Microsoft Antitrust Case to Supreme Court -- U.S. District Judge Thomas Penfield Jackson - who has been presiding over the Microsoft antitrust trial - has agreed with the Justice Department's request under the Expediting Act to send Microsoft's appeal directly to the U.SShow full article

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Microsoft Antitrust Case to Supreme Court -- U.S. District Judge Thomas Penfield Jackson - who has been presiding over the Microsoft antitrust trial - has agreed with the Justice Department's request under the Expediting Act to send Microsoft's appeal directly to the U.S. Supreme Court, bypassing the U.S. Circuit Court of Appeals. Judge Jackson has already found Microsoft guilty of violating antitrust law and, earlier this month, ordered both a series of restrictions on Microsoft's business practices and that Microsoft be split into two separate entities. The decision to expedite the case directly to the Supreme Court is a blow to Microsoft, which wanted to proceed to the Appeals Court, which has previously been friendly to the company and (in a controversial move) had already agreed to hear Microsoft's appeal with a panel of seven judges rather than the usual three. However, Judge Jackson's decision does have a silver lining for the software giant: the judge's divestiture order and conduct restrictions on the company are suspended until the ruling is overturned or Microsoft exhausts its appeals. The Supreme Court must now decide whether it will hear the case - a decision which may come quickly or could take months - and it could still cede the case to the Appeals Court. (For more background, see TidBITS's coverage of Microsoft antitrust issues.) [GD]

<http://db.tidbits.com/article/05875>
<http://db.tidbits.com/article/05971>
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As trial continues on the U.S. Department of Justice's antitrust case against Microsoft, the public remains divided about whether or not Microsoft has tried to interfere with competition, and if so, if it mattersShow full article

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As trial continues on the U.S. Department of Justice's antitrust case against Microsoft, the public remains divided about whether or not Microsoft has tried to interfere with competition, and if so, if it matters. If you think this isn't an Apple problem, think again, because this issue has repercussions throughout the computing industry. Apple could benefit or lose no matter which way the issue is resolved, but after staking out the available paths, I think you'll discover a preferable one.

What Exactly Is Wrong? The problem presented by Microsoft's domination of the computer industry is complex and will likely have a complex solution, something you've probably guessed because no proposal has yet made sense to everyone. The issue defies attempts to encapsulate it in sound bites, so please indulge a more thorough discussion.

U.S. laws from the early 20th century classify businesses that hold a nearly exclusive position in a given market as "monopolies." That era saw several such businesses achieve virtual strangleholds on the markets they allegedly served. When competition arose, the monopoly firms would use their powerful positions either to squash it or to assimilate it in moves that predated the Borg by 500 years. Standard Oil, for example, owned railroads, insuring that Standard-brand oil was transported less expensively than any other oil. That gave Standard Oil lower costs and an unbeatable price advantage.

Standard Oil theoretically consisted of several companies, but they acted in collusion as a giant entity to fix prices and eliminate competition. Such a collaboration is called a "trust," defined by the American Heritage Dictionary as "a combination of firms or corporations for the purpose of reducing competition and controlling prices throughout a business or an industry." That's why the pro-competition laws in the U.S. are called "antitrust" laws, even though they're often applied to a single corporation, such as AT&T or Microsoft.

The laws themselves are often debated. Some quote economist Adam Smith, who theorized than an "Invisible Hand" works to guide free markets to optimal positions. If one company becomes too powerful, the Invisible Hand points to opportunities for smaller companies to come in and pick off sales, restoring competition. If no company succeeds in a market, the Invisible Hand is signing that no such market exists. The theory has withstood a few centuries of interpretation and practice, and remains the chief explanation of why a mostly unregulated economy manages to stay afloat so well. Regulations on U.S. businesses are typically social; few firms are told what products they can and cannot sell, and prohibited items are usually banned for social reasons like toxicity or "national security." Since the Invisible Hand usually keeps the economy flourishing, people are reluctant to see a bureaucracy like the U.S. government start regulating commerce.

Proponents of regulation and antitrust laws say this is a simplistic notion. Adam Smith, living hundreds of years ago, couldn't have imagined modern business. Corporations today are commonplace - it takes only a form and a small payment to start one. But they were extremely rare in Smith's day and for a long time thereafter - when Texas became a state, chartering a corporation took a two-thirds majority of both houses of the legislature. Corporations divorce personal responsibility from economic action, and it can be argued this has greatly changed how our economy works. Today, corporations are seen as responsible only to their shareholders. As little as 20 years ago, such businesses were widely - and without much question - seen as also having duties to their employees, the communities in which they reside, and their customers. Today there is little controversy, though much grumbling, if a corporation decides to lay off a few thousand people in the name of higher profits.

<http://db.tidbits.com/getbits.acgi?tlkthrd=387>

Abandoning older customers in favor of newer ones may not be the best business move, but many companies do just that if the new path leads to higher profitability - how many profitable Macintosh software companies have decided to become more profitable Windows companies? The news is full of lawsuits, boycotts, and other actions against companies that have allegedly sold products they knew were harmful, or engaged in practices which they knew could damage the environment or employee health, simply for higher profits. Exploitation of workers was a staple of Adam Smith's era also, but in Smith's economy, such business owners could be held personally responsible for their actions. Today that responsibility lies with the corporations themselves, and corporations can be punished only economically unless specific charges can be proven against specific people. The buck stops nowhere, and lack of responsibility leads to a lack of social conscience.

That said, there are two key questions in the Microsoft matter:

1. Did Microsoft break the letter or spirit of the U.S. antitrust laws?

2. If they did, should Microsoft be punished, or should the laws be changed?

Is Microsoft Guilty? Judge Thomas Penfield Jackson is currently presiding over a trial to decide that question, but even "guilty" is a loaded word. Microsoft is charged with civil, not criminal, violations of the antitrust laws.

In June, when we first considered this issue in MWJ, we concluded that Microsoft was probably in violation of these laws based on evidence available at the time. The revelations at trial have been interesting, but haven't done much to damage the basic case against the company.

Under U.S. law, a company that holds a monopoly position cannot use that advantage to achieve dominance in another market. A monopoly position by itself is tolerable; public utilities are often said to constitute "natural monopolies" because the infrastructure of power lines and phone cables is impractical, if not impossible, to duplicate. Those utilities can often stay intact at the price of regulation, but sometimes even that isn't enough for regulators, as the 1984 breakup of AT&T demonstrated. It's easy to forget that in 1984, AT&T was pressing to require that all modems be used on business-rate phone lines. Today's competitive market would laugh at such a notion.

Conservative estimates give Microsoft 80 percent of computer operating systems sold today, a monopoly by most standards. For better or worse, companies in monopoly positions are held to stricter standards. If Microsoft tries to use its position as the dominant OS vendor to become a dominant force in another market, the company has broken the rules. It's pretty clear this is what happened with Internet Explorer.

The U.S. Justice Department alleges that Microsoft entered the Web browser market in 1995 because Netscape was talking about Netscape Navigator replacing the operating system. Windows (or Mac OS) would host Navigator, but Navigator would be your gateway to Internet capabilities, from the Web to file transfer to videoconferencing. Historically, Microsoft has made its Big Money on applications like Office and Encarta, with help from server software like BackOffice and Windows NT Server Edition (the one bundled with lots of Microsoft's servers). Windows is now posting lots of revenue for Microsoft, but it's unclear how the company accounts for the servers that are technically applications but sold with Windows NT Server Edition as "platforms." Microsoft software often does well because it takes full advantage of the latest advances in Microsoft operating systems. Microsoft Office 95 was available when Windows 95 was released, providing benefits like long file names to frustrated Office users. If Microsoft became "just another developer" writing Internet software to specifications set by Netscape, they'd lose a major competitive advantage, and that was not acceptable to super-competitive Microsoft.

So they created an Internet strategy that involved not only moving applications towards Internet standards and providing servers for those standards (a smart move few people would question), but also creating a Microsoft Internet browser to provide Microsoft's own layer of "middleware." If the Internet did become the next operating system, Microsoft wanted it to be their Internet. They wanted the standards for multimedia to be Microsoft standards, not QuickTime. They wanted people to write ActiveX controls to add on to a browser's functionality - not Netscape plug-ins or OpenDoc parts or Java applets. They wanted standards invented in Redmond and incorporated in Microsoft applications, not some third-party technology that another company knew better.

This is all healthy competition, an area the government normally wouldn't touch - but it didn't stop there. Microsoft also allegedly decided to use its position as the supplier of Windows to force its Internet software into customer hands. The Department of Justice (DOJ) claims that Microsoft required Windows licensees like Compaq and Dell to include the Internet Explorer icon on all systems or risk losing the right to distribute Windows. The DOJ further alleges that Microsoft initially refused to allow PC makers the right to include Netscape Navigator or any other Web browser with PCs equipped with Windows 95, and that Microsoft coerced Internet service providers into preferring Microsoft Internet software by providing priceless marketing exposure within Windows for those who cooperated and denying it to those who stuck with Netscape.

Early evidence released in the trial supports some of these claims. David Colburn, AOL's senior vice-president of business affairs, has testified that Microsoft approached the company to make Internet Explorer the browser of the AOL software - specifically asking "How much do we need to pay you to screw Netscape?" Microsoft points to other documents in the AOL negotiations emphasizing the technical merits of Microsoft's software - how it competes with Netscape. But the government's claim is not that Microsoft's browser works poorly, it's that they tried to use a monopoly position with Windows to dominate the Internet software market. In that sense, the AOL testimony was particularly damaging, because Colburn was not swayed from his claim that AOL chose Microsoft's technology because it was the only way to have AOL's client software included on the desktop of every copy of Windows 95.

<http://www.usdoj.gov/atr/cases/f2000/2045.pdf>
<http://www.mercurycenter.com/business/microsoft /trial/breaking/docs/colbur102798.htm>

Other allegations say Microsoft used similar tactics with ISPs - unless they agreed to promote Internet Explorer, restrict distribution of Netscape Navigator, and try to convert users to Microsoft software, they wouldn't be included in Windows 95's built-in software for signing up new Internet accounts. In each case, Microsoft is accused of using the power of owning Windows to push Microsoft Internet software into the hands of people who may or may not have wanted it. Few people will purchase a program when a free version does almost everything they need. If you doubt this, think of how many email users you know who have never purchased a commercial client like Claris Emailer, Eudora Pro, or Bare Bones Mailsmith. Microsoft counts on this strategy to increase market share; recent figures show Microsoft Internet Explorer now has anywhere from 40 percent to 55 percent of the browser market, up from nothing in 1995.

The Joy of Bundling -- Microsoft, in part, defends against these allegations by saying Internet Explorer is part of the operating system. The Justice Department says Internet Explorer is an application, just like Microsoft Word or Netscape Communicator or Riven. As such, Microsoft's inclusion of the browser in Windows 98 is bundling, and anything that's bundled can be unbundled. Microsoft rebuts by saying Internet Explorer functionality is built into Windows 98 and used by many parts of the operating system; the Internet Explorer "application" is just a shell that puts an application wrapper around core Windows 98 capabilities. Trying to rip out those capabilities would be as disastrous as trying to remove the Apple Event Manager from the Mac OS.

The Internet Explorer functionality is increasingly contained in what Mac OS users know as shared libraries (called dynamically linked libraries, or DLLs, to Windows folk). The Windows version of Internet Explorer calls those libraries to do the majority of its work. Other parts of Windows 98 use those libraries as well, as do a growing number of applications (for example, Eudora Pro 4.0 for Windows can use those libraries to render HTML-formatted email), so unbundling them is not an option for Microsoft. That's why the company maintains that the government's demand to remove the "shell" application is misguided, since the bulk of the Internet Explorer functionality must remain in Windows 98 for it and other applications to work properly.

So is it bundled? Not in a traditional sense. Microsoft is to be commended for adding more Internet functionality to the OS, since the media continues to emphasize how the Internet is increasingly important to Every Single Person in the World. Removing the Internet Explorer shell doesn't solve the problem, and neither would the government's belated request that Microsoft should bundle Netscape Communicator with Windows 98. Communicator is now free in response to Microsoft's free browser, so Microsoft would incur no cost for the bundling, but the company's resistance to the suggestion shows how deeply Microsoft is out to control the middleware layer Netscape threatened to dominate just two years ago.

Before we surrender Microsoft to the DOJ's legal wolves, however, it's important to realize that this isn't a simple case of one company bullying others. The outcome of Microsoft's antitrust trial promises to impact the rest of the industry as well, and we'll look at that in part two of this article.

[Matt Deatherage is the publisher of MWJ, an acclaimed subscription-only newsletter for serious Macintosh users. Those who sign up this week for a free three-issue trial subscription can still receive MWJ's Mac OS 8.5 special edition, the most comprehensive coverage of Mac OS 8.5 available anywhere.]

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Last week, I looked at how Microsoft wound up facing monopoly and antitrust complaints from friends and enemies alike. Now it's time to see if the charges are relevant or leftovers from a different economic time - and why only Microsoft seems to be facing such scrutiny. Could Microsoft Learn From Apple? Why doesn't Apple get complaints like those against Microsoft? A former Mac OS clone vendor has filed suit against Apple, claiming that Apple abused a monopoly position in Mac OS hardware to kill clones in 1997 - but no one has filed a similar suit claiming Apple has abused a software monopolyShow full article

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Last week, I looked at how Microsoft wound up facing monopoly and antitrust complaints from friends and enemies alike. Now it's time to see if the charges are relevant or leftovers from a different economic time - and why only Microsoft seems to be facing such scrutiny.

<http://db.tidbits.com/article/05175>

Could Microsoft Learn From Apple? Why doesn't Apple get complaints like those against Microsoft? A former Mac OS clone vendor has filed suit against Apple, claiming that Apple abused a monopoly position in Mac OS hardware to kill clones in 1997 - but no one has filed a similar suit claiming Apple has abused a software monopoly. It's surprising, because software firms love to file lawsuits. It's a status thing.

Apple generally avoids such difficulties by building systems that invite third-party participation and not tightly integrated components that can't be separated. Think about your Internet software. You can't rip the email functionality out of Netscape Communicator and put Eudora or Mailsmith into your browser, but you can use Eudora or Mailsmith instead of the built-in email capability. That's the difference.

Look at AppleScript. It's based on Apple events - an inter-application communication mechanism useful in many ways other than scripting. Apple events in turn are based on other Mac OS components like low-level events and AppleTalk. None of these technologies is restricted to AppleScript - developers are free to use any of them without including AppleScript support, or even if AppleScript isn't installed.

But Apple didn't limit the Mac OS to a single scripting implementation. UserLand Frontier was available before AppleScript hit the market, and programs from CE Software's QuicKeys to MacPerl to WestCode's OneClick all provide some level of system-wide automation. Anticipating third-party interest, Apple constructed a layer called the Open Scripting Architecture, or OSA. (In fact, the technical name of a scripting addition is "Open Scripting Architecture Extension," or OSAX.) The mechanisms for scripting, but not the actual AppleScript language, were made available in the system to any scripting language. Through this layer, all Macintosh scripting languages can work together if they want. That's why the Script Editor lets you edit and compile scripts in any OSA-compliant language you have installed (clicking the word AppleScript in the lower-left corner of a Script Editor window activates a pop-up menu for selecting languages).

AppleScript comes free with the Mac OS, but other scripting languages do a better job of meeting other needs. This kind of open-ended support is typical of the Mac OS. You may not know it, but even fonts are now handled this way. QuickDraw GX introduced the Open Font Architecture, which lets developers insert their own code to draw fonts in their own formats. When OFA is available, Adobe Type Manager works as an OFA font scaler, as does the built-in TrueType scaler. OFA is available without QuickDraw GX in Mac OS 8.5 and later, though documentation is still not available to mortals.

If Microsoft had created some kind of "Open HTML Rendering Architecture" and supplied Internet Explorer's engines as one implementation, there wouldn't be much problem. Netscape could write their own components to replace Microsoft's components, and customers would have their choice of code to use underneath the application level. For instance, Eudora Pro 4 for Windows would ask the operating system to provide HTML functionality, and users could choose whether that functionality came from Microsoft, Netscape, Spyglass, or from any other developer of HTML renderers.

If Microsoft had done this, it's unlikely the Justice Department would have had a complaint concerning bundling. If the government were more engineering-savvy, this might be the kind of remedy they want a court to impose if they win their suit. Such a solution addresses problems of Microsoft stifling competitiveness without swinging the pendulum too far the other way - forcing Microsoft to bundle Netscape's code when the two have legitimate competitive issues about middleware layers.

Yet it's the absence of this solution that, to me, shows more of Microsoft's probable intent. Microsoft hasn't been shy about appropriating Apple ideas in the past, and they're currently in the process of lifting the scripting architecture for use in Windows. Microsoft knows how to do the third-party expandability drill, as they've shown in areas like ActiveX. By deliberately ignoring these well-known and successful ways of allowing third-party integration - and bundling Internet Explorer and only Internet Explorer with Windows 98 - Microsoft has inadvertently shown just how intent they are on controlling the middleware layer and not just providing the new features they're constantly crowing about.

I see little doubt that Microsoft broke at least the spirit and probably the letter of the antitrust laws. Internal Microsoft memos released by the U.S. government have shown Microsoft trying to drive Netscape out of business, using Windows as a club wherever they believe it will work. If the Justice Department establishes these allegations as fact in Judge Jackson's eyes, the government will have made its case. Using Windows to muscle other software into everyone's hands is exactly the kind of behavior the antitrust laws were designed to prevent, or at least to punish.

Does Microsoft's Behavior Matter? Are these alleged violations of U.S. law something that means Microsoft should change, or something that means the laws should change? After all, these laws were written in the days of an industrial economy. When a company in 1912 included something "free" with another product, the free item had a definite cost. It's fair to guess that none of those legislative authors ever conceived that the entire cost of a product could one day be tied up in research and development, with virtually no cost for each individual unit. Once Microsoft creates Internet Explorer and makes it available for download, the "cost" of each new user is only the barely measurable cost of the bandwidth for the download. Even the classic information distribution methods of newspapers and books have production costs. How do - and should - the government and citizens respond to monopolistic behavior in the information age?

Microsoft argues that their behavior is competitive, not anti-competitive. In a 1998 Wall Street Journal op-ed piece, Bill Gates says the main reason Microsoft is a target of government investigators is that they innovate too well.

"The government's proposals for how software products should be designed would hurt Microsoft, but they would hurt others more. They would deny independent software developers the ability to make use of the latest operating system technology in their own products. And they would deny consumers the ability to buy innovative software that allows them, say, to download data from the Internet while they are using Microsoft Word or Intuit's Quicken. Some of our competitors don't think consumers should be allowed to benefit from such innovations. They don't want to compete in the marketplace; they want to compete in court."

<http://www.microsoft.com/corpinfo/doj/5- 20wsjoped.htm>

As usual, Gates is twisting the truth in his desire to win. Nothing stops anyone from downloading material from the Internet while using Word or Quicken today; browser functionality doesn't have to be built into the operating system for Windows's vaunted preemptive multitasking to work. But the real battle here, as an article in Information Week points out, is more about bundling and architecture than anything else.

<http://www.techweb.com/se/directlink.cgi? IWK19980525S0016>

Whenever Microsoft releases a new product, part of the feature list includes new code added to address customer concerns (or Microsoft's strategic concerns), and qualifies as "new features" by anyone's definition. But part of the feature list almost always includes formerly separate products that Microsoft tosses in for free. If a particular expensive stand-alone server isn't doing well, Microsoft may decide to make it free with another, more popular server, in the name of adding functionality to the more popular product.

The trouble here, of course, is that Microsoft is essentially giving away certain products to build market share - the same products can't win in the free marketplace. Information Week talks about a new Microsoft Online Analytical Processing (OLAP) server bundled with the latest release of Microsoft's SQL Server (version 7.0). Existing OLAP servers, reports IW, sell for up to $3,500 per user, but Microsoft's will be free with their popular SQL Server. If Gates's mantra about "choice for consumers" were more than an empty marketing slogan, his company wouldn't routinely undertake moves like this to eliminate those pesky competitors.

He could be the world's most self-absorbed person, but Oracle CEO Larry Ellison may have been on target about Microsoft. Ellison may have studied Microsoft more closely than anyone else in the world, since his overwhelming drive in life is to be Bill Gates Except With Style. Ellison thinks Gates's mantra of "choice" via bundling is, to no one's surprise, total crap. The Oracle chairman has told interviewers that Gates's logic sounds good, except that what he sees as "innovation" is whatever his major competitor's main product is. What if Oracle becomes Microsoft's next strategic threat? Will SQL Server become a free part of Windows NT - or Windows 98? Will Gates then argue that he can't "innovate" without the ability to take any piece of application software and build it into the operating system?

<http://www.news.com/News/Item/0,4,22475,00.html>

Microsoft's strength as a combined application and OS vendor has always been integration, like the simultaneous release of Office 95 and Windows 95. If Microsoft's servers are the most integrated with Microsoft's operating system features, it follows that Microsoft's servers already enjoy a serious competitive advantage. Tight integration, as with Internet Explorer, makes it impossible for competitors to replace functionality. If Microsoft then uses that position to destroy competition by bundling inferior servers, giving away a mediocre but free built-in product in a high-quality but high-price market, then in the end they're using the monopoly OS position in more than just the Internet market.

What's the Result? Most roads lead to the same conclusion: Microsoft's behavior is bad for the industry and thus bad for consumers. It's not about giving people more choice; it's about giving them the choice of Microsoft for free or other products for way more money. Once the choice to use Microsoft products would be too expensive to change, Microsoft can then start raising fees and moving their servers towards working well only with their applications, locking in more Microsoft choices. Think about how many offices today have already standardized on Microsoft Windows and Microsoft Office. Will any situation be helped by those same offices locking into Microsoft Internet software, Microsoft server software, and who knows what else?

When a company obtains a market share as large as Microsoft's, the rules simply are different. A small company can use a strong product to wedge its way into new markets, just like BMW has done by using its niche in luxury cars to enter the upscale sport utility vehicle market in the U.S. A large company can't use this sort of tactic, because the lack of competition in one market gives them an unfair advantage over the others. Even if other makers of OLAP servers did decide to give away their products (and their revenue), they couldn't reach all the customers of Microsoft's SQL Server. In short, anti-competitive actions may be unpleasant and even unethical when practiced by small companies, but they don't violate antitrust law, as they do when they're practiced by monopolies.

If Microsoft hadn't shown signs of anti-competitive behavior in the past, maybe its critics could cut the company some slack. If Microsoft's version of "innovation" wasn't so often just buying or copying a product and giving it away at lower prices, the arguments might not ring hollow. If Microsoft's examples of competition were companies that had thrived instead of barely hanging on, they might sway detractors. But they have, it has, and they are, and it all adds up to trouble. Messy though it is, and unsympathetic though U.S. courts sometimes are to antitrust claims, the Department of Justice is moving wisely to at least keep Microsoft in check.

The recent past has shown U.S. citizens that ignoring antitrust laws doesn't lead to more choice - it leads to larger companies with fewer options. It's become apparent with banks, cable TV providers, regional phone companies, and others too obscure to mention. It may not be the government's business to regulate Adam Smith's Invisible Hand, but the government does serve the people by preventing too much power from being vested in non-elected bodies. The strange part is that Adam Smith agreed - he was strongly opposed to monopolies and corporations.

<http://iisd1.iisd.ca/pcdf/corprule/betrayal.htm>

The U.S. Great Depression of the 1930s showed us how dangerous large and unrestricted banks can become - not because they don't operate well, but because the consequences of failure are too much to bear. The 1970s and 1980s showed that when large companies would seriously damage the U.S. economy by their failure (Continental Illinois Bank, Chrysler, and recently Long-Term Capital Management), those companies are bailed out instead of letting the Invisible Hand run them through. The result could easily be a Microsoft that has freedom to forget everything it knows about innovation and competition and still remain the strongest software company in the world - at taxpayer expense.

Microsoft seems beyond failure now, but if their products become so good that upgrade sales evaporate, the story could change. No company is crash-proof, and no interest other than Microsoft's is served by so much power residing in one company's hands. If it really was about innovation and choice, no one would care.

Implications for Apple -- Had things gone differently for Apple, this might be a battle fought in Cupertino instead of in Redmond. Pundits love to speculate that Apple would be in Microsoft's position had the company licensed the Mac OS in 1985 like Bill Gates wanted. Unfortunately for revisionists, there remains no evidence to support this conclusion, making it speculative at best, sensationalistic at worst.

But Apple has already seen a taste of this, as noted earlier, with frustrated cloners claiming Apple is in the same position as Microsoft, just over the smaller Mac OS market as opposed to the entire PC market. (Microsoft is trying to avoid prosecution using a similar tactic, claiming they don't have a monopoly on all computer operating systems, especially if Unix is added to the mix.) If the claims against Microsoft succeed, Apple could find itself in similar straits by those who want to force the company to restart a cloning policy. If done under court order, cloners would be sure Apple wouldn't suddenly decide to end all the contracts again, and Apple could once again be in financial trouble.

While breaking Microsoft's stranglehold on competition bodes well for the PC industry, the major effect these specific lawsuits would have on Apple is the strengthening of Netscape. Microsoft argues this is the only reason they're being persecuted, but Netscape is simply the strongest competitor in the market Microsoft is trying to corner. The strongest second-place company will always benefit when a monopoly is broken; this one just happens to be Netscape. A stronger Netscape could help the Macintosh browser market, although the Mac OS hasn't been Netscape's platform of choice for some time. And Netscape isn't above this kind of behavior, either - they announced an OpenDoc part for their browser in 1996 and never followed through, largely to prevent investment in Spyglass's set of OpenDoc Internet parts. It's good to remember that hypocrisy is typical in business allegations.

If the Justice Department succeeds in making Microsoft create a more open operating system, Apple may reap benefits. When developers and users aren't so locked into Microsoft technology, the Macintosh becomes a more viable platform. Such folks wouldn't depend on Microsoft largesse in implementing Microsoft technologies for the Mac OS just to render it suitable for their use, and that won't hurt a bit.

There are also the obvious benefits - testimony in the trial so far has alleged that Microsoft tried to make QuickTime for Windows look buggy and threatened to discontinue Microsoft Office for Macintosh unless Apple chose Microsoft Internet Explorer as the default Web browser. However, the plaintiffs are not alleging that Microsoft has a monopoly in application software. The plaintiffs' introduction of these claims - which are not directly related to the Windows monopoly - is risky. If they prevail, the judge may grant them broad remedies; if they fail, Microsoft will have been "cleared" to proceed with these business practices. And that's the rub.

Remember what Microsoft did after Apple's interface lawsuit of 1988? Microsoft prevailed in the infringement battle, largely because Apple unwisely and unwittingly licensed Microsoft to use interface elements. Once the U.S. Supreme Court turned down Apple's final appeal, Microsoft wasted no time in appropriating more Macintosh user interface elements for Windows 95, and even more in Windows 98. If Microsoft wins this battle with the Justice Department, the kind of behavior we saw from them before the investigations started could pale in comparison to the ensuing bundling, integrating, and wholesale elimination of competing products. The stated goal of Microsoft is to see a computer on every desk on the planet, and Microsoft software running on all of them. That's not a goal you achieve by being either shy or scared of lawsuits you've lost.

You may disagree, and that's great. Your ideas may be better, and only through discussion and debate will those come to light and implementation. But no matter how Microsoft tries to reassure people, I still think it's a problem. A monopoly position almost always is, because power still corrupts. Unlimited economic power in the hands of the richest man in the world can spell real trouble for anyone who decides to compete with him, as lots of companies have already seen. The Invisible Hand has difficulty controlling a market where individual responsibility is divorced from corporate interests. Even Adam Smith knew this, and what the world has seen of such experiments so far isn't encouraging. Given Microsoft's stated goals, keeping the powers in check remains a good idea.

[Matt Deatherage is the publisher of MWJ, an acclaimed subscription-only newsletter for serious Macintosh users. Those who sign up before 01-Dec-98 for a free three-issue trial subscription can still receive MWJ's Mac OS 8.5 special edition, the most comprehensive coverage of Mac OS 8.5 available anywhere.]

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Antitrust Lawsuits Filed Against Microsoft -- After settlement talks collapsed this weekend, the United States Department of Justice and 20 states have filed closely related antitrust lawsuits against MicrosoftShow full article

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Antitrust Lawsuits Filed Against Microsoft -- After settlement talks collapsed this weekend, the United States Department of Justice and 20 states have filed closely related antitrust lawsuits against Microsoft. The lawsuits allege that Microsoft has illegally exploited its dominant position in operating systems to extend that dominance into the Internet software market. In addition, the lawsuit filed by the states accuses Microsoft of unfairly using its position to promote Microsoft Office at the expense of competitors. Microsoft has said that it will fight the charges in court, although Microsoft chairman Bill Gates also said the company is still open to settling. For more details, see ZDNet's "Special Report: U.S. v. Microsoft." [ACE]

<http://www.zdnet.com/zdnn/special/msvdoj.html>

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In an ironic Valentine's Day present, U.S. District Judge Stanley Sporkin on February 14th rejected an agreement made between Microsoft and the U.S. Justice Department regarding charges that Microsoft licensing practices stifle competitionShow full article

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In an ironic Valentine's Day present, U.S. District Judge Stanley Sporkin on February 14th rejected an agreement made between Microsoft and the U.S. Justice Department regarding charges that Microsoft licensing practices stifle competition. The dispute primarily involves how Microsoft licenses operating systems to personal computer manufacturers, including restrictive arrangements that allegedly exclude other operating systems and that may require manufacturers to pay a per-unit fee to Microsoft even on computers that do not contain Microsoft software. Additionally, Microsoft's proposed licensing arrangements for Windows 95, due to be released later this year, have drawn sharp criticism from computer manufacturers, who admit they have little choice but to agree to terms Microsoft dictates.

Microsoft had reached an agreement with the Justice Department to change the way it licenses its products to personal computer manufacturers. However, Judge Sporkin rejected the agreement on the grounds it did not constitute an effective antitrust remedy and that it failed to adequately address Microsoft's past and future monopolistic practices. In Judge Sporkin's words, "simply telling a defendant to go forth and sin no more does little or nothing to address the unfair advantage it has already gained." In strong language, Judge Sporkin also characterized the agreement as "too little, too late."

The Justice Department has decided to appeal Judge Sporkin's ruling, and U.S. Attorney General Janet Reno defended the original agreement, saying that the judge is going beyond his legal authority by examining Microsoft business practices not alleged in the original complaint. Not surprisingly, within a few hours Microsoft announced it would join the Justice Department's appeal of the ruling.

Although the proposed $1.5 billion Microsoft/Intuit merger (see TidBITS-248) is a completely separate case being examined by the Justice Department, Intuit's stock price fell when Judge Sporkin's ruling was announced last week.

The direct implications of this ruling on the Macintosh community are comparatively slight, since the case primarily concerns Microsoft's DOS and Windows licensing. However, as Apple licenses the Macintosh and its operating system to third parties, it might take care to notice where Microsoft is allocating its legal budget. Ironically, an argument could be made that a successful appeal of Judge Sporkin's decision could be financially advantageous for Apple in the future, particularly if the Mac clone market takes off. Since a successful Macintosh clone market will eat into Apple's hardware business, a legal precedent for restrictive OS licensing practices might allow Apple to earn back some of that money in the form of licensing fees if the clone market proves viable.

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Late last week, the U.S. Justice Department filed suit to block the proposed merger between software giant Microsoft Corporation and Intuit, Inc., makers of finance and tax software (see TidBITS-248)Show full article

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Late last week, the U.S. Justice Department filed suit to block the proposed merger between software giant Microsoft Corporation and Intuit, Inc., makers of finance and tax software (see TidBITS-248). The proposed merger is the largest ever in the software industry, with Microsoft's offer to buy all Intuit stock currently valued at about U.S. $2 billion. Microsoft and Intuit have both indicated they will defend the proposed merger and press for a quick resolution of the suit.

Microsoft and the Justice Department are actually working together on a separate case involving U.S. District Judge Stanley Sporkin's rejection of an anti-trust case settlement between Microsoft and the Justice Department (see TidBITS-264). Nonetheless, the Justice Department moved to block the Microsoft-Intuit merger on the grounds that it would stifle innovation in personal finance software and lead to higher software prices. Microsoft and Intuit maintain the merger is in the best interests of the market.

However, more is at stake here than the immediate future of Quicken: this merger is about electronic funds transfer and banking, a rapidly-growing industry set to explode in the next few years. At present, Intuit's Quicken dominates more than two-thirds of the personal finance software market, and it's no secret that Microsoft wants a hefty slice of the online-transaction pie. If the merger is approved, Microsoft could be reasonably expected to roll electronic funds transfer technologies into its operating system and desktop applications and, further, to leverage off the upcoming Microsoft Network to provide a single-click solution to electronic banking, shopping, and commerce. By providing the only widely-accepted development tools and packages, Microsoft would be in a unique position to license those technologies to anyone wanting to develop for its platforms. And it's not just Windows: by controlling Intuit, Microsoft also gains a significant advantage in developing commerce technologies for future broadband applications such as interactive television. No matter which of these (or other) scenarios play out, Microsoft will likely position itself to receive royalty checks as often as possible, perhaps even on a per-transaction basis.

Industry analysts have split opinions on the Justice Department suit. Some say it only indicates an agreement couldn't be reached immediately. Others believe the Justice Department case is legally sound, and note that the suit was filed in San Francisco rather than the more conservative environment in Washington D.C. Personally, I think it'd be a shame if the merger was approved. I'd hate to see the relatively svelte Macintosh version of Quicken turn into a 4 MB application that required a Power Mac, OLE, a dozen or more installation disks, and that featured a responsiveness and interface that reminded me of going to the bank.

Information from:
Intuit propaganda
Microsoft propaganda

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Microsoft and Intuit announced on 20-May-95 they are terminating their planned $2 billion merger rather pursuing additional months of legal negotiation and investigation by the U.SShow full article

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Microsoft and Intuit announced on 20-May-95 they are terminating their planned $2 billion merger rather pursuing additional months of legal negotiation and investigation by the U.S. Justice Department (see TidBITS-275). The merger, originally announced in October of 1994, would have been the largest in the history of the software industry.

Speculation about the future of the deal began only the week before, when Microsoft failed to meet a filing deadline for a court brief, causing a temporary drop in Intuit's stock price. Until that point, it was widely anticipated that both companies would vigorously purse the deal, especially in light of recent announcements by BankAmerica and NationsBank that they plan to enter the electronic banking market.

Asked about reasons for withdrawing the offer to buy Intuit, Microsoft Chairman Bill Gates has been quoted as saying the industry is moving too fast for Microsoft to wait for the sale to go through. Some industry sources estimate it might have been as late as mid-1996 before the deal could be finalized - assuming it was approved under U.S. antitrust laws.

Does this mean Microsoft is dropping its designs on electronic banking and commerce? Don't count on it. Microsoft continues to aggressively recruit vendors and businesses for its upcoming Microsoft Network online service and you can bet online transactions are part of the package. Also look for Microsoft to offer finance services in upcoming wireless devices and personal information managers, in addition to direct integration in desktop applications and versions of Windows.

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Last week the Federal Trade Commission (FTC) announced that it will begin a non-public investigation of Microsoft for allegedly crippling Windows 2.1 in favor of OS/2Show full article

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Last week the Federal Trade Commission (FTC) announced that it will begin a non-public investigation of Microsoft for allegedly crippling Windows 2.1 in favor of OS/2. The investigation stems from a 1989 press release in which Microsoft and IBM discussed the direction they would take in respect to Windows and OS/2. At the time, the companies agreed that Windows would serve the low end of the market and OS/2 would take the high end. Since then, quite obviously, Microsoft has changed its mind about what Windows will do and has put its OS/2 work on the back burner.

There are a couple of possibilities here. First, the FTC investigators have been in another part of the galaxy for the past year and haven't seen what Microsoft is doing with Windows. That's possible, but unlikely. Second, IBM and Microsoft were (and perhaps still are) in some sort of collusion designed to reduce competition. That's a no-no in the eyes of the FTC and is quite likely, given Microsoft's bid to control even more of the software industry than it currently does and IBM's tainted history with such things. Third, the investigation is broader than one might be led to believe from the start, and Microsoft's hegemony of both the operating system and applications worlds looks bad in terms of fair competition. The idea here is that Microsoft applications developers can just talk to the Microsoft OS developers over lunch, which gives both an advantage over third party developers. It's no insight that Microsoft has taken advantage of its position as the developer of Windows to release the most powerful and most popular Windows applications. Microsoft has something like five of the top ten Windows applications, and those five are in the upper half of the ten. If Microsoft were found guilty of unfair competition, I doubt any of its competitors would be at all upset.

Although this third possibility is the most likely, there are arguments on both sides. For instance, Borland negotiated with the Windows group at Microsoft to release a version of its Turbo languages that could create Windows applications before Microsoft's own languages feature the same level of support. On the other hand, developers have been complaining because Microsoft released only a beta version of the Object Linking and Embedding (OLE) specs in December, but had been shipping a version of PowerPoint that used OLE for several months. Of course, like Apple's AppleEvents in System 7.0, it will take quite some time before programmers become familiar with OLE and start using it, so it may not be that big of a deal.

No matter what happens, it seems that Microsoft is clearing the legal decks (or was that docks :-)) for a large legal battle. Bob Cringely tells me that Microsoft is trying to settle other litigation quickly, out of court if possible, in preparation for the potential antitrust suit. This might mean an early settlement to the Apple suit, though if Microsoft settles out of court, Apple will certainly extract some royalty payments for Windows. While I'm on that subject, it looks as though I was incorrect when I wrote that the judge might be moving the whole thing into court to decide the issue once and for all. It now seems that he has limited the issue to the simple contract dispute and isn't allowing Apple to bring the larger issues into the case at all.

Information from:
Bob Cringely -- CRINGE@mcimail.com
Microsoft propaganda

Related articles:
MacWEEK -- 19-Mar-91, Vol. 5, #11, pg. 75, 77
COMMUNICATIONS WEEK -- 11-Mar-91, pg. 6
InfoWorld -- 18-Mar-91, Vol. 13, #11, pg. 1
InfoWorld -- 11-Mar-91, Vol. 13, #10, pg. 1
PC WEEK -- 18-Mar-91, Vol. 8, #11, pg. 1, 6

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Judge Finds Microsoft a Monopoly -- Last Friday U.S. District Court Judge Thomas Penfield Jackson released his "finding of fact" in the ongoing federal antitrust lawsuit against Microsoft Corporation, finding that Microsoft holds a monopoly in Intel-compatible PC operating systemsShow full article

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Judge Finds Microsoft a Monopoly -- Last Friday U.S. District Court Judge Thomas Penfield Jackson released his "finding of fact" in the ongoing federal antitrust lawsuit against Microsoft Corporation, finding that Microsoft holds a monopoly in Intel-compatible PC operating systems. (For a history of Microsoft antitrust actions covered in TidBITS, including a detailed look at the current case in the two-part "Who Do You Antitrust?" article, see the arrs in the landmark antitrust case. A final ruling in the case is not expected until sometime next year, and appeals and settlement negotiations could cause the suit to drag out for some time yet. [ACE]

<http://usvms.gpo.gov/findfact.html>
<http://www.microsoft.com/presspass/trial/>
<http://db.tidbits.com/series/1152>

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Microsoft Violated Anti-Trust Laws -- U.S. District Court Judge Thomas Penfield Jackson has ruled that Microsoft Corporation violated the Sherman Anti-Trust Act by using its position in the Web browser market to "the detriment of competitors." The judge also found that Microsoft could be liable under state anti-competition lawsShow full article

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Microsoft Violated Anti-Trust Laws -- U.S. District Court Judge Thomas Penfield Jackson has ruled that Microsoft Corporation violated the Sherman Anti-Trust Act by using its position in the Web browser market to "the detriment of competitors." The judge also found that Microsoft could be liable under state anti-competition laws. Judge Jackson must now schedule hearings later this year to consider remedies for Microsoft's actions, which could include structural changes to the company, business restrictions, or an actual breakup of the company. The only major point on which Judge Jackson disagreed with the government's case was that Microsoft's marketing arrangements with other companies did not ultimately exclude Netscape's browser software from the worldwide browser market. Microsoft has repeatedly said it would appeal any ruling against it; experts estimate the case could easily drag out to the year 2002. Microsoft stock was down nearly 15 percent in anticipation of Judge Jackson's announcement, dragging the NASDAQ index down 7.63 percent in its largest single-day point decline in history. [GD]

<http://usvms.gpo.gov/ms-conclusions.html>
<http://db.tidbits.com/series/1152>

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Judge Orders Microsoft Breakup; Company to Appeal -- U.S. District Court Judge Thomas Penfield Jackson last week ordered Microsoft be split into two separate enterprises, one focusing on operating system software, and the other encompassing Microsoft's other business interests, ranging from office applications and hardware to games and online servicesShow full article

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Judge Orders Microsoft Breakup; Company to Appeal -- U.S. District Court Judge Thomas Penfield Jackson last week ordered Microsoft be split into two separate enterprises, one focusing on operating system software, and the other encompassing Microsoft's other business interests, ranging from office applications and hardware to games and online services. This ruling comes during the penalty phase of the Microsoft antitrust trial; Microsoft has repeatedly claimed it will appeal any decision against it, and also says it would resist any government action to bypass the appeals process via an expedited hearing before the U.S. Supreme Court. In his final judgment, Judge Jackson requires Microsoft to submit a divestiture plan within four months and to adhere to a series of interim restrictions on its business practices until three years after the divestiture is complete. Microsoft's spin-off businesses would have to remain separate for at least ten years. Despite the definitive tone of the order, however, don't expect anything to change soon. Microsoft has filed a motion seeking a stay of the interim measures, pending appeal, and the appeals process for the entire case may drag out two or more years before any breakup goes into effect. [GD]

<http://usvms.gpo.gov/ms-final.html>
<http://usvms.gpo.gov/ms-final2.html>
<http://db.tidbits.com/series/1152>

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In a substantial victory for Microsoft Corporation, last week the Court of Appeals for the District of Columbia unanimously reversed Judge Thomas Penfield Jackson's ordered breakup of Microsoft under U.SShow full article

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In a substantial victory for Microsoft Corporation, last week the Court of Appeals for the District of Columbia unanimously reversed Judge Thomas Penfield Jackson's ordered breakup of Microsoft under U.S. antitrust laws. The 125-page ruling comes more than a year after Judge Jackson's initial order to break up the company, and more than eighteen months after his finding of fact that Microsoft constituted a monopoly.

<http://pacer.cadc.uscourts.gov/common/opinions/ 200106/00-5212a.txt>

Although the Appeals Court upheld that Microsoft is indeed a monopoly and engaged in anti-competitive practices, it also concluded that Judge Jackson engaged in "serious judicial misconduct" in his statements outside of court and to the media during the penalty phase of the trial. The Appeals Court then remanded a portion of the case back to distric