January 8, 1999 - Friday
12:01 PM PST (Sunday) - Microsoft just ignores the law as necessary?
This may seem like a pretty strong statement to make. Well it is. But, it brings up a rather important question. Did Microsoft consult with antitrust lawyers before they decided to "just bundle" IE in with the OS? As an attorney, I would hope that they did. After all, large companies like Microsoft do pay lawyers a lot of money to advise them from time to time. Advice on antitrust matters that might result in the break up of the company itself, clearly rises to the level of importance of at least a phone call.
Did Bill Gates consult with legal advice before committing to the illegal browser business plan? We may never know. Any communication with Microsoft lawyers is and should be privileged.
However, I can tell you that they certainly should have discussed all of the issues raised in this case BEFORE any decision was made to force all consumers to buy the OS and the browser with the obvious result that Netscape's ability to survive would be removed if not severely limited. They should have discussed the same issues when they bundled networking, disc compression and other system utilities with the OS.
Did they do so? My guess is "yes, they did". My guess is that their attorneys pointed out the probability that the DOJ would in fact file a major antitrust suit and the probability that the DOJ would be successful in getting a favorable decision. They could then go on and discuss the probable court order. If, in the end, the court orders that IE be sold separately, Microsoft still wins since it keeps it monopoly intact and has removed a competitor from the marketplace.
It is very likely that the attorneys for Microsoft told Bill Gates that Microsoft can win even if it loses the case. By the time all appeals have been taken, Microsoft will have already gained a complete monopoly in browsers and have established such barriers to any other browser from gaining entry into the market, that it just will not matter even if the DOJ wins.
In fact, given the chance to think about it, I would have given them that advice. It would take millions of dollars in legal fees. It would take considerable disruption in the normal business of the company. But, in the end, Microsoft would survive with another monopoly product intact and Netscape would be gone. (Netscape is already gone in the practical sense.)
The only exception to the above would occur if the court orders that Microsoft be split up. Any attorney could easily suggest that the likelihood of that remedy surviving an appeal is sufficiently small that it is worth the risk.
In other words, it could pay to just ignore the law and hope that whatever judgment is handed down, the final result would be better for Microsoft than to abide by the law and compete fairly. So far, Microsoft has decided to completely ignore the consent decree. And, the consent decree was supposed to avoid this litigation.
Microsoft is unlikely to change its character and its disdain for laws that get into its way.
If the law is to have its intended affect upon the industry (and ensure competition), the judgment must take into account the acts by Microsoft that prove it will do nothing that does not further increase the raw economic power of itself. The judgment must take into account that what Microsoft agrees to do just does not have any meaning. The Java license agreement was ignored. The consent decree was ignored. The agreement by Bill Gates to testify fully and completely was ignored.
Bill Gates and Microsoft will do nothing except force consumers to buy Microsoft products at prices and terms which they alone dictate. Any competitor will be removed from the marketplace regardless of what laws might exist.
See the article below regarding a suggested 10 billion dollar fine for overcharging customers.
See my article suggesting consumer fraud by Microsoft in marketing Windows 98 (it suggests a future harm to consumers in the billions).
And, read the testimony offered in court by those 12 witnesses. Read the testimony. Read the cross examination. Read the documents submitted as exhibits.
Then, read the comment by Microsoft lawyers that suggest that no admissible evidence has been submitted in court supporting the allegations by the DOJ. Top Microsoft lawyers have proven that they either have no understanding of the evidence submitted against Microsoft or they simply do not wish to comment truthfully about it.
It is okay if Microsoft lawyers act like a PR department. But, do not confuse an advertisement written and published by a lawyer on the courthouse steps with legal advice or even legal commentary. They have nothing to do with each other.
That statement by the Microsoft lawyers comes very close to meeting the requirements for consumer fraud and false public statements intended to influence the price of a publicly held stock.
2:30 PM PST - 10 Billion returned to consumers might be about right.
After that fine is paid (consumers reimbursed), then the horizontal and vertical splits of Microsoft can be implemented to prevent future abuses of the consumer.
Microsoft should agree to that. All that is being removed is the raw monopoly power. The merit of any product would remain even if sold in the future by another company. Even Microsoft employees would have a choice of employer. They could choose to work for a monopolist or someone with better character and respect for consumers.
1:30 PM PST - Microsoft overcharges for Windows?
Why am I not surprised?
10 Billion is a lot of money. Months ago I estimated the financial damage to consumers by forcing them to buy IE. "Billions and Billions" is about right. Microsoft claims IE is free. The DOJ has not challenged that claim, however it is clearly false. I have estimated that all consumers pay between $70 and $140 per copy of IE. And even Microsoft has claimed to charge OEM's more for Windows as "features are added". Maybe by Money the public will have a better idea of how much Microsoft has raised the price of Windows over time. It will clearly go up again as the feature "IE" is charged for. (As my article points out, Microsoft already charges for IE, they just lie about that.)
Which other products has Microsoft forced upon consumers in the past? Networking (harmed Lantastic and Novell), Disc Compression (harmed Stac) and other utilities and games. All of these added features have been forced upon all consumers and they do in fact increase the cost of the product. Even Microsoft claims that is the case.
The financial statements filed by Microsoft allocates 20% of all OS revenue (all versions) to "unearned revenue" which they say includes IE.
So at best a statement from Microsoft that IE is free is "inconsistent" and at worst it is "consumer fraud".
I can understand the DOJ letting Microsoft stick to a zero price in court. A zero price is much easier to prove as predatory than a positive one. But, Mr. Fisher has also pointed out that the economic price may actually be negative. Well. If Microsoft is charging $140 per copy retail, the net price is not negative. Microsoft can claim it is negative if they want to hang themselves.
As to the "strong competition in the operating system market" that Microsoft suggests exists, I would like them to mention the consumer OS products that they are referring to. Personal computer consumers do not view any of the Unix versions as a choice. They are not consumer operating systems. They do not seriously consider Linux nor OS/2 as easy alternatives. No applications are available for them at the store where they buy their stuff. You do find Apple stuff. Apple is a competitor. But, remember that Microsoft's power is so great that Microsoft forced Apple to bundle IE too.
I can hardly wait to hear testimony from Microsoft employees trying to explain this "strong" competition they seem to know about that does not affect anyone else. Their expertise as a witness will truly be challenged. One would think that a top employee with Microsoft should be able to clearly explain competition in the consumer OS marketplace and its affect upon Microsoft. For this story of theirs, I truly wait.
Mr. Fisher was accused of not understand the computer industry.
But, his testimony has proven he understands the industry very well.
Somehow I think that the testimony from upcoming witnesses may cause them
to loose their jobs due to a lack of intelligence and logical reasoning.
But, we will see. Maybe they do understand the business they are
in.
1:00 PM PST - Microsoft just trying to avoid consumer and economic issues.
Microsoft seems to be ignoring any cross examination of Mr. Fisher on his basic economic testimony and conclusions. You have to keep in mind that lawyers often avoid asking too many questions that only point out the importance of key testimony.
Franklin M. Fisher is an economist. He is clearly qualified to testify as to how certain acts conducted in the marketplace might affect competition and/or monopoly power. He has clearly demonstrated an ability to evaluate the consumer OS marketplace and put the acts conducted by Microsoft into its economic context.
Rather than challenge this, Microsoft appears to have spent most of its precious time questioning the accuracy of some information that is really only relevant for a very short time. When Microsoft bundled IE with its OS and forced Apple to do the same, it is only a matter of time until Microsoft has a monopoly in internet browsers. To suggest any other conclusion is to prove you live on another planet.
I also point out the question asked of Mr. Fisher. "Is there anything wrong with consumers being forced to buy a copy of IE?". (This is not the precise quote, but that is the question the attorney was asking.) I guess the attorney wants the DOJ to prove that IE will cause all computers to cease to be of any value before "harm to consumers" will have been proven.
Microsoft and their attorneys do not live in the same world economy as the rest of us. Many Microsoft supports are just as ill-bent in their thinking. They have no problem with all consumers being forced to buy a product that they might want. That is understandable. I would much prefer that all consumers drive the same model car as I do so that repair parts are more readily available and all repairmen are fully qualified to attend to my needs should they arise. This makes a lot of sense. It would be great if all computers used the same technology. It would be great if all consumers purchased the same software as I use.
The only problem is that the world does not give any company such a franchise.
Microsoft clearly thinks they own such a franchise and can do anything they might want to protect that one and get another one too. Nothing is more obvious than that. The very questions posed by Microsoft attorneys suggest that a world wide franchise should be issued to Microsoft so that it alone can provide all software technology.
Microsoft even had the opportunity to respond to consumer's needs with Edward W. Felten testified. But, each time the consumer came up in the Q&A, Microsoft choose to change the subject. Microsoft has demonstrated with certainty that they do not care what consumers think or need.
Microsoft is proving that it as a company is so corrupt in its thinking that it should lose it right to exist. Microsoft does not believe in the concept of open and fair competition at all. Microsoft does not believe in the basic elementary right of individual consumers to pick and choose the products they buy.
Microsoft thinks that it should own an exclusive franchise to force all consumers to buy Microsoft branded products. Look at the questions posed by their attorney in court.
"What is wrong with all consumers buying IE?".
12:30 PM PST - Does Microsoft think that only Microsoft Corporation should be permitted to sell products?
If you review the cross examination of Franklin M. Fisher by a Microsoft attorney, you may have to conclude that they do think so. The line of questions by that attorney is truly sickening.
Microsoft acts in such a way to prevent other companies from selling competing products and the Microsoft attorney asks what is wrong with all consumers being forced to buy the Microsoft product? Is this guy serious? We do not live in a world wide dictatorship. And, we do not live in an economy where only one company is permitted to sell products.
Microsoft thinks we do.
Microsoft clearly thinks it is fair to prevent other companies from selling products and paying wages.
For their attorney to ask "what is wrong with that" is truly sickening.
Microsoft needs to be disassembled. They just do not respect the legal rights of any other company or their own customers.
January 7, 1999 - Thursday
2:08 PM PST - Does Microsoft think consumers benefit from being forced to buy Microsoft products?
This trial is getting to be very revealing. Every time consumer choice comes up, Microsoft tries to figure out some way to ignore the discussion or suggest that the only benefit that a consumer can expect is by being forced to buy Microsoft products. My guess is that each Microsoft witness will also have some reason why the consumer should be required to buy a Microsoft product and at the same time denied any ability to pick and choose from another vendor.
The harm being caused by Microsoft has a solution. See horizontal splitting of Microsoft.
It is beginning to appear like that kind of remedy will be absolutely necessary.
11:45 AM PST - Microsoft still hopes ghost competition will excuse antitrust violations
You would think that Microsoft's attorneys do not know which case they are defending. The AOL-Netscape merger keeps coming up as if somehow that company might in the future offer an operating system that would compete with Microsoft. That would be equivalent with Standard Oil suggesting they did not possess monopoly power in the oil business upon the vague possibility that solar power would provide an alternative someday. Or, nuclear power, for that matter. Well. Solar power is available. Nuclear power is available too. So is wind power for that matter. But, none of those alternative sources would have much impact upon the oil industry even today should such an antitrust problem come up.
Microsoft is only trying to avoid antitrust liability by suggesting the possibility of future competition. Well. The possibility is there. But, as Mr. Fisher testified, the mere possibility is quite remote and not very likely. In fact, the merger is more likely to be considered as proof that Microsoft forced a competitor to merge via its specific acts of forcing the price for browsers on all platforms to be reduced to zero. This act goes beyond the consumer OS marketplace and in fact extends into the enterprise market place. This would not expand the market definition for consumer operating systems (as Microsoft would like to include Unix, etc.), but it does broaden the markets harmed directly by the acts of Microsoft.
In fact, since Microsoft's acts go beyond the consumer OS marketplace, such acts can not be excused by purely fabricated integration claims of the consumer OS and IE. Microsoft will surely argue that they can force the sale of IE upon all consumers because Windows 98 is only one product and not two of them. Well. The testimony in this trial has already proven this is not so. They are two products. Windows 98 is an OS and IE is a cross-platform application. Thus, it can not be only a part of the Windows 98 program. (If IE only existed as part of Windows 98, they might have an argument.) Microsoft insists that IE be a cross platform application. And, Microsoft has successfully ruined the market for internet browsers in several other markets (I.E. Apple systems, HP-UX systems, Solaris Systems, etc.). And certainly no consumer using one of those other systems can possibly benefit from the integration (if it were true) of Windows 98 and IE. All of those consumers are only harmed by lack of choice for such applications and subject to Microsoft's further actions to make certain that the best browsing experience is only available when IE is run on Windows platforms. (I.E. Java all over again.)
Microsoft has effectively prevented any competition for browsers to be used on the internet regardless of platform. (The old Netscape browser may linger for awhile, but no market will ever support active competition.)
Seems to me that Franklin M. Fisher has expressed extensive knowledge of just what Microsoft is up to. Read his testimony. See the Q&A below. He may be only an expert in economics but he has fully grasped the impact of the acts of Microsoft in precluding competition and increasing barriers to future competition.
Microsoft's vain attempt to discredit him by suggesting he is not a computer scientist is only proof that they either do not understand what this trial is all about (or they understand very well and are thus refusing to discuss those issues with the expert brought to the stand for that testimony).
Again, compare the testimony of Franklin M. Fisher with that of Bill
Gates. The out of court statements made by Bill Gates prove that
Bill Gates and Franklin M. Fisher agree on all points. In court statements
from Bill Gates are little more than a joke.
January 6, 1999 - Wednesday
6:30 PM PST - Microsoft will soon rest its defense?
Earlier today (down this page) Microsoft attorneys were heard outside the courtroom saying, "there has been no admissible evidence produced by the government that supports its allegations."? Well. If the Microsoft attorneys believe that public statement made on the courthouse steps, they should be able rest their defense without calling a single witness. After all, there is absolutely no reason to call any witnesses or submit exhibits if the DOJ has not produced any evidence against them. The burden is clearly upon the DOJ and if they have failed to meet that burden at this point, Microsoft wins.
Rather, I suspect they themselves know for a fact that they made a categorically false statement to the press and will choose to present their own evidence and call witnesses to counter that evidence produced by the government.
You can hold your breath, we will all know the answer in a day or two. Microsoft will move for a summary judgment and if Judge Jackson denies that motion, Microsoft can decide whether they were telling the truth on Jan 6th or not.
4:30 PM PST - Of course the AOL-Netscape merger will not affect Microsoft's liability.
How can it? Neither AOL nor Netscape write, distribute nor sell operating systems.
Of course Microsoft will point to that merger as if somehow that legally excuses their conduct. Personally, I would like the same attorney from Microsoft who claimed "no admissible evidence" has been produced yet by the DOJ to explain how a merger of a browser company and an ISP or content provider is going to compete with an operating system. If anything, that merger proves that Microsoft has in fact removed a potential competitor from the market. That does not exonerate Microsoft. At best it only makes it more difficult for Microsoft to achieve its primary goal in all this: Directly use its monopoly power to gain another monopoly in browsers and possibly the internet itself.
Maybe Microsoft still thinks that nothing they do is illegal if their victims have not filed for bankruptcy? Do you think that maybe the Microsoft lawyers might think that? The quote from Microsoft mentioned below would suggest they do think that.
Being successful in actually achieving a monopoly in browsers is not the test. However, barring court action that will be the result shortly. Maybe the employees from Microsoft coming up as witnesses can explain how they can force the sale of IE to all consumers yet not end up with a monopoly in browsers. I would love to hear their economic theories on how that could be the case. I hope they do not forget the number of ISVs and ISPs they have forced to support unique capabilities offered only by IE. And, the features of Windows that refuses to allow the user to use any application other than IE.
12:43 PM PST - Microsoft attorneys do not understand what evidence is?
A Microsoft attorney is quoted as saying "there has been no admissible evidence produced by the government that supports its allegations."?
I guess he is just getting ready to prepare the papers asking for the case to be dismissed as Mr. Fisher sits down. It is customary for the defense to stand at that point and ask the case to be dismissed or for a decision to be found in favor of the defendant. (Either that or he does not know which trial he is attending. Or, maybe he skipped the reading of the testimony from Franklin M. Fisher, do you think? Or, maybe he missed the testimony from the other 11 witnesses.)
Oh well. I have almost stopped listening to what Microsoft or their attorneys have to say anyway. Almost nothing even approaches a logical statement.
11:30 AM PST - Barriers to market entry
In the process of proving that Microsoft holds monopoly power, Franklin M. Fisher discussed "barriers to entry" as being a key component or concept. His direct testimony addresses this issue as well as others. The "network effect" is one way to describe this concept.
What is interesting is that Microsoft by acting as it has in ruining the market for browsers and sabotaging the Java concept, has in fact increased barriers to entry for both markets relevant to this case. Barriers for both the browser market and for the consumer OS market have been increased significantly. Such barriers are even much higher now that when the trial started. How so, you say?
1. As each new computer is sold in the marketplace, more and more
systems have IE installed (and presumed to be in use).
2. Ruining the market for browsers has not only caused Netscape
to merge but may very well result in the further reduction in use for the
Netscape browser.
3. The forced combination of Windows 98 and IE requires that
any entry into either market provide both products. This makes it
harder for Linux and OS/2 (as well as others) to gain any ground at all
on the Windows platform since neither of them have a version of IE.
4. The IE standard is slowly but surely being forced upon the
industry regardless of its merits. With each additional browser the
barriers to market entry increase for everyone else.
See the Q&A below taken from the Fisher cross examination. His testimony correctly identifies the problem. He is absolutely correct. Barring the courts actions, Microsoft will in fact force itself into a monopoly power position with browsers, browser standards and the internet itself.
Of course, the Microsoft lawyers will continue to claim not to understand this as it in fact occurs.
Microsoft and its lawyers are similar to a python snake that claims
not to understand the concept of suffocation as a tighter grip is set each
time the prey exhales. Well. Snakes do not know what they are
doing. Bill Gates and his lawyers know precisely what they are doing
and they know their acts violate antitrust law (they may think they can
avoid any obligation to abide by the law). If you believe what they
say, then you must conclude they lack basic intelligence (as a python does).
Bill Gates does not lack basic intelligence. His lawyers do not lack
basic intelligence. (Even Mr. Fisher's testimony has illustrated
the simple concepts in play.) But, do not confuse intelligence with creditability,
character, morals or abiding by the law. In fact, intelligent lawyers
are often accused of being hired to offset the lack of morals, character,
creditability and abiding by the law. Consistent with this view is
the suggested defense offered by Microsoft that "integration", "innovation"
and "higher quality software", etc., should provide an legal excuse
for antitrust violations and unfair competition.
10:45 AM PST - More ghost stories suggested by Microsoft?
I guess when you do not have any meaningful competition and have just recently illegally suppressed recent challenges, you just have to make up some stories. This false act by Microsoft is disingenuous to say the least. Microsoft is no longer believable no matter what they say or do.
Microsoft itself does not believe that the AOL-Netscape merger has any affect upon their monopoly power in the consumer OS market. How could it? Even the Netscape browser requires an OS. Potentially, Netscape could have developed an OS to compete, but since the merger that is not very likely at all. See the Q&A below. Microsoft has effectively increased the barriers to entry for both the browser market and the consumer OS market in bundling and forcing the sale of IE.
Had Microsoft not acted illegally in regard to Netscape and Java, the barriers preventing competition may have been reduced. And, that is precisely why Microsoft acted illegally. Legal acts would not be as effective. Certainly, comments from Microsoft employees have indicated that IE could not compete well on its merits. Legal and fair acts generally allow competitors the ability to sell their products. Forcing all consumers to buy IE and fracturing the Java trademark provide absolutely no benefit to consumers but only preclude competitors. Of course, Microsoft will argue in court that forcing consumers to buy Microsoft products benefits consumers. (That is why they think they do not have to give the consumer any choice and can prevent competitors products from having a market?)
Check it out. Not once has Microsoft acknowledged the right of any consumer NOT to buy Microsoft products. To Microsoft that is not even a remote possibility. Of course, everyone must by their products from Microsoft. You can even check out Microsoft's "Greyhound Bus" defense. In their reply to the Fisher testimony, Microsoft suggested that Unix was an alternative to their consumer OS? Huh?
I guess when you have nothing intelligent to say, you just combine some
words together, call it a sentence and send it off to the PR department.
To think that Microsoft suggested that Mr. Fisher did not understand the
industry. His testimony is proving he understands it very well (even
much better than Bill Gates).
10:30 AM PST - Franklin M Fisher seems to understand the market for consumer operating systems and browsers quite well. Reading the cross examination from yesterday, January 5, in the PM, I came across this little exchange: I have added a few comments in blue italics.
q. Just for the record. You summarize certain barriers to entry and the effects of those barriers to entry. And in particular, the one I would like to ask you about is where you represent that by, quote, tying its browser to the operating system, closed quote, Microsoft is, quote, requiring companies to enter successfully the already monopolized operating system market in order to compete successfully with Microsoft in supplying browsers, closed quote. Is that your understanding of the market reality today; namely, that it is impossible, profitably, to enter the browser market without simultaneously entering the operating system market?
a. Well, entering the browser market today, profitably, is a little hard to do because Microsoft sells its browser for a negative price.
The testimony by Mr. Fisher and highlighted here by the Microsoft attorney puts the case into a nutshell. When Microsoft bundled IE with the OS it not only forced the sale of that product to all consumers and ruined the market for stand-alone browsers but also greatly increased the barriers to entry for either market. Seems that Mr. Fisher knows precisely what Bill Gates knows. Only Bill Gates is playing dumb.
q. Have you calculated the ancillary revenues that are derived from distributing browsers for free?
a. I have not calculated them numerically. I know some things about them.
q. Okay. Do you know whether Ncompass makes money and whether it changes for its browser?
a. It may charge for its shell. It's distributing IE's browser, Microsoft's browser, as we said before.
q. You understand Ncompass to distribute technology, sir?
a. It is distributing a shell and browser. The browser is, in fact, Microsoft's browser.
q. Okay. Well, let me represent that Ncompass doesn't distribute internet explorer. It doesn't have to.
a. Not as much.
q. Moving that aside, do you understand whether it charges that for which it distributes whatever software it distributes?
a. I don't know.
q. Does surf monkey or Neoplanet charge?
a. I don't know. As I sit here, I would be surprised.
q. Do you know whether those companies make money, the companies that distribute that--those products make money?
a. I do not know.
q. Do you know whether netscape has earned positive revenue as a result of distributing its browsing software for free which it did for all of calendar year 1998; correct?
a. Yes, it's correct that they distributed it for free for calendar 1998; and yes, I believe it is true that they found that a profitable activity, generally, or they would have stopped doing it. of course, now they have been acquired by somebody else.
The suggestion here by Microsoft is that all other competitors are not restricted in this Microsoft owned market because they can still earn "ancillary revenues"? Does Microsoft really believe they have the right to force the direct sale of IE to all consumers yet competitors must not only develop and market an OS and browser combination (overcoming enormous barriers to entry) and be happy with "ancillary revenues"? Is this going to be their idea of a defense?
q. Do you know of any potential entrants into the browser business who has been deterred because they couldn't charge a positive price for a browser?
a. The fact that you can't charge a positive price for a browser has got to provide something of a deterrent for any entrant.
This is an absurd question for Microsoft to ask. Again, is this going to be their idea of a defense?
q. That wasn't my question. The question was: do you know of any entrant that has actually been deterred?
a. I do not. But I do not know, on the other hand, of any sort of serious entrant into the browser market, period.
Perhaps Microsoft can find a witness who would not respond in this fashion to these questions. (Maybe they could get Bill Gates on the stand to say differently?)
Aside from the actual Q&A in regard
to this witness, I find it interesting that the Microsoft attorneys have
attempted to challenge Mr. Fisher's understanding of the nature and character
of the consumer OS marketplace. I think if Bill Gates were so questioned,
he would not qualify as the mail-boy for any company in the industry.
It is standard practice to suggest that an expert knows little about the
topic in the case, but in this case, Mr. Fisher's answer demonstrate a
much higher degree of understanding about the reality of the industry than
anyone from Microsoft (Bill Gates and Attorneys included).
January 5, 1999 - Tuesday
2:32 PM PST - Microsoft has lost it (the case and their minds).
I could not resist reading the reply posted by Microsoft to the Fisher testimony.
Microsoft's credibility is lost. Gone. They are completely non-sensical.
Buried in their reply is a statement that free products benefit consumers because they are free. This is highly convoluted logic. Of course "free" products are nice. But, Microsoft does not give away its monopoly product. It only gives away products that a competitor needs to sell for money.
Microsoft's defense is completely bogus. They violate the law by giving away products then claim in court that since the competitor is no longer able to survive without sales and their R&D must necessarily dry up because of Microsoft's illegal acts, Microsoft tries to suggest that customers are only buying IE because it is superior.
I have never heard of a more ridiculous legal argument. No court would ever entertain such circular reasoning to defend an antitrust charge.
It is almost as funny as the claim that Microsoft does not have a monopoly.
Microsoft would like to avoid antitrust liability by claiming Windows 98 competes with Unix? Who is the idiot suggesting that idea?
Next Microsoft will claim it does not have a monopoly in the consumer OS market because it competes with NT. Sure, OS/2, BeOS and Linux do exist. But, for Microsoft to suggest their are competitors is a total joke. For one, OS/2 and Linux only compete with NT in any realistic sense. And, BeOS is only a nitch player. Even tossing Apple into the mix means little since Microsoft has forced Apple to sell IE to the exclusion of competing browsers.
As as been pointed out below, Microsoft ignores competing products for its Office Suite when setting price. And, as has been pointed out by Mr. Fisher, when companies ignore competing products in setting price it does show that they themselves think they have monopoly power.
2:00 PM PST - Microsoft charges as much as it can for the Office suite?
The pricing for the office suite from Microsoft is not a subject of the antitrust litigation, but this most recent announcement is telling just the same. Microsoft says it is holding the price on the cost of the suite to avoid consumer backlash with a higher price in light of reduced hardware costs.
Gosh. That is funny. Yes. Hardware is coming down. But, I assume from this announcement that Microsoft does not even consider the price of competitor's products in pricing its own. Does Microsoft think that is also has monopoly power in the Office Suite market? Apparently so. See the testimony from Franklin M Fisher. He points out that when Microsoft fails to consider competitor's products while making pricing decisions, that is evidence that at least Microsoft thinks it has monopoly power in that market.
I guess Microsoft just charges as much as it thinks it can and still avoid stirring up the anger of too many customers. That is how monopolists think. Companies with competition MUST consider prices and features charged by their competitors.
Microsoft does not even do that in the office products markets. According to their thinking, they just charge what ever the market will bear ignoring any minimal competition. Sounds just like their decision to hold the price of Windows 98 as high as it ever was.
1:01 PM PST - Microsoft found an economist?
Apparently Microsoft values the testimony from Mr. Fisher such that their own economist may be called as their first witness. Mr. Schmalsne could be asked if he would buy the "bubblegum" deal?
Mr. Schmalsne is going to have to convince the court that Microsoft does not have a monopoly nor monopoly power. If that is so, then Mr. Schmalsne could easily explain how consumers can avoid the "jawbreaker deal", right? Economists know things like that.
If Mr. Schmalsne sounds like he is buying the bubblegum deal, then he is giving false testimony.
1:00 PM PST - Supply and Demand?
Does Microsoft think this is a supply and demand case?
In Microsoft's vain attempt to discredit Dr. Fisher, Microsoft suggests this is a "supply and demand" case? I think they need to take a few economics courses. This is a case about raw monopoly power and how that power is used by Microsoft to preclude competition in several markets. It is not even remotely related to supply and demand. Unless of course, Microsoft wants to consider the demands by OEMs and consumers to pick and choose their applications.
Is Microsoft so out of touch with reality that they actually think that their ability to be the sole supplier of a product can also manipulate demand to their liking?
Microsoft and their lawyers have lost it. They do not even know what this case is about. As I recall, even Bill Gates said something to the effect that he did not know what this case was all about. Oh well.
12:30 PM PST - Quick review of upcoming testimony from Franklin M. Fisher
The testimony from Franklin M. Fisher needs to be read in its entirety. It is a bit long at 110 pages but it incorporates many references an quotes of testimony from both DOJ witnesses as well as Microsoft employees. This testimony does a very good job of using the various quotes and snippets in the context of the economic discussion directly relevant to this case.
Rather than try to re-write this testimony I will suggest that you at least look at the Table of Contents for his testimony and read those parts that are of particular interest to you. The "Summary of Opinions" will also give you an overview of his conclusions.
He was asked to consider four basic economic questions: 1) Does Microsoft possess monopoly power, 2) Has Microsoft maintained its monopoly power by anticompetitive conduct? 3) Has Microsoft used its monopoly power to achieve a monopoly in other markets? and 4) Has Microsoft engaged in unreasonable restraints of trade?
Of course, he has concluded "yes" on all four questions. But, that is not why the testimony is so valuable. The testimony is valuable because it makes sense. This is the kind of reasoning and evidence to be expected of Bill Gates but clearly not provided by Bill nor any of his high paid lawyers. Nothing that Bill Gates nor his lawyers have made any sense at all. All explanations from Microsoft are simply vague references to general concepts such as "innovation", "choice", "consumer requests", etc. But, the testimony from Mr. Fisher lays out just how Microsoft suppresses "innovation", "choice" and consumer rights. At the end of Mr. Fisher's testimony he even concludes that Microsoft's actions levy a net harm to consumers. Mr. Fisher rightly concludes that Microsoft actions are intended only to protect the monopoly held by Microsoft in the consumer OS market and to achieve yet another monopoly in the internet browser market. Mr. Fisher rightly concludes that this extensive illegal effort on their part can never make consumers better off and is likely to make consumers worse off.
Months ago I have already concluded that consumers right now are significantly worse off as a direct result of Microsoft's acts.
But, how much is Microsoft charging for IE? Anyone who has read my material on this subject is aware that I reject Microsoft's claim that IE is free as bundled with Windows 98. It might be free if downloaded since no money need change hands. But, with a new machine or even the upgrade, this is not the case. Well. Mr. Fisher does testify at length regarding the costs that Microsoft is willing to incur in its effort to eliminate competitors. He even suggests that the price for IE is actually negative. Of course, this is possible depending upon your allocation of the revenue generated by Windows 98 sales. If you accept my suggested allocation of 70% of the OS revenue going to IE, then even taking into account Mr. Fisher's testimony, IE is a profitable product. If you accept Microsoft's public claim that the price for windows is not adjusted for the browser features (and never will be), then they may be "losing" money on IE. (The "free" browsers for Solaris, etc., is not even relevant because Windows 98 customers could easily be forced to pay for those versions too. I think they are.)
But, why does the DOJ accept the zero price claim by Microsoft? The short answer is that Microsoft admits it and a zero price is relatively easy to qualify as a predatory price. It is also true that many of the States participating in this action have laws precluding "zero prices" or simply characterizing "zero prices" as being "unfair". The DOJ may have just decided to give Microsoft all of the "extra rope it wants" to hang by. Microsoft might hope that the rope reaches the ground (I.E. consumers will support Microsoft being fooled by the undisclosed price for IE in Windows 98).
But, what is the real significance of the Fisher testimony?
The computer software industry just does not need Microsoft Corporation (in its current form) at all.
Microsoft if only suppressing technology and harming the further development of highly significant technologies.
Mr. Fisher's testimony points out the urgency to remove or eliminate monopoly power held by Microsoft (or any other company in the computer software industry). Why? Because if it is not completely removed, the industry will have to be tightly regulated to avoid ongoing and future harm to consumers. And, the world really can not regulate it. We have federal laws. We even have federal courts. (Not to mention State Courts and State Laws.) But, we do not have world wide laws and courts. The result of not splitting up Microsoft (see discussion for both horizontal and vertical splits) will be minimal at best. Sure, you can tell Microsoft to do this or not do that, but it will not matter. The ignored consent decree all but proves that nothing short of a complete disassembly of Microsoft will have any affect at all.
If you have an interest in the future of this industry, read the Fisher testimony real carefully. Collectively, we are at a cross road for the computer software industry. Microsoft can be restructured so that innovation and advanced technology can again have a marketplace in which they can succeed on their merits. Or, we can accomplish nothing and simply let Microsoft to continue to suppress any and all technology which they do not own.
There is no more reason to permit Microsoft to retain its monopoly power than it was for Standard Oil, IBM or AT&T. In fact the health and well being of the computer software industry as well as its customers require the removal of that power. The non-monopoly value of all Microsoft technology can easily be retained for the shareholders. The value of using the technology by consumers can likewise be retained. And, unlike Netscape, even the employees of Microsoft can be assured jobs with other companies (most likely those buying the code base).
Just this past year Microsoft has all but prevented the cross platform capabilities of an internet browser and Java from offering a very beneficial service to computer users regardless of the operating system best suited for the particular hardware on which it runs. In recent years, Microsoft has suppressed numerous other technologies such as disc compression, utilities, networking and others using the same process of just bundling "their" version with the OS and precluding competition. Coming up in both audio and visual technologies on the internet. The absolute worst result looking ahead is to allow any company to dictate future technologies and their implementation. And, that is precisely what Microsoft intends to do. If the dominate OS remains in the hands of any single company, it will only be used as a club to eliminate not only potential competition in the OS marketplace but also any other technology or service related to the internet.
That is the significance of the Fisher testimony. You need to understand the power a monopolist has and the ease by which that power can be used to preclude competition and harm consumers.
11:30 AM PST - Microsoft attorneys just do not understand reality?
Microsoft attorneys keep harping on the argument that the only reason people deal with Microsoft is superior technology. Do they actually believe that? Of course not. But, that is the only legally safe suggestion they can make. So when Mr. Harris of Intuit points out how important being the desktop is for their future business, the Microsoft attorneys are forced to react as if they do not understand that concept. They understand it very well. Bill Gates understands it very well. And, I would guess that just about everyone in the industry also understands it very well.
So, why then is Microsoft trying to convince the judge that the only reason Intuit dealt with Microsoft was better stuff? As mentioned, the only reasons (the real ones) prove Microsoft liable for violating the antitrust laws.
Writing quality software is legal. Even selling quality software is legal. But, designing products specifically to preclude competition and then forcing the sale of that product upon all consumers is not. Microsoft knows that. Microsoft's attorneys know that. Everyone knows that. Thus, Microsoft can not discuss why they bundled IE and why they forced companies like Intuit, Apple and AOL to cease doing business with Netscape.
In fact, if Microsoft was correct, their illegal acts would not have been necessary at all.
8:00 AM PST - Direct testimony for the DOJ's last witness, Franklin M. Fisher released.
A review of this testimony will be posted here later today.
January 4, 1999 - Monday
3:00 PM PST - I wonder if the Microsoft lawyers bought the "Jaw Breaker" deal?
What is interesting about the questioning of Mr. Harris by the Microsoft lawyers is that they (the lawyers) do not seem to know the difference between a dominant product than can be easily replaced by a consumer and a dominant one that can not. Do you support they (the Microsoft lawyers) do not understand the dependency created by an operating system? Do you suppose they do not understand why so many applications are available for Windows and practically none anywhere else?
I wonder if the Microsoft lawyers bought the "bubblegum deal" or the "jawbreaker deal"? And if they did buy one of them, what were their reasons? In a week or so, they may have to argue the taste of the bubblegum. Or, they may have to argue the ease by which anyone can simply not upgrade their OS. Or, they can try to explain how a consumer is going to switch to one of the other operating systems they are sure to mention. Every consumer is faced with the #1, #2 and #3 choice those two deals present. Maybe the Microsoft witnesses will be able to explain to the Microsoft attorneys how easy it is for a Microsoft customer to switch to Linux or OS/2 just to avoid the bubblegum?
Maybe they will just argue that everyone benefits from having a large supply of the candy? Candy bundled with your computer of all things.
The San Jose Mercury News has published an article that may provide some idea of what they may try to suggest by way of defense for requiring all consumers to buy IE (I.E. bubblegum or jawbreakers). Why must everyone buy the bubblegum?
Will they argue that everyone does not have to buy the bubblegum? (indeed Mr. Harris is correct, everyone is not forced to buy Intuit products)
Will they argue that anyone can simply switch their OS if they do not like the jawbreaker deal? (that would be choice #2, but Microsoft needs to really manufacture some facts before anyone will believe they can switch... ...hint... just visit your local computer store.)
Or, will they argue that no purchases are necessary despite Y2K and the fact that all new systems are bundled with the OS from Microsoft?
This will be interesting to watch. However, it appears the questions posed to Mr. Harris promise a "situation comedy". It appears that Microsoft will be forced to present evidence that no one would consider to be creditable.
Hint: Marketing IE at a competitive price just like everyone else does not violate the law. Doing precisely what Bill Gates threatened to do to preclude competition does.
2:15 PM PST - What? Microsoft scoffs at the intelligence of Bill Gates?
Do Microsoft lawyers really think that Bill Gates fails to understand the computer software industry?
If you understand the questioning by Microsoft lawyers of William H. Harris, you might think so.
Microsoft continues to suggest that Intuit signed on with Microsoft due to superior browser technology. Maybe the lawyers and the PR department should check with Bill Gates first. When Bill Gates threatened the whole industry with bundling a browser with OS to prevent anyone from offering that application on Windows platforms, Bill Gates was not even thinking about software quality. He was thinking solely about the raw monopoly power of Microsoft to preclude any competition in that market simply by Microsoft bundling IE with the OS. Quality of software never even came up.
So I guess the lawyers who seem to always bring up quality of software as somehow even being relevant in this case, should first check with the expert who hired them, Bill Gates. The Microsoft lawyers are coming across as knowing very little about the computer software industry much less antitrust law.
1:00 PM PST - Trial resumes with the cross examination of William H. Harris of Intuit
Exclusive contracts certainly can be evidence of monopoly power. They can also be evidence of the abuse of that power when such contracts serve the desire of Microsoft to eliminate a competitor or simply force the sale of unwanted products preventing a competitor from having a viable market.
Any agreement made by one company which restricts their ability to do business with another company is suspect. In the Harris testimony, it appears that Microsoft got Visa to agree not to do business with Intuit. Now do you suppose that Intuit could get an agreement preventing a company like Visa to conduct no business with Microsoft? Highly unlikely. Why? Intuit has no monopoly power. (They may have a high market share, but as Harris quickly points out, that does not equate to monopoly power. It could. But, I would have to agree with Mr. Harris that it is pretty easy for customers of an application to switch programs if Intuit did any kind of bundling which made the price of their product too high or tried to force consumers to forgo other natural choices they may wish to make.)
Mr. Harris also brought up the deal between Microsoft and Compaq regarding personal financial software.
Anyone who doubts Mr. Harris's testimony on these points either has no understanding of the computer software industry or is being paid for their views. Microsoft's lawyers are clearly paid to challenge Mr. Harris. And, lately, almost nothing they say even begins to make sense. I know they mouth the words, "Nothing Microsoft has done violates antitrust law.". But, it is completely illogical and non-sensical. They are just words lined up and spoken in a particular order with no associated meaning or thought behind them.
The other interesting discussion was in regard to the "essential facilities" doctrine. What is really interesting in this regard is that a lot of so-called Microsoft supports think that their access to and use of Windows is somehow threatened by the DOJ action. I am not quite sure why they would think that, but their support of Microsoft certainly supports any suggestion that many consumers do think that Microsoft windows is an essential facility. Some even argue that monopolies should be given free reign so that more "essential facilities" would exist and life for them would be simpler. Well. I suppose if only one company made cars, their life would be simpler and they would not have to pick and choose the car they drive.
However, I have yet to find a single Microsoft supported who will let me pick any software for them, application or OS.
I do find the comment from Murray (Microsoft) interesting however. He expresses the suggestion that a successful company like Intuit would not come forward. I think Mr. Murray misspoke. What he meant to say was that a company like Intuit that Microsoft has been able to manipulate as much as it has would be one of the last companies to complain about abuse. This is somewhat similar to the "beaten wife" syndrome. It is as if Microsoft thinks it can violate any and all laws and escape liability if it can only be shown to have not succeeded completely and the "wife" lives. Being a successful company does not mean you disapprove of all antitrust laws and their enforcement to your own detriment. Maybe Microsoft thinks so, but I doubt it. They seem to like the trademark laws when their trademarks are under attack. They seem to like copyright laws when their products are threatened. Any suggestion that some other company should be against any law simply because they are successful is highly disingenuous. It is not even logical. In fact, Microsoft itself has benefited from the antitrust laws during its early days when either Hp or IBM could have snuffed them out if they just wanted to. They refrained from doing so. However, if either HP or IBM had attempted to rub out Microsoft, the antitrust laws may very well have prevented it. One could even argue that the good conduct of these two companies is the direct result of the DOJ enforcing the antitrust laws against both HP and IBM during the late 1970's. The good conduct certainly let Microsoft get off the ground. And, today Microsoft uses its monopoly power as much as possible to prevent other companies from doing so (IE Netscape, Caldera, Novell, Real Networks, Blue Mountain and even IBM and possibly HP). What ever happened to Next Wave (or New Wave) from HP? What happened with OS/2?
From Mr. Harris's testimony is is very clear that Intuit knows it continues to exist only because one or more laws have prevented Microsoft from removing it. They did try to just buy it. And, apparently they also tried to "snuff out" their air as well by forcing Compaq to distribute Money. Microsoft just did not have enough raw power to force Compaq to drop doing business with Intuit.
But, they will try that again and again and again and again with Intuit and any other company that offers a product in competition with Microsoft. In each case, Microsoft is just using its monopoly power to force other companies to do business in such a way that will not always favor Microsoft but also disfavor a key competitor.
Daily Wrap and Flow - Week Ten
Daily Wrap and Flow - Week Nine
Daily Wrap and Flow - Week Eight
Daily Wrap and Flow - Week Seven
Daily Wrap and Flow - Week Six
Daily Wrap and Flow - Week Five
Daily Wrap and Flow - Week Four
Daily Wrap and Flow - Week Three
Daily Wrap and Flow - Week Two
Daily Wrap and Flow - Week One