Microsoft == Monopoly says Judge

Judge Thomas Penfield Jackson has released his initial finding of facts - which appears to be very favorable to the government. Judge Jackson agrees with the government's assertions that Microsoft holds monopoly power in operating systems in the Intel world. Now, note of course, that is just an initial finding - now the two sides debate the penalties against Microsoft. Check out the government web site for the Findings of Fact - though it's running pretty slow there's a mirror as well. The info is all over the news as well. Thing sound grim - click below for a quote from 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," Jackson wrote in his findings. "The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self-interest."

Ouch. Pretty harsh words from the Judge. No one knows what the penalties will be, and the possibility for a settlement between the Government and DOJ are much more probable now, as Microsoft knows the way the judge feels about it. Things are gonna be different, though.

Comments

Stay calm folks. This is Just a Finding Of Fact..

[torpor]

As much as I'm happy that this is finally out there, and I feel that this is a major step in bringing Microsoft into line with the rest of the computer industry, I want to make sure that people realize that this is BY NO MEANS A GUILTY VERDICT.

It's just a "Finding of Fact" from the Judge - he's selected all the facts presented to him, and determined what he finds to be true, and supported by the arguments presented.

I am not a lawyer, but I know enough to realize that this is not a final verdict, and that this trial could still go anywhere from this point on.

It's a significant step, but before we get all slashdot-a-riffic about how Microsoft sucks, just realize that this is a formal step in what is still going to be a very long legal battle against Microsoft.

If anything, however, this will effect a lot of peoples attitudes towards Microsoft, regardless of their understanding of the legal system and exactly what this FoF means... so we should probably be happy about that.

People generally are no longer going to be viewing Microsoft as the warm fuzzy company that it is in the minds of many ignorant Americans, as a result of this Finding of Fact.

And that's a good thing, because it was our (computer industry in generaly) complacency towards businesses like Microsoft, doing the things they've done, that led to this problem in the first place...

I'm posting this whole thing

[crayz]

This just totally disgusts me, I can't believe what I'm reading. But when I see the judge saying things like this, I think it's about 100% certain he'll break them up into veryMicrosofts:

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6. Foreclosing Apple as a Distribution Channel for Navigator

341. In the summer of 1995, Microsoft had been willing to cede to Netscape the development of browsing software for the Mac OS, provided that Netscape would stop competing with the platform-level browsing technologies that Microsoft was developing for its 32-bit Windows products. The genesis of this offer had been Microsoft's belief that Netscape could never become the leading platform for network-centric software development if it did not distribute a middleware layer for the soon-to-be dominant 32-bit Windows platform. But once Netscape confirmed its determination to offer a middleware layer that would expose the same set of APIs on Windows, the Mac OS, and other platforms, Microsoft recognized that it needed to stifle the attention that developers would be inclined to devote to those APIs, even when the they rested on top of a non-Windows platform like the Mac OS. After all, if Navigator became so popular on the Mac OS that developers made extensive use of the APIs exposed by that version of Navigator, those developers would be disposed to take advantage of identical APIs exposed by the version of Navigator written for the dominant platform, Windows. Microsoft therefore set out to convince developers that applications relying on APIs exposed by Navigator would not reach as many Mac OS users as applications that invoked platform technologies found exclusively in Windows. Therefore, Microsoft set out to recruit Mac OS users to Internet Explorer, and to minimize Navigator's usage share among Mac OS users.

342. Just as pre-installation and promotion by OEMs is one of the most effective means of raising the usage share of browsing software among users of Intel-compatible PC systems, pre-installation and promotion by Apple is one of the most effective means of raising the usage share of browsing software among the users of Apple PC systems. Recognizing this, Bill Gates consistently urged Microsoft executives to persuade Apple to pre-install the Mac OS version of Internet Explorer on its PC systems and to feature it more prominently than the Mac OS version of Navigator.

343. By the summer of 1996, Apple was already shipping Internet Explorer with the Mac OS, but it was pre-installing Navigator as the default browsing software. After a meeting with Apple in June 1996, Gates wrote to some of his top executives: "I have 2 key goals in investing in the Apple relationship - 1) Maintain our applications share on the platform and 2) See if we can get them to embrace Internet Explorer in some way." Later in the same message, Gates expressed his desire that Apple "agree to immediately ship IE on all their systems as the standard browser."

344. One point of leverage that Microsoft held over Apple was the fact that ninety percent of Mac OS users running a suite of office productivity applications had adopted Microsoft's Mac Office. In 1997, Apple's business was in steep decline, and many doubted that the company would survive much longer. Observing Apple's poor performance in the marketplace and its dismal prospects for the future, many ISVs questioned the wisdom of continuing to spend time and money developing applications for the Mac OS. Had Microsoft announced in the midst of this atmosphere that it was ceasing to develop new versions of Mac Office, a great number of ISVs, customers, developers, and investors would have interpreted the announcement as Apple's death notice.

345. Recognizing the importance of Mac Office to Apple's survival, Microsoft threatened to cancel the product unless Apple compromised on a number of outstanding issues between the companies. One of these issues was the extent to which Apple distributed and promoted Internet Explorer, as opposed to Navigator, with the Mac OS.

346. At the end of June 1997, the Microsoft executive in charge of Mac Office, Ben Waldman, sent a message to Gates and Microsoft's Chief Financial Officer, Greg Maffei. The message reflected Waldman's understanding that Microsoft was threatening to cancel Mac Office:

The pace of our discussions with Apple as well as their recent unsatisfactory response have certainly frustrated a lot of people at Microsoft. The threat to cancel Mac Office 97 is certainly the strongest bargaining point we have, as doing so will do a great deal of harm to Apple immediately. I also believe that Apple is taking this threat pretty seriously . . . . 347. Waldman was actually an advocate for releasing Mac Office 97 promptly, and he pressed for that outcome in his message to Gates and Maffei. Although they applauded Waldman's devotion to the product, Gates and Maffei made clear that the threat of canceling Mac Office was too valuable a source of leverage to give up before Microsoft had extracted acceptable concessions from Apple. Maffei wrote Waldman, "Ben - great mail, but [we] need a way to push these guys and this is the only one that seems to make them move." In his response to Waldman, Gates asked whether Microsoft could conceal from Apple in the coming month the fact that Microsoft was almost finished developing of Mac Office 97.

348. In order to assure his superiors that he was pursuing corporate policy despite his personal convictions, Waldman reported to Maffei in his June 1997 message that he had recently told his counterpart at Apple that Maffei "would be recommending to Bill [Gates] that we cancel Mac Office 97." Waldman believed that his counterpart "got the message that we would, in fact, cancel." Waldman went on to write that when his counterpart had asked what specific problems Microsoft had with Apple's recent response to Microsoft's proposals, Waldman had replied by mentioning four issues, including "IE equal access." By that, Waldman meant Microsoft's demand that the Mac OS make Internet Explorer just as available to its users as it made Navigator. According to Waldman, the Apple employee had responded that Apple would not be able to change the Mac OS's default browser from Navigator until it released the next version of the operating system product in the summer of 1998.

349. A few days after the exchange with Waldman, Gates informed those Microsoft executives most closely involved in the negotiations with Apple that the discussions "have not been going well at all." One of the several reasons for this, Gates wrote, was that "Apple let us down on the browser by making Netscape the standard install." Gates then reported that he had already called Apple's CEO (who at the time was Gil Amelio) to ask "how we should announce the cancellation of Mac Office . . . ."

350. Within a month of Gates' call to Amelio, Steve Jobs was once again Apple's CEO, and the two companies had settled all outstanding issues between them in three agreements, all of which were signed on August 7, 1997. Under the agreement titled "Technology Agreement," which remains in force today, Microsoft's primary obligation is to continue releasing up-to-date versions of Mac Office for at least five years. Among the obligations that the Technology Agreement places on Apple are several relating to browsing software.

351. First, Apple has agreed, for as long as Microsoft remains in compliance with its obligation to support Mac Office, to "bundle the most current version of Microsoft's Internet Explorer for Macintosh . . . with all system software releases for Macintosh Computers (`MacOS') sold by Apple." The Technology Agreement also provides: "While Apple may bundle browsers other than Internet Explorer with such Mac OS system software releases, Apple will make Internet Explorer for Macintosh the default selection in the choice of all included internet browsers (i.e., when the user invokes the "Browse the Internet" or equivalent icon, the Mac OS will launch Internet Explorer for Macintosh)." In fulfillment of this requirement, Apple did not include Navigator in the default installation of the Mac OS 8.5 upgrade product. In other words, Navigator is not installed on the computer hard drive during the default installation, which is the type of installation most users elect to employ. Therefore, most users who upgraded their Macintosh systems to Mac OS 8.5 were unable to access Navigator without doing a customized installation. Having already installed an altogether adequate browser (Internet Explorer) when the Mac OS 8.5 upgrade completed its default installation process, however, most users are unlikely to trouble to install Navigator as well.

352. The Technology Agreement further provides that "[a]ny other internet browsers bundled in the Mac OS system software sold by Apple shall be placed in folders in the software as released." In other words, Apple may not position icons for non-Microsoft browsing software on the desktop of new Macintosh PC systems or Mac OS upgrades. Moreover, the agreement states that "Apple will not be proactive or initiate actions to encourage users to swap out Internet Explorer for Macintosh." Both Apple and Microsoft read this term to prohibit Apple from promoting non-Microsoft browsing software. The agreement even states that Apple will "encourage its employees to use Microsoft Internet Explorer for Macintosh for all Apple-sponsored events and will not promote another browser to its employees." Pursuant to this provision, Apple's management has instructed the firm's employees to not use Navigator in demonstrations at trade shows and other public events. Also with regard to the promotion of browser technology, the agreement requires Apple to display the Internet Explorer logo on "all Apple-controlled web pages where any browser logo is displayed." Finally, the agreement grants Microsoft the right of first refusal to supply the default browsing software for any new operating system product that Apple develops during the term of the agreement.

353. At the same time that it entered the Technology Agreement, Microsoft concluded a "Preferred Stock Purchase Agreement" and a "Patent Cross License Agreement" with Apple. These latter two agreements place obligations on Microsoft that are unrelated to Mac Office, and they bind Apple in areas other than browsing software. The fact that Microsoft and Apple entered two other agreements at the same time that they entered the Technology Agreement does not change the fact that Microsoft's commitment to continue developing Mac Office was at least partial consideration for Apple's commitment to distribute and promote Internet Explorer more favorably than Navigator. Indeed, the language of the agreements themselves demonstrates that Microsoft and Apple saw the Mac Office and Internet Explorer obligations as more closely linked to each other than to any other obligations the parties simultaneously undertook: Whereas the provision in the Technology Agreement setting forth Apple's obligations relating to browsing software explicitly states that those obligations will last as long as Microsoft complies with its obligation to continue supporting Mac Office, the provisions in the other two agreements describing the patent cross-license and Microsoft's purchase of Apple stock mention neither browsing software nor Mac Office.

354. That the Mac Office and browsing software obligations are tied to each other is highlighted by the fact that the Microsoft executives who negotiated the agreement believe that Microsoft's remedy, were Apple to fail to meet its obligations with respect to browsing software, would be to discontinue Mac Office. When, in February 1998, a Microsoft employee proposed giving Apple an HTML control in exchange for Apple's agreement to use Internet Explorer as its standard browser internally, Waldman informed the employee that Apple was already obligated to use Internet Explorer as its standard browser internally and that Microsoft would revive the threat to discontinue Mac Office if Apple failed to comply with its obligation. In Waldman's words:

Sounds like we give them the HTML control for nothing except making IE the "standard browser for Apple?" I think they should be doing this anyway. Though the language of the agreement uses the word "encourage," I think that the spirit is that Apple should be using it everywhere and if they don't do it, then we can use Office as a club.

For at least a year after the Technology Agreement went into effect, Waldman and other Microsoft employees continued to use the threat of reduced commitment to Mac Office in holding Apple to its commitments to support Internet Explorer.

355. Apple increased its distribution and promotion of Internet Explorer not because of a conviction that the quality of Microsoft's product was superior to Navigator's, or that consumer demand for it was greater, but rather because of the in terrorem effect of the prospect of the loss of Mac Office. To be blunt, Microsoft threatened to refuse to sell a profitable product to Apple, a product in whose development Microsoft had invested substantial resources, and which was virtually ready for shipment. Not only would this ploy have wasted sunk costs and sacrificed substantial profit, it also would have damaged Microsoft's goodwill among Apple's customers, whom Microsoft had led to expect a new version of Mac Office. The predominant reason Microsoft was prepared to make this sacrifice, and the sole reason that it required Apple to make Internet Explorer its default browser and restricted Apple's freedom to feature and promote non-Microsoft browsing software, was to protect the applications barrier to entry. More specifically, the requirements and restrictions relating to browsing software were intended to raise Internet Explorer's usage share, to lower Navigator's share, and more broadly to demonstrate to important observers (including consumer, developers, industry participants, and investors) that Navigator's success had crested. Had Microsoft's only interest in developing the Mac OS version of Internet Explorer been to enable organizational customers using multiple PC operating-system products to standardize on one user interface for Web browsing, Microsoft would not have extracted from Apple the commitment to make Internet Explorer the default browser or imposed restrictions on its use and promotion of Navigator.

356. Microsoft understands that PC users tend to use the browsing software that comes pre-installed on their machines, particularly when conspicuous means of easy access appear on the PC desktop. By guaranteeing that Internet Explorer is the default browsing software on the Mac OS, by relegating Navigator to less favorable placement, by requiring Navigator's exclusion from the default installation for the Mac OS 8.5 upgrade, and by otherwise limiting Apple's promotion of Navigator, Microsoft has ensured that most users of the Mac OS will use Internet Explorer and not Navigator. Although the number of Mac OS users is very small compared to the Windows installed base, the Mac OS is nevertheless the most important consumer-oriented operating system product next to Windows. Navigator needed high usage share among Mac OS users if it was ever to enable the development of a substantial body of cross-platform software not dependent on Windows. By extracting from Apple terms that significantly diminished the usage of Navigator on the Mac OS, Microsoft severely sabotaged Navigator's potential to weaken the applications barrier to entry.
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Use Office "as a club"? You piece of shit.

Re:IN DEFENSE OF MICROSOFT

[Graymalkin]

What payroll are you on dude? If there was EVER an example of a monopoly it's Microsoft. It's a known fact that any OEM that uses x86 processors is leveraged by M$ to use Windows or else. M$ gives major discounts on Windows 98 for OEMs unless they decide to offer alternative OSes on their prebuilt systems as the primary OS. While Compaq and IBM can toy with Linux all they want, there are hundreds of small companies that can't just absorb the undiscounted price on Windows if they want to offer Linux, Be, ad infinitum as the primary OS. That 80$ can make a big difference in the quality of the system offered. Not only does M$ leverage OEMs to use their product but they also transfer the responsibilities of tech support to the OEMs, which means the companies now need to add in the cost of a 24x7 tech support to their overhead.
You are an idiot to even claim that use of Microsoft products is voluntary. If I were to buy a pre-built computer from any company and ask for a refund on Win 98 because I installed Linux on the system without ever booting into Windows I would probably never get it. This is because Windows is considered by the OEM as a component of the computer like a modem or video card would be considered. If Windows weren't mandatory on a vast majority of systems it would be seen as an option rather than an integral component.
Besides a lack of options on whether the OS should be installed on a system there is a very good display of M$'s tactics as a vertical monopoly. Sometime around 1987 Microsoft and Intel defined a network scheme called Sever Message Block (SMB) which M$ bundled with every version of Windows. Microsoft decided instead of TCP/IP or IPX they would make their trusty SMB protocol the standard for their networks. This is fun when you have an all Windows network environment but is ugly when you have several different OSes on a network. Without Andrew Tridgell and Samba most Linux/FreeBSD users would be left behind in Windows dominated networks, even Solaris 7 comes packaged with Samba. This neat little networking scheme was a nice little tool to convince IT managers to just go 100% Microsoft in offices since SMB was well integrated into Windows already.
The "moral right of man" to go after a "free" economy is a misnomer. Since Bill Gates and his megacorporation own a huge vertical monopoly in the computer market that prevents anyone else with a good idea, love of computers, and start-up capital to experience what you think of as a free economy. The business practices M$ has inspired are leading our current economic boom to a steep crash. In the effort to compete with M$ companies now have to market, program, FUD, leverage, and play exactly like M$. You're Joe Computeruser and for years you've been using a great program that helps you create megawidgets in the widget division in your company. The maker of the program decides in the next version they will add a ton of new features but change their EULA to say only so many megawidgets can be created in a month unless you get the professional version of MegaWidget Creator. You need to create at least 20 megawidgets a month but if you upgrade to the standard edition of MegaWidget Creator you can only create 10 per month, professional costs almost a thousand dollars more. Poor megawidget creator dude, he sounds like he's in a similar situation to people who used Windows NT 3.5 and wanted to upgrade to NT 4. Microsoft uses it's muscle power to produce NT Workstation with a limited number of TCP/IP socket connections while NT Server has an unlimited number. Workstation runs about 350$ IIRC, Server costs about 1800 for 10 users. But that doesn't mean much to someone on M$'s payroll, you're getting part of that wasted 1800$.

File formats for the official findings...

[victim]

I note that you can get the findings in HTML, PDF, and WordPerfect 6 formats. Some popular format seems to be missing, now what could that be...

Munchkins

[scumdamn]

Is it just me or did the world just gain color? I feel like dancing around singing "Ding Dong the witch is dead!" This means good things for Caldera and any company that's suing Microsoft. They just have to say "Judge Jackson says Microsoft is a monopoly" rather than trying to prove it. MS is and will always be considered a monopoly. At least until they've gained considerable market share.

Remember Your History!

[Jack William Bell]

IBM was found to be a monopoly that acted in illegal restraint of trade back in the 1970's. Fifteen years of appeals later they got it thrown out of court...

Don't expect anything right away from this. Other than the stock tanking that is :-)

But one important point: While IBM was fighting the Justice Dept. they took their eye off the ball for just a little bit. It wouldn't be important, except that little bit was more than long enough for Microsoft to pull a fast one and end up owning the PC OS market. What happened before can happen again.

My take? Don't count on the slow, grinding wheel of the courts to achieve any particular end. Look for an opportunity and do it yourself!

Jack