Why was microsoft investigated for antitrust behaviour

If Microsoft was found to have made it unreasonably difficult for consumers to uninstall Internet Explorer and use a competing browser, the company's practices would be deemed anti-competitive. The case meandered along with accusations of misleading statements and a variety of courtroom distractions. A group of economists even published a full-page open letter to President Bill Clinton in major newspapers in support of Microsoft stating that antitrust laws hurt consumers as well as the success of domestic firms in global competition.

They urged authorities to drop protectionism fueled by antitrust laws. The trial didn't necessarily run very smoothly. In fact, the DOJ's case against Microsoft was plagued with problems. First, there were questions about whether charges should have been brought against Microsoft in the first place. Microsoft claimed that its competitors were jealous of its success. Meanwhile, those who supported Microsoft proposed that if the company was to be considered a monopoly, it was, at best, a noncoercive one.

They argued that even with options like Unix, Linux, and Macintosh, consumers demonstrated a preference for the convenience of Microsoft's Windows product on their computers. Windows may not have been the superior product, but it could run on a Toshiba laptop or on a number of clones.

The ease of its installation and its other bundled software allowed it to become the norm. Despite the creative editing of video, facts, and emails, Microsoft lost the case.

The presiding judge, Thomas Penfield Jackson, ruled that Microsoft violated parts of the Sherman Antitrust Act , which was established in to outlaw monopolies and cartels. He found that Microsoft's position in the marketplace constituted a monopoly that threatened not only the competition but also innovation in the industry.

Jackson also called for Microsoft to divide the company in half and create two separate entities that would be called baby bills. The operating system would make up one half of the company and the software arm would make up the other. Microsoft didn't take the ruling lightly and appealed the decision.

The company took issue with the judge's position, citing bias in favor of the prosecution. The appeals court overturned Jackson's decision against Microsoft.

Instead of seeking to break up the company, the Department of Justice decided to settle with Microsoft. In its settlement, the DoJ abandoned the requirement to break up the company, In return, Microsoft agreed to share computing interfaces with other companies. The company saw its once invincible market share erode due to old-fashioned competition.

He adds that while several client companies find these practices disadvantageous, they also keep mum in public. Mingorance says that, partly as a consequence of an awareness campaign orchestrated by CISPE and others, several MEPs have brought forward nearly 1, amendments to the DMA aimed at strengthening its rules on competition in the cloud space. Slack has previously suggested that Teams is merely a ripoff of its own product, and that Microsoft is using it to unfairly undermine Slack with paying business users.

Microsoft appears to be steeling for an impending change. The company is already the third biggest lobbying spender in the EU — behind Facebook and Google — according to a study by pressure groups Corporate Europe Observatory and Lobbycontrol.

Also unlike the Microsoft case, several of the lawyers said, the person or entity being harmed by Google's actions is not as clear. The government was able to paint Netscape as a clear foil to Microsoft at the time and showed how Microsoft's allegedly exclusionary practices effectively cut it out of the market. The allegations against Google are not as neat. The DOJ alleges Google harms consumer and advertisers by reducing competition in search and therefore lowering the quality of available services.

It's also harmed competitors themselves by raising costs and closing off distribution channels, according to the complaint. But Houck still assessed based on the initial complaint against Google, "there's no real apparent consumer harm. The Google complaint is "more forward-looking" than that against Microsoft, according to Harry First, who led the New York attorney general's antitrust bureau during part of the Microsoft trial and settlement.

The Google complaint alleges the company is already eyeing the next distribution channel it can lock up. The complaint claims Google is positioning itself to control emerging search distribution channels like smart speakers and connected TVs and watches.

So all the computing effort was really on huge mainframes or PCs," First said. This tries to do that. Time has not entirely worked in the government's favor in this case.

New Supreme Court rulings could potentially undermine the strength of the Microsoft precedent, First said. One well-known case, Ohio v. Internet browsers, however, offer the potential to become alternative platforms on which software applications and programs could run instead. In addition, browsers can be an "interface" -- the primary visual environment in which a user performs most computing tasks -- to which both the operating system and application programs can be connected.

The browser thus can be a software "layer" between the operating system and application programs. Application programs can be and are written to the browser instead of the operating system interface. Because competing browsers operate not only on Windows but also on a variety of other operating systems, their widespread adoption and use would create significant potential to reduce the dependence of most PC users on any particular operating system, such as Windows.

The development of numerous software applications not specific to Windows that could ultimately result from the widespread use of non-Microsoft Internet browsers would therefore greatly reduce or eliminate a key barrier that maintains Microsoft's Windows operating system monopoly because application programs written to interface to a competing browser could run on any operating system. Competing Internet browsers also threaten Microsoft's Windows monopoly because such browsers are a primary distribution vehicle for Java virtual machines "JVMs" , the software programs necessary to run programs written in the Java programming language.

JVMs that use Java enable any application written in the Java language to run regardless of the operating system on top of which the JVM and application are installed. The widespread distribution of Java virtual machines along with non-Microsoft Internet browsers could provide another avenue by which applications developers could write programs that are not dependent on Windows, thereby weakening the network effects that help entrench Windows' monopoly position in the operating system market.

Faced with the threat browsers posed to its operating system monopoly, and desiring to monopolize the browser market itself, Microsoft undertook steps designed to ensure that it would win what it considers a "browser war. In May , not long before Microsoft released the first version of Internet Explorer, Microsoft executives visited Netscape and met with its top executives. During this meeting, Microsoft offered Netscape a deal: For Windows 95, Microsoft proposed to draw a hypothetical line between the operating system and the browser.

If Netscape agreed not to compete below the line i. As one participating Microsoft executive has subsequently admitted, Microsoft "absolutely" hoped to persuade Netscape not to compete with Microsoft. Microsoft's proposal would have divided the browser market between Netscape, the early leader, and Microsoft, which was then on the verge of entering, and would have eliminated the competitive threat potentially posed by Netscape's competing browser to Microsoft's operating system monopoly.

Microsoft's proposal was not intended to advance, and would not have advanced, any legitimate procompetitive interest. Rather, it was a blatant and illegal attempt to monopolize the Internet browser market. Indeed, if accepted, it would readily have enabled Microsoft to monopolize that market. Netscape's executives refused Microsoft's proposal. They chose instead to continue to compete to serve all computer users, with successive versions of Navigator that work on Windows 95 as well as other PC operating systems.

Netscape's refusal of Microsoft's proposed scheme meant that its competing browser would continue to have the potential to become an alternative platform to Windows; would continue to facilitate the development and distribution of other software with the potential to support applications regardless of the identity of the underlying operating system; and would, thus, continue to threaten to "commoditize" the operating system and ultimately reduce or eliminate Microsoft's monopoly power.

Microsoft thereafter embarked on a coordinated course of conduct aimed at eliminating this threat by leveraging its monopoly power to drive competing Internet browsers from the market and to extend its monopoly to the browser market.

Starting in early , Microsoft began to condition the granting to an ISP of placement in the "Internet Connection Wizard" screens or the Online Services folder in Windows 95 on the service provider's agreement to deny most or all of its subscribers a choice of Internet browser.

Accordingly, placement on the Windows desktop is unique among the numerous ways that software firms, including ISPs and ICPs, promote and distribute their products and services because only this placement offers near ubiquitous distribution and advantageous promotion in exactly the place and context in which users are deciding which software to use. Promotion or distribution of a software product or service through a Windows desktop icon is perhaps unrivaled in its ability to reach the vast majority of PC users in a manner that ensures their attention.

No other distribution channel matches the level of convenience, the number of users reached, or the premium placement that Microsoft's Windows desktop offers. Web sites developed with these Microsoft-specific programming extensions and tools will look better when they are viewed with IE than with a non-Microsoft browser.

Under Microsoft's ISP contracts, the penalty for promoting a competing browser, distributing a competing browser more than the maximum permitted percentage, or otherwise failing to provide preferential treatment for Microsoft's Internet browser, is deletion from the Windows desktop -- a penalty even the largest ISPs are unwilling to risk.

Microsoft recognizes the importance to ISPs of favorable placement on Windows screens. In late April , on the eve of hearings before a committee of the United States Senate and immediately following news reports that the United States had issued civil subpoenas to various ISPs about their agreements with Microsoft, Microsoft announced that it was modifying its contracts with certain ISPs.

Microsoft's exclusionary agreements continue in full force and effect for these firms. Even as to the ISPs whose contracts Microsoft has chosen to change, Microsoft's belated announcements, made on the eve of Congressional scrutiny and under the threat of litigation, do not correct the anticompetitive effects of the provisions which have been in place for almost two years; nor do the announcements provide any assurance that Microsoft will not reinstitute the exclusionary restrictions in the future.

Moreover, they do not eradicate all of the unlawfully restrictive aspects of even the ISP agreements they modify because they leave intact according to Microsoft's Cameron Myhrvold, the executive responsible for dealing with ISPs requirements that ISPs distribute and promote Internet Explorer at least at parity with any other browser.

Finally, and perhaps most significantly, Microsoft's modifications, by its own admission, do not apply at all to OLSs, which as a group provide Internet access to more than fifty percent of Internet users in the United States. Thus, the modifications provide no relief from Microsoft's anticompetitive restrictions as to most browser distribution through ISPs.

Approximately one-third of Internet browser users obtained the browser they use from their service provider, and Microsoft's exclusionary agreements with these firms substantially foreclose Microsoft's browser competitors from a vital means of distribution. As Microsoft has itself acknowledged, distribution of Internet browsers through the largest online services providers is critical to the competitive success and viability of any browser. The exclusionary restrictions in Microsoft's ISP agreements are not reasonably necessary to further any legitimate, procompetitive purpose.

Microsoft has also entered into exclusionary agreements with Internet Content Providers "ICPs" -- firms such as Disney, Hollywood Online, and CBS Sportsline, that provide news, entertainment, and other information from sites on the web. One of the new features included in Internet Explorer 4. The same channels will appear automatically on the Windows 98 desktop screen if Microsoft is permitted to tie Internet Explorer 4.

Microsoft provides different levels of channel placement, "platinum" being the most prominent. Under Microsoft's Internet Explorer 4. These exclusionary restrictions are not reasonably necessary to further any legitimate, procompetitive purpose. Notwithstanding these restrictions on their dealings with competing browsers, ICPs have entered into Internet Explorer 4.

ICPs had to agree to these restrictions in order to gain placement on the Windows desktop, which provides a valuable distributional and promotional mechanism for their content. Microsoft's exclusionary ICP contracts, expressly targeted at its primary Internet browser competitors, further foreclose these firms from access to customers, and further impede their ability to compete against Internet Explorer on the merits of the respective products.

Microsoft has recently announced that it intends to change its agreements with ICPs. However, the changes announced by Microsoft will not remedy the anticompetitive effects the exclusionary provisions of those agreements have had to date, and there is no certainty that Microsoft will not reimpose the same or similar restrictions in the future.

Specifically, among other things, Microsoft's license agreements prohibit OEMs from:. These contractual restrictions have and were intended by Microsoft to have two basic effects on competing browser suppliers. Second, these contractual restrictions greatly limit an OEM's ability to modify or customize the screens or initial "boot-up" sequence on a new PC either in response to customer demand or in an attempt to differentiate their products, or to substitute or feature a non-Microsoft browser, alternative user interface, or other Internet offerings.

The Windows desktop screen is the screen through which most PC users access application programs and the other functionality on their PCs. The desktop screen contains, among other things, icons i. Microsoft places a number of icons on the Windows desktop screen, prohibits OEMs from removing any of them, and permits OEMs to add others only subject to strict limitations.

Furthermore, an OEM that does not preinstall the Active Desktop may not add to Windows desktop screens new icons or folders that are of a size or appearance different from those already placed on the desktop by Microsoft. Through these restrictions, Microsoft leverages its Windows monopoly to ensure that Microsoft-designated applications or other software reach all new Windows users, and that no software not designated by Microsoft receives preferential placement, no matter which OEM has built the computer or what options the OEM would like to have in presenting software products to its customers.

Moreover, these restrictions ensure that users of Windows continue to see the Microsoft-specified Windows desktop unless and until they take affirmative steps to change the screens presented.

The restrictions preserve the advantageous desktop positioning that Microsoft secures for Internet Explorer and other Microsoft or Microsoft-designated software, foreclose competing Internet browsers from securing preferential placement, and foreclose OEMs from choosing among competing browsers on the merits. Microsoft's refusal to permit OEMs to alter the initial boot-up sequence and screens, or to install an alternative user interface, precludes OEMs from developing such alternative interfaces on their own or with competing browser suppliers.

The effect of these restrictions is to significantly restrict the access of competing browsers to the important OEM channel and further perpetuate Microsoft's operating system monopoly by making the successful introduction of a new platform more difficult.

OEMs including Micron, Hewlett Packard, and Gateway have requested that Microsoft allow them to provide new PC purchasers with an alternative user interface, boot-up sequence, or initial or default screens, but Microsoft has refused.

Microsoft recognizes and intends that these restrictions consolidate its strategic power over the valuable real estate that the desktop screen represents for the provision of software, advertising and promotion. Indeed, Microsoft's Vice President of Marketing and Developer Relations made clear in an internal document that the underlying purpose of the restrictions was to prevent OEMs or others from ultimately gaining control over the desktop: "In order to protect our position on the desktop and increase the likelihood that IE gets the prominent position with the end user we should move the [Internet] Sign Up Wizard into the boot-sequence some where, before we give control over to the OEM.

In Windows 98, Microsoft has done exactly as its Vice President of Marketing and Developer Relations urged, moving the Internet Connection Wizard feature of Internet Explorer, which presents new users with the ability to sign up at the time of the initial boot and before the Windows desktop appears with any of a number of ISPs, none of which according to Microsoft's Cameron Myhrvold is permitted to distribute or promote any other browser more favorably than Internet Explorer.

Microsoft's boot-up and first-screen restrictions make it more difficult for competing browsers to attract users and have resulted in fewer choices for OEMs and PC end users.

These restrictions are not reasonably necessary to serve any legitimate, procompetitive purpose. Internet Explorer is recognized by both Microsoft and the industry as a product separate and apart from Windows. There is separate demand for Internet browsers from the demand for operating systems.

Microsoft has consistently treated and referred to its browser software as a separate product, and not merely as a component of the operating system, both internally and in agreements with other companies. However, over "the last couple of years" Microsoft was told by its counsel to be "careful" not to refer to its browser software in such a way that it appeared that the software was a separate product.

Maritz Tr. Microsoft executives became "very concerned" that statements in the ordinary course of business made IE "appear separate" and concluded it was "critical" that there be "a thorough walk-through looking for places in the UI that can be corrected" and that there be a "sweep" of the IE web site to remove references inconsistent with Microsoft's present legal position.

It was agreed that there would be "a review of win 98" by Microsoft executives and "someone from legal staff" to "ensure IE is properly presented. Microsoft recognized that there was a potential danger that a competing Internet browser could eventually "obsolete Windows. Microsoft also recognized that Netscape was initially the leading browser supplier and that Netscape's "survival depends on their ability to upgrade a significant chunk of their installed base" MS7 Microsoft's top executives internally declared that gaining browser market share for Internet Explorer and depriving Netscape of market share was a top priority.

Microsoft recognized, however, that it could not win what it described as the "browser war" MS6 on the merits alone, even if it gave its browser away for free -- indeed, even if it paid bounties for its distribution. Microsoft concluded that to win the browser war and preserve its Windows monopoly it would have to tie its Internet browser to the Windows 95 operating system that was being preinstalled on most new PCs.

For example, Microsoft's Megan Bliss and Rob Bennett recognized that designing Windows 95 "to win the browser battle" required "a very substantial set of trade-offs. Accordingly, Microsoft tied Internet Explorer to Windows 95 and continued to do so until January of this year, when it came into compliance with an Order of the Court prohibiting it from distributing its Internet Explorer browser as a condition of licensing Windows Microsoft effectuated this tie, among other things, by requiring, as a condition of licensing Windows 95, that OEMs also license, install and distribute Microsoft's Internet browser software, including software that provides the Internet Explorer icon and the other means by which users may readily use IE to browse the web.

It is this software that establishes Internet Explorer's identity for commercial purposes as a separate product. Microsoft's internal documents make clear that Microsoft tied that software to its Windows operating system, and refused to give OEMs an unbundled option, not because Microsoft believed the market wanted only a bundled product, but rather in order to foreclose OEM choice.

By tying Internet Explorer to Windows 95 in this way, Microsoft has substantially foreclosed competing Internet browsers from a significant channel of distribution.

Among other things, tying Internet Explorer to Windows 95 has significantly reduced the willingness of OEMs to install or distribute other browsers because of concerns about customer confusion and increased support costs; and the forced tying has made it impossible for OEMs to differentiate their products by, or to receive consideration for, distributing only a non-Microsoft browser on some or all of their products. Tying Internet Explorer to Windows 95 also reduced demand for other browsers, even by users and OEMs that would otherwise have preferred another browser.

Microsoft has distributed andcontinues to distribute Internet Explorer separate from its Windows 95 operating system, and it is efficient for it to do so.

Microsoft can also efficiently distribute or permit the distribution of Windows 95 without Microsoft's Internet browser software. Microsoft considered not bundling IE with Windows 98 code named "Memphis" as late as the Spring of