"The worst thing that could come of this is I could fall down the steps of the FTC building, hit my head and kill myself," quipped Microsoft Chairman William H. Gates in 1992, as the Federal Trade Commission launched an investigation of his company. But nobody joked on the third day of April, 2000, as Judge Thomas Penfield Jackson delivered his decision on what had morphed into the biggest software antitrust case in history: The United States of America vs. Microsoft.
"The court concludes that Microsoft maintained its monopoly power by anticompetitive means and attempted to monopolize the Web browser market," Jackson declared.
Ten years ago, on September 26, 2000, that trial took a crucial turn towards the settlement that would allow Microsoft to retain its vast control over the personal computer operating system market. Let's revisit the essentials of that case, and follow the aftermath—a legacy of endless negotiation and struggle with the entity that, to this day, is the OS on 91.32 percent of the world's PCs.
Drastic reduction
To Judge Jackson, Microsoft's behavior was a clear and present violation of the Sherman Antitrust Act. Early on, he warned, Microsoft came to see "middleware"—specifically the Netscape Navigator Web browser and Sun's Java technology—as a "Trojan horse," that could enable competing operating systems to prevail over the Intel-empowered PC market.
"When Netscape refused to abandon its efforts to develop Navigator into a substantial platform for applications development," Jackson continued, "Microsoft focused its efforts on minimizing the extent to which developers would avail themselves of interfaces exposed by that nascent platform." Microsoft did this primarily via by tethering its own Internet Explorer to every Windows PC system and simultaneously making it more difficult to install or pre-install Navigator.
This "increased the likelihood that preinstallation of Navigator onto Windows would cause user confusion and system degradation," leading to more support costs and lower sales for computer manufacturers, the court concluded. Thus these companies felt "compelled by Microsoft's actions to reduce drastically their distribution and promotion of Navigator."
Three weeks later, the Department of Justice and the Attorneys General of 17 states asked that same judge to cut Microsoft in half. Company one would make and sell Microsoft's operating system. Company two would produce and distribute applications. This is what Jackson ordered on June 7, 2000.
Here was a 1911 Standard Oil and 1984 AT&T break-up moment, noted The New York Times. "If the recommendation were enacted by the court and upheld on appeal, it would be one of the few times in the 110-year history of the Sherman Antitrust Act that the government had succeeded in breaking up a major multinational corporation."
But it never happened. Instead, on September 26, 2000, the Supreme Court refused to hear the case, which was then routed to the United States Court of Appeals for the District of Columbia. Regular Ars readers are quite familiar with this venue, which recently rebuked the Federal Communications Commission's attempt to sanction Comcast for P2P throttling.
There, Jackson's conclusions met a similar fate. "I am not in the camp that says just because a district court lists something under 'findings of fact,' it's gospel," declared the court's Harry Edwards during oral arguments. "It has to be a fact, in fact."
Beyond the pale
Not a great sign, reporters noted, and it all went downhill from there. The DC court noted with disdain that Jackson—a decidedly off-the-cuff kind of guy—had consented to behind-the-scenes interviews with top newspapers and magazines, including The New York York Times and The Wall Street Journal. During these discussions, the judge compared top Microsoft executives to drug dealers and Gates himself to Napoleon.
"Beyond the pale," one justice complained. "It's not what we do," another protested. The breakup order was also not to be done. On June 28 the appeals court put the kibosh on that plan, skewered Jackson for not holding a hearing on the remedy for Microsoft's behavior, and took him off the case.
"Although we find no evidence of actual bias, we hold that the actions of the trial judge seriously tainted the proceedings before the District Court and called into question the integrity of the judicial process," the DC court ruled. More fundamentally, the court found erroneous Jackson's conclusion that Microsoft's liability for its monopoly on the operating system market could be understood as "a presumptive indicator of attempted monopolization of an entirely different market"—that is, web browsers.
The court branded the Department of Justice's effort to demonstrate a "dangerous probability of achieving monopoly power in the putative browser market" a "failure."
You could read this decision in various ways. It obviously threw a lot of what Jackson had decided to the wind. But, as journalist John Heilemann noted, a "judicial panel that was obviously the most conservative in the nation," had agreed that Microsoft enjoyed monopoly power over PC operating system market.
The court had "unanimously handed the government a victory that no one had predicted on most of the case's central legal issues," Heilemann wrote. "What it had handed Microsoft was a stay of execution."
But when the hangman's noose finally arrived, critics dismissed it as a rather light and silky affair that suspended the software giant only a few millimeters off the ground. The Final Judgment that the Bush administration's DoJ and Microsoft worked out in November of 2002 prohibited the company from retaliating against non-Microsoft software vendors or computer manufacturers or that included non-Microsoft middleware in their Windows PC offerings.
The deal also required Microsoft to properly disclose to software makers and computer manufacturers the Application Programming Interfaces that the company used for its middleware products.
This agreement, warned Sun Microsystems, "does little or nothing to eliminate the unlawful monopoly maintained by Microsoft over PC operating systems. Nor does it redress the harm that Microsoft's illegal acts have caused to competition in that market."
While the judgment "apparently recognizes the threat to competition posed by Microsoft's exclusionary behavior in adjacent and downstream markets, the remedies it proposes to redress this threat are plagued with so many loopholes and ambiguities that there can be no assurance that Microsoft's anticompetitive conduct will stop."
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