Judging Microsoft

The judge’s finding of facts in the Microsoft case are a devastating indictment of the company. The judge found Microsoft responsible for a litany of anticompetitive and illegal practices that have harmed consumers.

The 207-page decision is a textbook on the use of monopoly power. The court found that Microsoft strong-armed personal computer makers and software publishers to limit consumer choices, engaged in technological warfare against competitors and sought to limit competition through collusive agreements with actual or would-be rivals.

Much of the decision concerns Microsoft’s efforts to crush Netscape’s Internet browser software in favor of Microsoft’s product. For example, the judge quotes Microsoft executive Brad Chase as recommending changes in the operating system to make “running any ‘other’ browser a jolting experience.”

Microsoft sought to bind its browser to Windows, Microsoft’s PC operating system that runs on most computers, and force PC makers to distribute it on all new computers “so that Netscape never gets a chance on these systems.”

Executives were concerned that Microsoft could not expand the market share of its own browser on its merits alone and were quoted saying they needed to “leverage [Windows] to make people use IE [Microsoft’s browser] instead of Navigator.”

Microsoft made it impossible for consumers or PC manufacturers to uninstall the Microsoft browser, created a number of situations where Netscape’s browser would not work as expected and withheld various types of technical information about Windows that made Netscape less useful to consumers.

While these and many related actions were designed to prevent consumers from using Netscape, the judge found they also increased security and privacy risks for consumers, “unjustifiably jeopardized the stability and security of the operating system,” “increased the likelihood that a browser crash will cause the entire system to crash” and made PCs more vulnerable to computer viruses and other security risks.

In these and in many other cases detailed in the findings of fact, Microsoft was seeking to control and monopolize key sectors of the PC software market. According to the judge, “Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft’s core products.” The judge found further that Microsoft’s anti-competitive actions deter investments in new technologies and stifle innovation.

The judge also took note of an analysis by Microsoft that it could charge $49 for Windows 98 but choose a price of $89 as the revenue-maximizing price as evidence of Microsoft’s “substantial discretion” in setting prices and of its monopoly power.

What does this mean for consumers? It means a Reagan-appointed judge agrees with the Justice Department that Microsoft’s actions are anticompetitive and must be reined in. It means Microsoft’s dominance in many markets is often due to underhanded efforts to sabotage rivals rather than to superior products. It means that the introduction of new and innovative products has been retarded and sometimes extinguished by Microsoft, reducing consumer choice.

It means the familiar “blue screen of death” when Microsoft Windows freezes and crashes could sometimes be avoided if Microsoft weren’t intent on forcing consumers to use its applications.

Mostly, though, it means the government may do something about the Microsoft monopoly. This bodes well for the future of competition and the Internet.