.”
* On Microsoft’s harm to consumers:
“Microsoft’s actions have inflicted collateral harm on consumers who have no interest in using a Web browser at all. If these consumers want the non-browsing features available only in Windows 98, they must content themselves with an operating system that runs more slowly than if Microsoft had not interspersed browsing-specific routines throughout various files containing routines relied upon by the operating system. More generally, Microsoft has forced Windows 98 users uninterested in browsing to carry software that, while providing them with no benefits, brings with it all the costs associated with carrying additional software on a system. These include performance degradation, increased risk of incompatibilities and the introduction of bugs. Corporate consumers who need the hardware support and other non-browsing features not available in earlier versions of Windows, but who do not want Web browsing at all, are further burdened in that they are denied a simple and effective means of preventing employees from attempting to browse the Web.
“Microsoft has harmed even those consumers who desire to use Internet Explorer, and no other browser, with Windows 98. To the extent that browsing-specific routines have been commingled with operating system routines to a greater degree than is necessary to provide any consumer benefit, Microsoft has unjustifiably jeopardized the stability and security of the operating system.”
* On Microsoft’s bundling and other business practices:
“Microsoft’s argument that binding the browser to the operating system is reasonably necessary to preserve the ‘integrity’ of the Windows platform is likewise specious. . . .
“In sum, Microsoft successfully secured for Internet Explorer--and foreclosed to Navigator--one of the two distribution channels that leads most efficiently to the usage of browsing software. Even to the extent that Navigator retains some access to the OEM channel, Microsoft has relegated it to markedly less efficient forms of distribution than the form vouchsafed for Internet Explorer. . . . “
* Jackson’s conclusions:
“Many of the tactics that Microsoft has employed have also harmed consumers indirectly by unjustifiably distorting competition. The actions that Microsoft took against Navigator hobbled a form of innovation that had shown the potential to depress the applications barrier to entry sufficiently to enable other firms to compete effectively against Microsoft in the market for Intel-compatible PC operating systems. That competition would have conduced to consumer choice and nurtured innovation. . . .
“Most harmful of all is the message that Microsoft’s actions have conveyed to every enterprise with the potential to innovate in the computer industry. Through its conduct toward Netscape, IBM, Compaq, Intel and others, Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft’s core products. Microsoft’s past success in hurting such companies and stifling innovation deters investment in technologies and businesses that exhibit the potential to threaten Microsoft. The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft’s self-interest.”
