|
|
Q: Do you feel that large corporations are likely to "move" their operations to more friendly countries (i.e. -- taxation, regulation, etc...)? Should Microsoft have leaped at the opportunity to relocate to British Columbia? Meredith Pearson, Silver Spring, Md.
A: I'm pretty skeptical that going offshore would help a company like Microsoft very much. The consumers of Microsoft products are still all over the place -- hence the interest in DG IV of the European Commission in possible violations of "competition law" by Microsoft in Europe. To be sure, it might be harder to effect a breakup of a company incorporated elsewhere, but fines or prohibitions on sales of particular kinds or sets of software could still be put into effect, at least with respect to the citizens of the country (or state) looking to impose liability. Also, a number of companies exist in Redmond, Bellevue, and Seattle, in satellite around Microsoft -- a mini-Silicon Valley of sorts. Neither Microsoft nor those companies would find it all that convenient to have their geographic ties severed. --Jonathan Zittrain
Q: To what extent does your remedy (5 years of copymumble protection followed by release of source code and royalty based usage) ADEQUATELY address the Jackson's findings of fact, let alone all the other MS misdeeds that were not part of the charges filed in the case?
It doesn't address future Java balkanization or MS' proprietary replacement - ActiveX. It doesn't address future control of the browser space (which would be a viable market if they cost $30 or so each, for current entrants -- Netscape, Opera, and the free graphical browsers, or new entrants). It doesn't address network effects beyond the OS, e.g. open source doesn't reduce the strong network effects between IE, FrontPage (including the server extensions!), IIS, ASP and Visual Studio, because after 5 years (or one!) these network effects have completely locked me into continued use and royalty payments to MS.
I would equate MS' actions with murder 1: it killed (many) competitors with malice of forethought. Instead of 25-life, you're suggesting making it share its old, worn toys, and allowing the monster to return home on parole without even an electronic leash around its ankle. I see only a combination of several of the remedies you discard as adequate. (Matthew E.)
A: Matthew, now tell me what you really think! I wouldn't equate Microsoft's actions with murder even as a simile; while Judge Jackson has found violations of the Sherman Act, it should go without saying that that's a far cry from killing people, and any intended analogy loses in prejudice what it might gain in punchiness.
The right remedy is truly complicated, and creating products with standards that differ from open ones isn't itself actionable -- standards aren't laws! My own "un-remedy" entails a drastic reduction in IP monopoly grant for all consumer computer software, whether application or operating system, and for everyone, not just Microsoft. I don't think it's even close to likely as a political matter right now, but thinking it through can be a helpful thought experiment that highlights the way that the government -- through copyright and patent -- is setting up the conditions precedent for monopolies of Microsoft's OS sort to form. --Jonathan Zittrain
Q: Although the evidence for a case against Microsoft on the grounds of it abusing its monopoly power seems credible, isn't the real reason for the government pursuing the case due to it being worried about Microsoft becoming a too powerful force in the United States? John Prior, Newcastle, England
A: I doubt it, though I'm not much of a conspiracy theorist to begin with. A number of U.S. policymakers are worried about dismantling or otherwise wounding what they see as one of the most successful American companies in years. Rather than fearing it, they're embracing it. And, as Larry Lessig has pointed out, having operating system software generated by a single company on American soil may ultimately make for a more regulable Internet than one in which open source coding generates alternatives from any number of places.
I really do think the government's case is brought almost reluctantly, and largely on the merits rather than on political grandstanding or ulterior motives. --Jonathan Zittrain
Q: If the settlement talks should fail and if the court then finds that Microsoft had indeed been in violation of the Sherman Act in regard to their contractual dealings with ISPs, ICPs and others as described in the findings of fact, would those companies which had cooperated with Microsoft then be vulnerable to civil suits from Netscape(AOL) for damages? In the findings of fact, Judge Jackson's language seems to imply that he considers them victims, as opposed to accomplices. Yet it would seem an argument could be made that they made a free choice to participate in illegal restraint of trade because they felt the rewards from Microsoft outweighed the legal risk. Or does the law consider their cooperation a matter of duress, i.e. they had no other viable option than to cooperate? (Jose Bustamante)
A: "Unlawful monopolization" and "conspiracies in restraint of trade" are different ideas. So, if two companies (neither of which is a monopoly) agree to fix prices in a smoke-filled room, it may qualify for the latter and not the former. If, in the same room, a monpoly twists the arm of a buyer in order to harm a potential competitor -- imagine a milk producer telling a grocery store that there'll be no milk at all from him if the store stocks even a small amount of an upstart competitor's milk -- it'd most likely be the monopolization without the conspiracy. --Jonathan Zittrain
Q: I'm a first year student of law and I'm interested in knowing or perhaps what is the feeling on how Judge Posner will manage the case. Would he press for a settlement? What are the alternatives that he may propose, if any? (Lumarie MaldonadoCruz)
A: I imagine Judge Posner sees his role as facilitating a settlement. How? If I were he, I'd try to get each side to recognize the weaker elements of its arguments and give ground accordingly. There's benefit to each side from settling and moving on -- yet, in the absence of a persuasive (and perhaps larger-than-life!) mediator like Posner, it seems quite possible that no agreement could be reached. In particular, the many separate state attorneys general are said to have splintered somewhat from the Department of Justice, reportedly demanding relatively more drastic remedies, and Posner therefore likely hopes to remind the plaintiffs of their common interest so that they're more likely to join together and settle. --Jonathan Zittrain
Q: Could Microsoft have argued that there was just a lack of competition and it wasn't their fault? (Tom Johnson, Lansdale, Pa.)
A: Remember that the Sherman Anti-Trust Act, under which Microsoft is being sued, does not outlaw having a monopoly but rather using anticompetitive means to obtain or preserve a monopoly. So complaints against Microsoft allege that the company uses illegal measures to extend and protect its market power. Lack of effective competition might make such measures relatively easier, perhaps to the point that otherwise-legitimate competitive tactics might become anticompetitive. In a way, Microsoft has argued just what you suggest -- when they point to the quality and value of Windows, they're saying it's the best out there, and that's why it has the market share it does.
However, certain contractual terms required by Microsoft in its dealings with OEMs appear decidedly anticompetitive, seemingly intended solely or primarily to extend Microsoft's monopoly in desktop operating systems to the new market for Web browsers. As I see the situation, there was competition in Web browsers, and Microsoft's actions preceded a notable decrease in competition. It's hard to know how to authoritatively explain and apportion Netscape's ultimate loss in momentum -- how much to Microsoft's allegedly-anticompetitive actions and how much to Netscape's failure to execute. But whatever Netscape's faults, it seems to me that Judge Jackson had evidence from which to find that Microsoft's contractual relations with OEMs crossed the line from "hardball" to "anticompetitive." --Jonathan Zittrain
Q: I've been hearing from a lot of people that complain how Microsoft is forcing you to buy Windows and have Internet explorer. But is Microsoft really forcing you to have its operating system? Who says that a consumer is obligated to buy from companies, and that companies are obligated to sell to consumers? What is preventing a person who does not want Microsoft products in his computer to, say, create his own OS and his own Web browser? Don't companies like Microsoft merely exist, then, to provide people a service so that they do not have to make their own software and therefore make their lives more convenient? I think if people do not want Microsoft, they should not be buying Microsoft and be making their own software. What do you think? (John Certeza)
A: It's certainly true that no one is actually "forced" to buy Windows. But the structure of the software market makes it relatively more difficult for an individual consumer to go elsewhere. My computer is useful to me in part because it runs the same programs as the computers of my friends, and if I used an alternative OS with different programs, my computer would be that much less useful. Creating my own perfectly-compatible OS and browser just isn't a reasonable possibility for me or anyone else -- it's too hard, for the barriers to entry in writing application software and device drivers are quite high.
Now, there's some level of mediocrity below which Windows must not sink lest everyone abandon it en masse. But my sense is that the "network effects" taking place in the OS market would cause us to stick with Windows for quite some time. Indeed, individuals who would be better served by a competitor to Windows if living and working alone might still use Windows in the real world when facing concerns about collaboration and compatibility. So the choice of OS is not just a question of what a particular consumer prefers; the choices of others also play a role, and it is in this sense that I, as an individual computer user, really don't have complete control over my choice of operating systems.
Fundamentally, the idea is to get competitive markets. If a milk producer has a monopoly over fresh milk in the region and uses illegal tactics to keep it that way, it's not a particularly satisfying answer to tell someone that he or she can always drink water instead, or use cans of condensed milk at the store. --Jonathan Zittrain
Q: I still feel that a standard operating system was needed to begin this computer technology age. Explain to me why do so many competitors try to be like Microsoft, and copy what they did to start their own company. Remember back in the late '70s, there were none of these companies like there are now, competing for space in the market place. If they were they would be leaders now. (David Swanson)
A: True -- many of Microsoft's competitors bemoan Microsoft's dominance at the same time they no doubt covet it!
And there may well have been only one winner destined to emerge from the OS wars; there are significant benefits to standardization of operating systems. It's great to know that almost any modern computer you stumble across will run Word and IE, and intuitively I can see there are huge efficiency gains to, say, all staff using the same software across the board. I agree too that much of the complaint against Microsoft can sound like the disappointed calls for help from the also-rans.
I don't mean to discount that perspective on the current antitrust proceedings; indeed, I tend to think of the proceedings as tainted, in a certain sense, by the influence of Microsoft's disgruntled competitors. But realize that competitors could at least in theory have a legitimate complaint against Microsoft. If it were unambiguously clear and generally agreed that Microsoft violated antitrust regulation, I'm afraid the "But everyone benefits from our OS standard!" excuse, as true as it might be, wouldn't save the company in a court of law. --Jonathan Zittrain
Q: I'm a student in Ph.D. law at the University of Aix en Provence. My subject is public utilities: regulation and competition. I know that the matter with Microsoft is not that his monopoly is out of law. The governement must prove that the monopoly has a monopoly and after that, it is used to abusing its situation. My question is: What is the text (Sherman Act?) and do you think that we could compare the Internet to public utilities? For example, is it possible to create Baby Bells? (Gilles Sabart)
A: Creating "Baby Windows" is indeed a tricky proposition. In the Bell breakup, a geographic split made sense -- while the split created issues of interconnecting the resulting baby networks, most of the work of running a phone company was done on a local level, making a split along geographic boundaries a logical proposition. But where's the similar split in Microsoft's business? Some propose a split into operating systems, applications, and content, but if Microsoft gives us reason to believe that market structure gives the OS-maker an advantage in applications and content, it would seem like the baby-MS with the OS would be likely to crush the others in short order. Another suggested remedy is to create multiple "duplicates" of Microsoft, each with license to all source code currently owned by Microsoft; each would make changes to Microsoft's various programs in an attempt to one-up the others, and consumers would allegedly benefit from the resulting competition. But just how to effect the split remains tricky -- the company with Bill Gates might be thought to have a significant advantage.
In short, I haven't been convinced that any split of Microsoft will solve the problems raised by the current litigation -- our toolkit of fixes to historical antitrust problems just doesn't seem to have the right implement for this job.
And, for the record, here's the Sherman Antitrust Act from Title 15 of the United States Code. They wrote shorter laws in the old days! This perhaps gives commensurately more latitude to courts in interpreting them. --Jonathan Zittrain
"Sec. 1. Trusts, etc., in restraint of trade illegal; penalty""Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court."
"Sec. 2. Monopolizing trade a felony; penalty"
"Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court."
Q: It seems that the government's main argument is that if Microsoft bundles other programs with its operating system, consumers will choose not to purchase duplicate systems separately - i.e. choosing convenience, perhaps, over the quality of those separate subsystems. But, shouldn't that choice, like all others, be left to the consumer? Don't we choose to buy the tires that come with a Toyota, even if someone out there who just makes tires might make them "better"?
A: The point is that Toyota doesn't have a monopoly -- it's one car manufacturer among many -- while Microsoft does. Antitrust law places additional limitations on companies with market power -- Microsoft is prohibited from taking certain actions that would be completely permissible for companies that didn't happen to dominate their markets. When Toyota bundles tires with a car, there remain other car companies that could still sell cars without tires were there sufficient demand. But when Microsoft makes a bundle (of software, not money), they more or less singlehandedly change the market -- potentially considerably more dangerous to consumers, and thus subject to more strict scrutiny under antitrust law. --Jonathan Zittrain
Q: To what extent does antitrust law apply to foreign companies -- e.g., if Microsoft were to migrate, say to Bermuda, and operate through a Washington subsidiary with title to the product staying in Bermuda, could the DOJ (God knows they'd try) have any say over what that Bermuda Co. sold to US customers or to customers elsewhere?
A: The European Union has been investigating Microsoft for some time, and in fact Microsoft signed a consent decree with the E.U. in conjunction with its 1994 consent decree with the U.S. This certainly suggests that the E.U. thinks it has jurisdiction over Microsoft also. For, as unlikely as it seems, it's at least in theory possible that a country would ban the import of Microsoft software -- or would tax it at an exceptionally high rate. So long as Microsoft wants to sell its products here, it'll have to concern itself with the antitrust laws. --Jonathan Zittrain
Q: I love your idea about copyright limitations. If Microsoft wants the protection afforded by the laws it needs to follow the laws, if it didn't then it shouldn't be protected. I am going to suggest a further step: How about Microsoft loses its copyright on all Windows versions prior the current ones it is selling? All source code and documentation would have to be published and any person could sell the older versions without any approval of or cash going to Microsoft. If Microsoft is truly fighting to protect its ability to innovate, then the old code shouldn't hurt them. If someone gets the old code and can create a new and compatible version of Windows then the consumer wins. Is there any precedence for this approach?
A: I know of no precedent for a remedy that places Microsoft's source code in the public domain, though I'm as intrigued by the possibility as you are. Some modification of Microsoft's intellectual property rights to its old source code is the remedy I think would be most effective in solving the structural problem ultimately at fault here. It'd put that much more pressure on Microsoft to improve Windows significantly in every version -- now Microsoft would be competing not just against the installed base of its old OS, but against low-cost modifications of its old OS -- and it would give lessen the challenge of compatibility with the installed base for Microsoft's competitors. It's potentially exactly what's needed to make the OS market one that results in long-term competition rather than hops from monopolist to monopolist as we've seen in recent history. --Jonathan Zittrain
Q: In the PC industry, you are literally forced to buy a version of Microsoft Windows and the only company that produces it is Microsoft. This simply doesn't occur outside the software world. If I, as an inventor, create a totally new product unlike anyone out there, I believe that after a time I am forced to license some parts of it to prevent me from maintaining a monopoly in that market. Why doesn't this fact get talked about much?
A: As an inventor, you'd obtain a patent on your new product. After some years, the patent would expire, and the design for your product would go into the public domain. But while Microsoft has lots of patents, its primary method of protecting its intellectual property is copyright -- and copyrights now last for 95 years. Yes, software's protection by a lengthy copyright is a significant contributor to Microsoft's monopoly power -- and this is all the more reason why I'm critical of the idea that software should get the same level of protection granted to books and music. Instead, I'd tend to favor a structure that causes Microsoft's exclusive rights to Windows to expire after, say, five years, at which point competitors get access to the source code and can make derivative works by adding new features -- forcing Microsoft to innovate while also perhaps lowering its price to compete with these low-cost competitors. --Jonathan Zittrain
Q: When connected to a Microsoft Web page, their system interrogates the user system. Is this legal and has it been incorporated into the antitrust case?
A: As far as I know, Microsoft's root Web site has no special tricks for getting information from your browser. Like all Web sites, Microsoft can find out where you were last (what link led you to their site), what your "IP address" is (and thus which Internet service provider you're using, from what country), what kind of browser you're using, and what your screen resolution is. It's true that their registration and Windows Update sites dig deeper (and prompt before doing so), but I don't think their standard site collects data beyond the usual. --Jonathan Zittrain
Q: I am doing a project in my Computer Literacy class. The project is to research the Microsoft case. We have been asked several questions to help our papers along. What will happen if the government wins the case? Or Microsoft? How will the outcome affect us? (Jennifer Kramer)
A: What happens if the government wins depends on the remedy ultimately imposed on Microsoft. Were Microsoft split up, you might buy the programs you now buy from Microsoft from multiple different companies -- Microsoft Operating Systems, Microsoft Applications, etc. If Microsoft were instead "duplicated," there might be multiple "baby Microsofts," each selling something similar to what we now call Windows that runs at least current Windows programs but making their own modifications. How this will shake out is not yet clear, but the government's goal is, ostensibly, to help consumers. So the government intends to lower prices and/or increase quality, though of course critics suggest that such goals, while nice in theory, won't be so easily achieved in practice. --Jonathan Zittrain
Q: What prevents MS from "improving" the functionality of computers for users?
Instead of buyers having to be "bothered" with the task of paying for a computer and then having to "struggle" to figure out what "basic" utilities to go with it, MS could simply include Word, Excel, Access, its entire Office suite to make computers "easier" for users right out of the box.
What STOPS Microsoft from folding ANY software program into the OS? (Ken Wicker)
A: The only things (legally) that would stop Microsoft from bundling anything it wanted with the OS would be to reconcile consent decree definitions of "integrated product" (which MS is allowed to create) and "covered/other product" (which MS is not allowed to bundle with its OS), so that it's not OK to bundle, say, Office, while allowing in whatever one thinks should be "bundleable" -- from a 3D graphics toolkit to IE. Or, one could ignore the consent decree and just go on a fresh case claiming improper tying of some future product. Microsoft's own position on this seems to be that they're allowed to bundle anything that they haven't gone to the trouble of selling separately in the relevant market. (This might include, say, orange juice, and since IE is not available separately in the OEM channel, to find it bundled with the OS in that channel is, under this reading, permissible.) The Justice Department's position seems to be, "Hey, IE is packaged and sold as a separate product, so there's no way to claim it's integrated."
The court of appeals seems to say that both sides need to forget about marketing and packaging and instead look at the actual underlying software code -- can the relevant files easily be teased apart, or are they intertwined in a way that makes them "integrated"? No one seems to be saying that "an orthodox OS has the following elements, anything more can't be said to be integrated." --Jonathan Zittrain
Q: I've heard a car radio metaphor before, but it wasn't very good. So, I'm doing my own metaphor for a little perspective on why MS is in trouble.
Let's say that there is only one car manufacturer. Some ex-NASA scientists don't like those cars, so they build there own. (This is Linux, OS8, etc.) Anyway, this car manufacturer also makes radios (among other things). Even though there isn't any real competition in the car front (except the NASA people, but they're so minor they almost don't count), there is competition in the radio front. What does this company do? Why, it uses its car monopoly to sell its radios. Radios are now included in all of the cars (just about the only cars there are remember).
The plan is to give away all of the radios in the cars -- destroying the enemy company. To protect this scheme, and prevent people from removing the radio they hate and adding the one they like, this company welds the radio into the car. They say it works better that way. (Amos Youren)
A: I wish we gave out a door prize for the millionth metaphor in the case. :)
Funny you should mention welding, though -- the court of appeals opinion mentions "bolting" as a way of suggesting that, if a technological test is used to determine whether something's truly integrated rather than merely bundled, a company shouldn't be allowed to just "bolt" some files together and then say, "see, it's integrated!" But knowing the difference between bolting and true intertwining isn't easy. --Jonathan Zittrain
Q: There is one major flaw with the government's argument: IE is a different product in that it is the first Web browser that allows you to see inward (i.e. into your own system). I believe that Microsoft has a right to try to apply the Web browser technology this way, especially in respnse to Netscape's announcing a browser-based OS that never came.
The questions are these: What if Netscape would have done the same thing, and released an integrated OS-Java-Web browser? Microsoft would be scrambling to catch up, wouldn't they? So should Microsoft be penalized for cleverly beating Netscape, AOL, and Sun to the punch? (William Cowan)
A: Interesting question! I'd bet the government might be perfectly happy to let Microsoft continue to develop the "inward" look at the hard drive through IE's engine, so long as Microsoft stopped insisting that the same engine also be used for the "outward" look at Web sites. It's true, though, that a set of determined programmers can pretty readily build IE into the OS in a way that really does make it hard to remove, and that blurs the line between inward and outward looks. To have the government forced to say "you can code it this way but not that way" is something of a nightmare for everyone. It may explain why the current case has ballooned so far past the original browser tying claim.--Jonathan Zittrain
Q: Most of the comparisons people make regarding Microsoft's monopoly use a product, while Microsoft's monopoly is based on intellectual property, more like a service. Can you give an example of another service monopoly?
Also, (regarding) the issue of 'improving' the OS by tying in a browser, doesn't the fact that software is produced without a warranty make it easier to add features in? Should operating systems not be services, and have mandated warranties? Would that allow for more competition and protection for new ideas? Dan Hasenwinkel
A: Your questions raise the important point that Microsoft's monopoly is one partly thanks to intellectual property protection. That monopoly is intentionally created and guaranteed by the government as an incentive to create. The details have been left to Congress, which has seen fit to protect different kinds of works in very different ways -- note, for example, the difference between patent protection for inventions (and "processes," in which software might fit) and copyright protection for artistic and other expression (for which software has been thought to fit).
The time of the monopolies is expressly a "limited" one under the Constitution, and Congress has gone from about 20 years in the patent realm to (now) 90 years for copyright. It's interesting to speculate on the dynamics of the software market if Congress made an explicit, new rule just for it: say, 18 or 30 months' protection instead of 90 years. (After all, Y2K observations aside, who expects to be using DOS in 2050?)
The trick would be to make copyright protection last long enough to make it worth it to develop software, but at the same time have it lapse into the public domain early enough for people to make meaningful derivitive works that provide real competition. (It's not easy to say what the ultimate "free market" would demand for IP protection -- would Microsoft want a deal whereby the government promises to lay off the antitrust case in exchange for Microsoft not relying on the government to create and protect its intellectual property monopoly?) --Jonathan Zittrain
Q: The government was woefully lax when Microsoft began it's illegal practices of tying in the operating system. At least that is my opinion, based upon the way in which Microsoft virtually required all PC companies to install their operating system. By ''blanket'' licensing Windows to the manufacturers, Microsoft coerced them into only using their system. Manufacturers who wished to supply other operating systems to customers who requested them, were FORCED to pay a licensing fee to Microsoft for Windows on that machine as well. This didn't cause too much trouble in the early days, but once competition began to get fierce, the PC companies began to look for ways to trim costs. Now, suppose you wanted to order Linux or OS/2 or one of the many DOS systems on your own machine. The manufacturer has to pay for the operating system you want, as well as Windows.
... They (Microsoft) KNEW that they had the majority market so NO PC manufacturer could afford to sell PCs without offering Windows. And they (PC manufacturers) couldn't afford to spend twice as much if they wanted to offer alternatives. Now, professor ...why is THAT not an illegal tie-in? Ronald Cullinan
A: Well, without admitting any particular liability, Microsoft did agree to stop most of the licensing practices you mention in the original consent decree. That Windows remains dominant is used by some to say that it's the quality of the product rather than the now-defunct licenses that have kept it on top, and by others to say that the government action and resulting decree was the barn door closing after the horse had left. Something else to think about, though: the cost of the Windows OS accounts for less than $100 of the price of a new computer, and many flavors of Linux run from free to $50. So we're back to the argument that consumers tend to stick with what they have, rather than consumers can't afford to switch to something else. --Jonathan Zittrain
Q: I go into a bank and say, "I'd like to open an account." The banker says, "Fine, and with your new account, you get a free toaster." To which I reply, "Thanks, but I don't want a toaster." To which he replies, "I'm sorry sir, my boss says I have to give these away. If you don't leave here with the toaster, I can't give you an account." Annoying though it is, I have to have a bank account. So I say, "Fine, give me the account and the toaster," I pay for my checks, and leave with the unwanted toaster. Walking past a garbage can on the way to my car, I drop the toaster in it, and drive to my nearest appliance store, where I can buy the toaster-oven I really wanted. What's the problem? (Zeke Johnson)
A: In your story, there's no problem! Your bank doesn't have a monopoly on money management, and unless the toaster is geared only to toast a specific patented kind of bread -- promising a leverage of the toaster design into a dominance of the entire breakfast industry -- it just doesn't sound that sinister.
A basis of the Microsoft case, on the other hand, is the claim that Microsoft does have a monopoly on PC operating systems -- and through giving away a browser with them, is that much better able to obtain a monopoly on browsers, or, better able to ensure that the threat posed by platform-independent browser-centered programming like Sun's Java, is neutralized. --Jonathan Zittrain
Q: If AOL and Netscape had cemented an alliance in October 1995, would that not be collusion? Microsoft would have been effectively cut off from the millions of AOL customers. (Richard Oberlin)
A: Well, not every agreement between companies --including agreements that include exclusive arrangements --represents illegal collusion in restraint of trade. One question might be whether competitors are agreeing to divide up a market between them so they can, together, extract monopoly (or duopoly) rents. AOL was arguably in the online services/dial-up services business, and Netscape in the browser business. So a deal between AOL and Netscape, or AOL and Microsoft (for IE) would be OK. The question is whether the deal between AOL and Microsoft was forged thanks to threats by Microsoft -- a leveraging of its monopoly OS power as the only source of widespread presence on the Windows desktop for AOL. --Jonathan Zittrain
Q: I have no ill will toward Microsoft, but it may be in everyone's best interest to break up Microsoft into several smaller companies just so each one can make its own versions of the most used software and we, the consumers, can choose between them. I would prefer that software be written for a standard protocol much the same way as Internet content is accessed through TCP/IPp, but that multiple OSes could support a single protocol. MS-Windows, I must admit, is a wonderful tool, but what choice do I have? I would like to be able to run Direct-X software and javascripts, etc., on other OSes, and while Windows is owned by one company, I can't see that happening. (James Hanna)
A: An interesting thought, and one that highlights the additional remedies that might be on the table because the market monopolized is one for software -- something with source code that is replicable in a way that could be given to a number of subsidiary companies to start new rounds of competition.
A related thought that some have expressed, independent of antitrust allegations, is that the life cycle of software as an object of intellectual property is much, much shorter than that, say, of literature. What if copyright protection only applied for 18 months, instead of 100 years (!), such that Microsoft or anyone else could reap the full rewards of a successful program for some time, and then see others able to use it as the basis for a new round of competition? --Jonathan Zittrain
Q: What about the concept of a "strategic resource"? (I don't believe this is the correct term ... I am referring to the concept when a product or design becomes so common or pervasive that it belongs to society and not just one company.) For example, the telephone system was the result of AT&T, but they wouldn't have been allowed to change the standards at a whim to keep the competition off-balance. Might not Windows be declared such a "resource" if most personal computers relied on it? (Bert Sperling)
A: You might be thinking of "monopoly," as in "monopolists can't abuse their power at a whim to keep competition off-balance" (that's "maintenance"). Or the idea of an "essential facility," like a rail switching yard that's the only one of its kind for miles around, or even the idea of a "generic," borrowed from trademark, when a term becomes so common and used --perhaps thanks to little protection by its originator -- that to try to corral the public into respecting the rights of the trademark holder is an unwise exercise in futiliy.
The trick, from an economic standpoint, is to ensure that worthwhile -- i.e. wildly successful -- products aren't simply "nationalized" by a hungry public in a way that dissaudes those who would create such products from ever investing in making them again. If one believes in a model where innovation is driven by the prospect of direct return on investment (and, to be sure, not everyone in the software industry does), some balance must be struck between allowing that return and foreclosing additional competition. --Jonathan Zittrain
Q: Try to buy a computer without a Windows OS installed on it, or purchase a computer with a different OS install like Linux, without Windows98 installed along with it, you can't. Microsoft is forcing the consumer to purchase a product they may not want or need, by pressuring the computer makers to include Windows as a basic component of every computer. Try it for yourself, ask to purchase a PC without Windows98 and without paying for the Windows98 license. Good luck. So it seems like a monopoly or possibly extortion on the consumer by Microsoft. What are your thoughts on this matter? (Joe Brand)
A: Harper's recently had a brief piece reporting the difficulties of trying to get a computer without Windows. A couple things to keep in mind:
Depending on your orientation here, you may be inclined to follow the "chicken" -- Windows is so hard to avoid because it's what most people want, and it's not worth it to most OEMs to cater to the niche that insists upon another OS -- or the "egg" -- the success of Windows can be credited to the fact that it ends up in front of most people who have walked into a computer store and asked for a computer. --Jonathan Zittrain
Q: If you were to take all desktop computers -- PCs, thin clients and terminals attached to mainframe and midrange computers, and tied those users back to the operating systems that drive them (i.e. VMS, MVS, OS/400, Unix, Linux, OS/2, Windows NT, Novell, Windows 95/98) you would find that Microsoft has only a very small piece of the real overall computer operating system market worldwide. How can the DOJ draw a box around Intel-based operating systems and call that a monopoly ?
Wouldn't that be like singling out airlines that fly planes with red tails, or oil companies that produce clear gasoline? No case without that! (Stephen Pfister)
A: Indeed -- see the answer above. Suppose you were sending your kid to college and had $2,000 in scholarship money to put towards a computer. The college sends you a sheet that says that the kid needs a Windows 95 laptop to best fit into the campus network and most seamlessly swap disks and files with other students and teachers. Now, you could get your kid something running OS/400, but unless she were going into computer science, she'd be unlikely to thank you for it later. Would it really be any solace if it turned out that Mr. Coffee has a 386 chip inside running a completely different OS?
Defining the market isn't easy, no doubt about it. But the more instances you can think of where people end up making a purchase because there's no "realistic" alternative for the applications they desire -- a lot loaded into "realistic," to be sure -- the more it seems like you've got a monopoly. --Jonathan Zittrain
Q: As far as I know about antitrust law it is not illegal to have a monopoly as long as it happened naturally. Microsoft can easily claim this for the Windows operating system. The point that I think is missed is that it is illegal to use that monopoly to further gain. Basically what Microsoft is doing wrong is that they use their position as the operating system vendor to further their other business units. (Stanley Aleksy)
(and)
Q: I believe that Microsoft should not be punished for enhancing their products. Is it a crime to include a free drink in a value meal? Microsoft started out small, and then grew into what it is now. It is not fair to punish them for their success!!! (Jaimee Patterson)
A: Two distinct views there. Natural monopolies are OK, but monopolists are under extra responsibility not to "abuse" their monopoly power. The worry is that monopolists, once they're in a nice perch, can (1) charge really high prices, (2) be lazy, and/or (3) impose all sorts of other unfair (i.e. a windfall to them) conditions on those desiring the product over which they have a monopoly -- after all, there's no competition to speak of. (Items in category 3 might relate to the steps necessary to maintain illegally a monopoly that was innocently acquired.)
So it might be that the restaurant that has a monopoly on meals (hard to imagine, but suppose it were the only place to get a bite in a small village with restrictive zoning regulations) could choose to obtain a monopoly in the trinket market by giving one away with every meal. If the five-and-dime next door closes as a result, the restaurant has now obtained a new monopoly in the precious trinkets market.
There may be extra dynamics in the market for software such that the new monopoly, once the ball is rolling, is really robust. If you can establish a new standard in software, and competitors' versions are incompatible, each new customer makes your software that much more appealing to other customers. The lesson: Ideally antitrust law is meant to foster competition, not stifle it. Wildly successful companies are entitled to just rewards, but not "more."
Of course, whether Microsoft is a monopolist, and is doing any of this, is the subject of the current litigation. --Jonathan Zittrain
Q: To me, this is like saying K-mart cannot incorporate the practice of "giving" pizza away free in its store because there is a Pizza Hut that wants to sell it. It happens every day. If Pizza Hut makes a better pizza, then they don't have to worry about the "free" pizza. (Ralph Thompson)
A: This is related to the last question. "Predatory pricing" is the term used to describe a company that lowers the price of something below even its own costs, in an effort to put everyone else out of business. It's a war of attrition of the sort that was lamented in the late '70s, when Japanese steel companies were accused of "dumping" steel in American markets at incredibly low prices, putting U.S. mills out of business, at which point the Japanese companies could raise their prices as high as they liked.
People aren't normally too worried about predation because as a firm that's been underpricing finally toughs out the price war with its competitors, it will have to raise its prices again to make up for all those sales and then face new competition. It's only cases where new competition is hard to generate -- it's less easy to start up a defunct steel mill than it is to open a new pizza shop -- that the problem is tough. Again, software markets may be closer to steel mills than pizza shops: Once a particular software platform has become dominant, it may be difficult to displace since everyone uses it and otherwise "better" systems aren't compatible with everyone else. --Jonathan Zittrain
Q: One of the main questions I'm put-up with is: What is the true definition of an operating system (OS)? This because Internet Explorer is being seen as an integral part of the Windows OS, which I doubt. Greetings from Holland! (Paul Kaspers)
A: Great question. Both the Justice Department and Microsoft have shied away from trying to define the boundaries of an OS. It's just too slippery.
There was a time when the OS was simply the code that told the computer how to run and manage other code -- literally the first group of punch cards off the stack, standardized from one stack to the next. Windows might be described, anyway, as a "platform" rather than an OS, and Microsoft is on nice territory if it can make the government out to be seeking to write its code for it. ("Yes, you can put that in, but you'll have to take that out...") Note that the Windows 95/IE matter arising from the consent decree wasn't about this issue directly -- rather, it was about contractual provisions preventing OEMs (see above) from failing to install IE if they were installing Windows 95, or from running the "uninstall" program to disable IE before shipping it out to a customer.
Once Windows 98 has technologically integrated IE into the operating system, it's hard to demand its ouster, even if one were convinced it was a "separate product" from the OS, and therefore "tied" to it. The Court of Appeals in the Windows 95/IE case suggested that an "integrated product" was one for which the benefits of previously separate parts were better than those obtained if the consumer were to put them together instead of Microsoft. That's not a hard standard to meet, and the court didn't mean it to be.
Is "Solitaire" part of the OS, or inappropriately tied to it? (Think of all the card games software makers potentially put out of business by its free inclusion.) How about WordPad? The ultimate result may be that software developers write software yet one more level removed from "application," which itself was a level removed from OS: That is, they'll write macros for use in Word, or applets for use with Internet Explorer. --Jonathan Zittrain
Q: I understand why the antitrust case is about Web browsers. Browsers are the choke point through which an awful lot of transactions (not only financial) flow. Having a monopoly on browsers is a lot like having control over one of the historical trade routes.
My question is why is the government focusing its case on the Netscape issue? Speaking as a non-lawyer in the computer field, I can see a good many occasions where Microsoft has used its monopoly in one area to compete unfairly in another. It would seem that a stronger case would be to demonstrate a pattern of monopoly abuse in a whole range of areas, then argue that Microsoft shouldn't have a monopoly over browsers also. That way the case wouldn't hinge on what Microsoft did to one specific company, and the remedies might come closer to fitting the actual problem. (Michael Glass)
A: Well -- and this is only speculation here -- preparing an antitrust case is no small task. It may be that the government thought that the browser issue was the one that was most ripe, reserving the right to raise other issues -- and it's already doing it in the current case under an amended complaint.
One complaint is that in this industry, by the time the legal mess is sorted out, the underlying war is over. I understand Netscape has just dropped below 50 percent market share in browsers. Whether the slip is thanks to differences in quality or through exercise of naked power, a lot of players in the case may well quietly think that the outcome of the browser wars is already decided. --Jonathan Zittrain
Q: Assuming Netscape and Microsoft had equal numbers of employees at the meeting in which it is alleged that Microsoft offered to split the market, how can it be proved that the offer was made? (Daniel Tangarone)
A: That's part of what we pay federal judges their hard-earned money for in cases like these. Using some standard of review, say, a "preponderance of the evidence," they'll have to look at the witnesses' credibilities, motives, substance and all the other evidence and come up with a judgment of whom to believe where important stories conflict. As it's turning out, much of this case is argued around factual questions for which, once the facts are resolved, the law would be rather clear. --Jonathan Zittrain
A: Well, a few people (including some at Apple) got bent out of shape when Windows came about, featuring a graphical interface that looked a lot like the Mac's. Whether it was stolen or not partly requires a legal judgment about the nature of intellectual property -- the code wasn't copied, which would have been an easy case, just the "look and feel." Lotus went after Borland for featuring all its 1-2-3 menu commands in Quattro and lost, partly on the basis that the menus were merely "methods of operation" that can't be protected by copyright. (An earlier case had tried to vindicate a copyright in the use of "1", "2", and "3" as ways of answering a multiple choice question on a computer!)
Doctrine aside, the question here is to what extent people should be allowed to build on (or adopt) others' work without having to negotiate for the right to do it. Many pointed out that Apple itself had borrowed much of the graphical interface concept from Xerox. A thought in the context of promoting competition: If it's permissible to copy "look and feel" pretty freely (neither copyright or patent stands in the way), it suggests that it's easier to woo customers to a new platform, since it could look a lot like the old one and not inspire fears of huge retraining costs.
So if it's competition you want, the ability for someone to make a hypothetical operating system called "Shmindows" to compete with Microsoft's OS, something that looks (and acts) like Windows but runs on completely independent code, might be the kind of "stealing" you'd be interested in. --Jonathan Zittrain
Q: I am a shareholder of Microsoft. In your opinion do you foresee any drastic measures against Microsoft (e.g. a breakup of the company)? (Mark Metcalf)
A: Remedy is the $64 question. The government's been pretty mum so far on the ultimate remedy it wants (the ones it originally named in the context of the browser war case are fairly tame compared to a breakup, or divestiture). If the government wins the basics of its antitrust case, one could expect a pretty lengthy and high-stakes set of hearings about remedy.
What the government would ask for is anyone's guess.--Jonathan Zittrain
Q: Dear sir: If we take into consideration the fact that the U.S. society bases its legal and social obligations in economic theories that are well beyond any logical interpretation, we could say that all and every attempt of the U.S. government to try to intervene into a free market and capitalistic society would be a sign that competitiveness, and ever-growing socialist countries do show an "in between way to go" for the economic, legal and social systems of the future.
What do you think about it, and how would you contrast it with France, Germany and Russia? (Ricardo Sanchez)
A: Even the most emphatic capitalist economists concede that there can be situations where a government needs to intervene to promote competition in a market that's failed in some way. "Pro-competition" doesn't have to mean "anti-government intervention." The devil is in the details -- what situations call for such interventions. Some of the allegations in the Microsoft case, if proven, are a slam dunk from the legal point of view -- they show abuse of power, one that's not allowed if Microsoft is found to have a monopoly in the relevant markets. Others raise really interesting questions of law even if all the facts are taken as true --particularly the question of "technological tying," where the browser is built right into the system. Note that the European Commission has been after Microsoft, too, and that the consent decree provision most at issue in the previous Windows 95/IE litigation was inspired by the EC's concerns.
So you might be able to separate antitrust law a bit from a nation's choice about other market interventions as part of its overall social policies.--Jonathan Zittrain
Q: From my point of view as only semi-computer literate, I cannot get a handle on what the problem is. Should the country of Microsoft or Government country win the war? How am I supposed to hold an opinion when I don't know what either "country" stands for or, for that matter what the war is over?
Can you recommend some way that I can get a clear, mental picture of just what is the problem and what is at stake? I feel this is extremely important, for the Internet is the common man's access to mass communication and I frankly don't know who is on the side of my citizen freedom more, Microsoft or the government. If Microsoft wins will they get control of the Net? If the government wins will it help stop innovation and the Edison and Gates spirit that built and builds America? My kingdom for a clear picture of the battlefield. (James Horsley)
A: Here's my best shot at the big picture right now: Many components of the Net are actually wholly open, built by engineers in their spare time, convening in little conferences or exchanging lots of e-mail to agree upon standards. (One such group, the "Internet Engineering Task Force," which is not actually formally incorporated, trumpets the motto, "We reject kings, presidents, and voting: We believe in rough consensus and running code.") TCP/IP, the protocol that anyone's software will use to communicate over the Net, amazingly isn't owned by anyone --none of the people who cooked it up directly get a dime for any of the millions of programs that have adopted it.
Windows, as it turns out, was developed in a much more traditional way -- a group of Microsoft engineers produced it under salary, the company protects it through copyright, and earns money every time someone seeks to (legally) install it on a machine. One system of development may not be clearly better than another, but there is worry that a company that has been as wildly successful as Microsoft -- perhaps thanks to its innovative spirit, motivated by the prospect of huge returns that come from success -- is able to leverage what may be monopoly power into dominance in yet other fields. If the leverage is coming from that power, instead of from the inherent quality of its products in the new field, we may be stuck with products that just aren't as good as what others may be making. The task in that case wouldn't be to punish Microsoft for its success -- just to make sure that the success itself, rather than another round of innovation, isn't what keeps its train rolling. --Jonathan Zittrain
Q: After 35 years in the computer business I thought I had seen it all. But now we see that if you can't make it on your own simply cry wolf and the self-righteous misguided government will kill the competition for you. If Netscape is so good why are they crying "foul". Have you ever used Netscape. I have and it is at best poor. I believe that we have entered an era when lawyers are out of control and the government abuses it's power. This is what happens when lawyers sit in the White House. Legal mischief.
The government also misses one very important point, there can be no progress without a standard operating system, a la IBM. Windows is the standard platform upon which a new technology can be built. If there are many different platforms we end up with fragmentation and no progress. The government that has gotten us 5 trillion dollars in debt has proven that business is not where its expertise is, therefore, they should stay out of it. (Dennis Ruggere)
A: It surely could be true that certain markets lend themselves to a single standard. A world where we're not all snagged by incompatible file formats sounds idyllic. The question may not be so much "Should there be a single standard?", but "What uses can a company that's created/fought for/lucked into ownership of that standard make of the power it now holds?" --Jonathan Zittrain
Q: A lot of the pro-Microsoft sentiment boils down to, "I agree Microsoft is a monopoly, but I don't see what harm that does." Are there examples of antitrust actions which had a clearly beneficial effect in the past, and how do they relate to the current case? (Marc Schabb)
A: A classic example might be Standard Oil: It happened to have many of the wellheads, pipes, etc., to get oil from the ground to the engines that needed it. Break it up -- make a few littler companies that each have some wellheads, pipes, etc., to themselves, and a buyer of oil now has competitors to choose from and bargain against each other when making a purchase.--Jonathan Zittrain