Microsoft: Persecuted Innocent or Anticompetitive Bully

1
Microsoft Persecuted Innocent or
Anti-competitive Bully?

• Relevant market is Intel-compatible PC operating
  systems and Def. has 90
• Threatened by Java and Netscape Navigator
  middleware, M targeted OEMs ISPs
• M bundled IE with Windows forbad OEMs from
  reconfiguring Windows to integrate Navigator or
  display it on desktop, and induced OEMs to favor
  IE in promotions
• Free IE kits to ISPs induced to exclude NN

2
More Microsoft

• Designed Windows so Java not portablecausing
  Java developers to create applications that only
  ran on Windows
• No legitimate business or efficiency objectives
  behind these maneuvers which inhibited
  competition on products merits
• Foregone revenues (e.g. free IE) irrational
• Attempted monopolization re web browsers
• If Netscape abandoned its 70 share monop.

3
More Microsoft

• Re Sherman 1 tie-in, Jackson cites Jefferson
  Parish and Eastman Kodak for market reality
  evidence as opposed to conceptual plausibility
  of D.C.Cir. Opinion
• Contrast combining functionality advantageously
  (Book p. 578)
• Re Clayton 3, despite Compac AOL Ks, NN not
  truly excluded
• But will consumers pay for NN if IE is free?

4
More Microsoft

• Network externalities cross-platform
  compatibility installed base
• Staggered contract expirations coordination
  problems for entrants or amelioration of temporal
  exclusion?
• Pre-paid balances in licenses inducement to ship
  IE or elimination of renewal incentive?
• Free IE kits predatory? Marginal cost? Cf. Free
  computers with ISP subscriptions

5
Remedies in Microsoft Case

• Divestiture of Windowsleaves Applications
• Includes facilities, personnel, IP
• Accomplished w/i 12 mos of appeal decision
• No gt5 shareholder cross-over of ownership
• Interim hold-steady
• No separate product cross-distribution no tech
  data exchange no cross licensing of otherwise
  separately-sold products
• No threats/rewards to OEMs re other prods

6
More on Microsoft Remedies

• Disclosure to OEMs, ISVs, IHVs of
  interoperability tech data
• No designed interference with others middleware
  interoperability without notice, justification
  and avoidance suggestions
• No threats to ISVs/IHVs to favor Microsoft or to
  disfavor rivals
• No exclusive dealing Ks no tie-ins
• Grandfathered limited bundling

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Alternative Microsoft Remedies

• Behavioral v. structural relief
• Divesting Windows still leaves a monopolist
• Practical oversight/enforcement issues
• What is upgrade? Functional integration?
• Dominance may be transitory
• Difficult to make injunction broad enough
• Also ineffective against entrenchment
• Compulsory Windows licenses

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More on Alternative Remedies

• Must Carry integrate others middleware
  accept broader standards
• Would make Windows slower or larger?
• Three-way split of integrated companies
• Fragmentation of Windows problem?
• Fairly sharing key personnel
• Licensing auction (one-time, fully paid-up)
• Relaxation of employee non-compete contracts