Daily Wrap and Flow

January 15, 1999 - Friday

12:50 PM PST - Microsoft's own witness (an economist) suggests (admits) that the price charged for Windows is or was lower because Netscape provided potential competition.

Testimony from January 14, (PM):

q.   Let me just try to close this off. I understand that you have said that you don't know whether the effect was important or not.  I thought you said, however, that you believed that there was an effect, and the effect was to have Microsoft's prices lower than they otherwise would have been.  Did I misunderstand you?

a.   No, sir, you did not.  That is a reasonable summary, yes.

q.   Okay.  Now, you also mentioned java, do you have a view as to whether java affected Microsoft's pricing of its operating system?

a.   I would give the same answer....

This is proof of the benefit of competition from Netscape and Java.

This also offers support for the argument that antitrust laws are not only necessary but should be applied to Microsoft in this specific case.

This also disproves the theory offered by Microsoft that consumers are better off if Microsoft is left alone and able to violate laws as it chooses.

11:00 AM PST - A quick summary of Microsoft's defense (at least one of them)

In reading the cross examination of Mr. Schmalensee, it is becoming evident that Microsoft will argue that somehow it has a fundamental right to do any act if that act is addressed to a possible threat to Microsoft's business or Microsoft's power in the consumer OS marketplace.  I do not doubt that Microsoft would wish it can so act as it thought might be best.  However, any perceived need by Microsoft is not relevant to any antitrust defense.  In fact, the antitrust laws are designed to encourage or foster competition not aid those companies that might want to suppress it.

This is the heart of the antitrust litigation.  Can Microsoft legally act to suppress competition?  Well.  Yes.  If it is not a monopoly or does not have substantial monopoly power.  However, when a company truly does not have such power, much of what they may want to do will not work for them.  (This is why such acts are only illegal when monopoly power is shown to be present.)

To put this concept more simply.  If Microsoft does not have monopoly power in the consumer OS marketplace, then bundling an application (pick anyone you want) will backfire.  Why?  Because not all consumers will want that application and as long as they can pick and choose another OS, those customers who do not wish to buy the bundled application (pick anyone you want) will do so.

If they can not pick an alternate OS, then consumers have no choice and are forced to comply with the raw power of the only OS practically available.  This is why the Q&A regarding realistic choices is so important.

I am sure that Microsoft will point to the Dell announcement as "proof" that no monopoly exists.  But, Dell apparently limits that choice to 50 computers or more.  I can not think of a single home or residence that could accept the installation of 50 PCs.  Maybe Bill's joint.  But, somehow I rather doubt he runs Linux at home.

What Microsoft's argument boils down to is that they want to be able to suppress any competition by what ever means they have because it is competition.  Unfortunately, this is precisely what the antitrust laws forbid.  Suppressing a browser or Java because you deem it as competition (they call this a threat) is not a right at all.  In fact, it is prohibited.

Microsoft is simply bundling applications or middlewear to suppress other products and other markets.  And, that only works if Microsoft has true monopoly power in the consumer OS marketplace.  This is a classic case of using monopoly power in one market to suppress competition in the current market and suppress competition in an associated market.  And, it goes even further here, as has been testified to by Mr. Fisher, the monopoly power is used to gain another monopoly position in a second market, internet browsers and possibly the internet itself.

This defense will fail.

What is really interesting about this testimony is the importance that it focuses upon the necessity that Microsoft fail.  It is absolutely essential that potential competition to Microsoft be guaranteed a fair opportunity to succeed.  It is absolutely essential that Microsoft be prevented from suppressing any possible competition.  This is true whether the competition come from another OS or another platform.  It does not matter.  Competition must always be assured and suppression of competition must always be prevented.

Microsoft Corporation does not have any right to its continued existence.  None.  It only has the right to compete.  It is illegal for it to preclude others from competing.
 

10:00 AM PST - Microsoft subsidizes ISVs to the tune of hundreds of millions a year

From the transcript, January 14, 1999:

q. (not relevant)
 a.  I cannot.  I've seen numbers on what Microsoft spends to deal with independent software vendors.  They're significant -- in the hundreds of millions of dollars a year.  It's a very important aspect of attracting and maintaining the interest of independent software vendors. What it would take someone with a hypothetical attractive operating system to attract the attention of independent software vendors to an operating system that we haven't defined is unanswerable.

This response was provided by Mr. Schmalensee while addressing barriers to entry into the consumer OS marketplace.  While the witness continues to suggest that few if any barriers exist, his testimony proves the opposite.  It is widely agreed that OS/2 failed in the marketplace because insufficient support was given to ISVs in the effort to get applications written for the platform.

However, the most interesting aspect of this testimony is the representation that ISVs are subsidized by Microsoft in their effort to make certain that ISVs write to Windows and not other platforms.  Guess who pays?  Consumers forced to buy IE pay.  Customers not having any alternatives but Windows when they purchase their new computer pay.

For an economist to take the stand in a court of law and suggest that this situation does not represent serious barriers to entry defies all logic.  This economist is ignoring economic realities in the industry in a vain attempt to defend a monopolist.

Instead of addressing economic issues this witness falsely claims that only technical factors affect who is successful in the market.  No person in the computer software industry believes that.  No qualified economist could possibly reach this conclusion.

9:30 AM PST - Just reviewing some of the conclusions reached by Mr. Schmalensee, the economist hired by Microsoft.

From the transcript, January 14, 1999: (believe it or not)

q.  You have looked at the question of whether or not there are barriers to entry into providing P.C. Operating systems in competition with Microsoft; have you not, sir?
a.  I've focused on the issue of platforms, and I have considered the analysis put forward by plaintiffs' economists on that subject, yes, I have.

q.  Let me be sure that the question and answer are meeting. Have you looked at and analyzed whether or not there are barriers to entry, as economists use that term, to people supplying P.C. Operating systems in competition with Microsoft?
a.  Yes.

q.  And what did you conclude?
a.  I concluded that while entry is not easy in the sense that you or I might find it easy to enter that market, that as economists use the term generally, there are not significant barriers to entry.  And, in particular, the applications program barrier described by or put forward by plaintiffs' economists is not a significant barrier to entry into that business.

I really would like to know the name of a single witness not paid by Microsoft that could testify in this manner.  I would accept any qualified economist, any software developer, any venture capitalist, any company CEO or any lawyer who works in technological areas.  Any.  Please find one person who would make such a claim using his own name and not having a financial interest directly associated with the forced sale of products by Microsoft.   I really would like to know if such a person exists.
 
 

January 14, 1999 - Thursday

5:15 PM PST - Bogus polls funded by Microsoft to suggest what the PR team wanted?

Even the poll suggested the phrase "put the browser into the OS"?  Sounds like the DOJ is correct.

Does anyone know when the Microsoft web page was changed from saying "browser" to "internet technologies"?  Does July 28, 1998 sound about right?  That was after the DOJ filed the current suit.

3:00 PM PST - Bill Gates subsidizes developers at the expense of consumers?

Apparently so.  This article discloses the effort by Bill Gates to get a "developer survey" to show that they favor bundling IE with the OS.

Well.  Of course Microsoft ISV want all consumers to be forced to buy IE.  It gives them another platform they can count upon for software products.  And, to think that Microsoft claims that consumers want IE.  Consumers do not want to be forced to buy any application.

This disclosure provides evidence that Microsoft knows the benefits of tipping, network affects, etc., as described by Mr. Schmalensee but discarded by him as relevant.  Microsoft ISVs benefit from Microsoft's monopoly power as long as they do not compete with Microsoft directly.  Should any ISV not do as Microsoft dictates, there are history.  Ask Real Networks.  Ask Netscape.  Is Netscape a Microsoft ISV gone independent?  You could say that.  Certainly any Microsoft ISV would take that hint.

2:00 PM PST - Question:  Did Mr. Schmalensee write his own direct testimony?

My assessment at this point is that Mr. Schmalensee did not write the direct testimony as submitted to the court.

I base this conclusion upon the very different styles of communication as evidenced by the direct testimony (written) and cross examination (oral in court).  The thought process used by the witness appears to be different.  The logical progression of ideas appears to be different.  And, I do not detect in the oral Q&A the disjointed connection between the detailed testimony and conclusions.  This was quite evident in the written direct testimony. I also find a rather significant difference in the understanding of technical issues between the written testimony and the oral examination.  The written testimony reflects a deep and detailed knowledge of many markets and products in the computer software industry whereas the oral testimony does not reflect the same depth of knowledge.

This raises the possibility of a rather serious charge.  However, at this point I personally suspect that someone other than Mr. Schmalensee wrote the direct testimony as submitted to the court.

This is one area where I would like to receive direct feed back from readers whether you think this is true or not.  Read the direct testimony and read the transcripts for this witness.  Then, let me know if you think it is my imagination or an accurate observation.

1:32 PM PST - And, yes, you have the Gates Factor.

But, what is really striking is that Bill Gates appears to contradict the testimony from Mr. Schmalensee.  This contradiction is detailed below during the review of some of the direct testimony from this witness.  The economist claims the browser was integrated for technical reasons while Bill Gates threatened to do that act in order to preclude competition.  It makes you wonder which of these guys passed their Economics examination, the Dean or the student who dropped out.

1:23 PM PST - ProComp weighs in.

1:18 PM PST - The Sacramento Bee weighs in.

1:00 PM PST - Microsoft continues its policy of trying to fragment and sabotage Java.

The appeal of the Sun injunction has now been filed.  Details to follow.  --- More details.

Normally appeals of this nature are based upon procedural matters or procedural omissions.

As you recall, the preliminary injunction regarding the consent decree was overturned.  That decision was based upon the failure to give Microsoft notice that an injunction was sought.  Notice of seeking an injunction is a requirement.  Since that did not take place, that injunction (issued by Judge Jackson) was set aside.

That was the appellate decision that Microsoft falsely claims supports their factual case.  The facts of the case were not even in issue.  Even though Microsoft cites this case as supportive of their position, it is improper to so conclude.
 

12:45 PM PST - Microsoft witness admits to "ghost competition"?

Let's get one thing straight.  Paranoia does not count for competition.

An economist should clearly understand this even if Bill Gates does not.

Suggesting that someday someone may offer competition to Microsoft (assume Microsoft permits them to exist) does not justify Microsoft's acts, does not re-define the consumer OS market nor provide any evidence that Microsoft does not have monopoly power.  Only reality can do that.

10:15 AM PST - The Microsoft witness is pretty much forced to take illogical positions.

The witnesses for Microsoft can never admit the obvious.  You know, the kind of determinations and conclusions that are obvious to anyone who steps inside a computer store or tries to buy a PC from almost any source.  That conclusion is that either you buy the parts and build your own computer, you buy an Apple product (which is also forced to sell you IE) or you buy a machine with a pre-loaded Microsoft operating system.  There are no other choices.  Period.

No consumer is so stupid to think that a palm sized electronic pad competes with Windows.

No consumer is so stupid to think that a Solaris OS is a practical alternative to a laptop or desktop running Windows.  Sure you can run Solaris on Intel machines.  But, those installations are not similar to the application of a PC.  Even Microsoft separates the market for Windows 98 and NT.  Even Microsoft draws the distinction between Windows 2000 for the consumer and Windows 2000 for the enterprise.  They are not stupid.  The Microsoft marketing department disagrees with Mr. Schmalensee on his key testimony.

Even Linux and OS/2 are just not practical alternatives for a very high percentage of consumers.

The testimony by Mr. Schmalensee is only offered to fool the court.  Suggesting that the market should be defined to include choices that no consumer can actually pick is a bit absurd.  Potential competition is not real competition.  Competition to the corporate entity is not competition for any specific product.  And, paranoia by a company is never an excuse for violations of law.

9:20 AM PST - Mr. Schmalensee falsely defines markets

Reading the cross examination of Mr. Schmalensee, I have observed a false conclusion he has made.

Q. Do you think that it is at all useful in assessing whether microsoft has monopoly power over the pc operating systems market to know what microsoft's share is of that market and what changes in the share have occurred over time?

A. Well, you're using "market" as if we agree that that is a relevant market here, and I simply don't.  I don't think it makes sense to define a market that doesn't include the competitors that are alleged to be major threats to Microsoft, to define a market that excludes them, by definition, and then try to analyze competition that involves them.  It just makes no sense analytically.

The relevant markets are determined by specific products not competitors.  Microsoft may consider Sun a possible competitor but not vice versa.  And, clearly consumers may not consider products from Sun as being in competition with anything from Microsoft.  They may actually have competing products such as a JVM.  But, that observation does not redefine the consumer OS marketplace to automatically include all Sun products (or any one of them).

Mr. Schmalensee's logic here would require that all computer software products exist only in one marketplace.  Clearly word processors, spreadsheets, data base systems, Java and browsers all have some degree of platform support capability.  But, none of them are operating systems.  Mr. Schmalensee himself clearly labels and separates out a number of different markets based upon a number of application types. (Of course operating systems and browsers do not exist.)

In this industry, operating systems are a very clearly defined product.  And, in fact many different markets even within the overall operating system market.
 
 

7:30 AM PST - Microsoft's economist offers false testimony

The suggestion by Mr. Schmalensee that no consumer OS market can be defined is clearly false.

He has no problem identifying a number of applications as having their own market or product category.  He even talks about companies racing to do their best and come out on top.  However, he conveniently forgets about consumer operating systems and internet browsers as being clearly defined markets and products.  Consumers are not so confused.

This testimony is unfounded and falsified so as to present a fabricated excuse for abusing the raw monopoly and forcing Microsoft customers to buy unwanted products from Microsoft.

Consumers can only pick and choose from the products actually available to them in the marketplace.  Those products define the markets.  Microsoft helps define the vary marketplace that Mr. Schmalensee claims not to exist when they offer for sale Windows NT and Windows 95/98.  Microsoft also defines separate markets when they offer a server version of NT.

If the consumer does not seriously consider or can not seriously consider alternative products then that product generally defines the boundaries of a market.  This is a simple way to look at market definition.  But, it is an important one.  Word processors do compete with each other.  But, word processors do not compete against spreadsheets.

Mr. Schmalensee knows that Microsoft has a very clear and powerful monopoly position in the consumer OS marketplace.  This power is such that consumers can in fact be forced to buy almost any product bundled with the OS.  It is for this reason that Mr. Schmalensee has fabricated this story that no such market exists.  Even common consumers know better.

January 13, 1999 - Wednesday

7:30 PM PST - Bundling, bundling and bundling.

So much for the theory that the OS and an application are really one product.  I see no evidence at all that any one person really believes that.  And, that includes Microsoft employees, advertisements, announcements, web pages and even witnesses.

There is nothing to the theory except a fabricated antitrust defense.  A defense that does not address all acts conducted by Microsoft that violate the antitrust laws.  A defense that does not address forcing Apple, Intuit and AOL to cease doing business with a competitor of Microsoft.  That exercise of raw monopoly power is just that.  And, it has nothing to do with integration, innovation or even high technology.  A defense which does not address giving away free products for Solaris, HP-UX, Windows 95 and NT.  Giving away free products to non-customers is addressed solely at preventing a competitor from selling to customers not even doing business with Microsoft.  Again, purely an exercise of using the money forced from its captive customers to preclude other companies from doing business with their customers.  No integration.  No innovation.  Just precluding the ability of other companies to sell their products to their customers (non Microsoft customers).  Customers that Microsoft has boasted as never requiring to buy IE.

And yet Microsoft found an economist to testify that forcing a zero price in a market to which Microsoft does not even intend to business in is "not predatory"?  I have a bridge in Arizona for this witness to invest in.

7:30 PM PST - "Lets make people to use IE"

Little can be more obvious.  That is called "force".  Economic force.  Monopoly force.
 

3:30 PM PST -  Mr. Schmalensee does not understand the consumer OS marketplace?

The definition of the consumer OS marketplace is at the very center of this case.

The reason is simple.  Consumers can only buy the products that offer a realistic choice for them.  Suggesting that Unix competes with Windows 98 is like suggesting that airplanes compete with the Geo.  Sure, some people do commute in airplanes both commercial and private.  But, for an economist to claim that airplanes compete with automobiles for business does not even begin to make sense.  This witness does not make sense.

As you can see by the commentary lower on this page, very little of anything that this witness has testified to supports his own conclusions.

The average consumer has no idea what Unix is.  If they do know, they know that as a potential consumer for that product, they might as well leave the store.  No products are available on the shelves.  It is a completely different market.

Why does the most obvious escape the notice of high paid economists working for Microsoft?

1:15 PM PST - The DOJ to rest its case soon.

It is normal for a defendant to ask that the case be dismissed as soon as the prosecution rests.  This is pro-forma.  However, the attorneys from Microsoft have publicly claimed that no admissible evidence has been submitted by the DOJ despite live testimony from 12 witnesses and thousands of exhibits.  I can understand claims by attorneys assuring the public that they will prevail in the end.  That is to be expected.  However, to make a blanket statement that no admissible evidence has been presented is a claim that only lawyers can make.  It requires an understanding of the charges presented and the evidence submitted. Most lawyers will never make such claims.  The statement did not even qualify the claim suggesting that the evidence was not creditable.  Microsoft used a rather objective standard in their claim on the court house steps.

As I proposed a week or so ago, if the lawyers from Microsoft really believe the words they express on the court house steps (that no evidence has been submitted), then they can rest their case as well immediately after the DOJ does.  If they are correct in their public claim, they win.  If they do not believe their own public assessment of the evidence submitted against their client, they will call a few witnesses.

Perhaps the only reason this might matter is that the claim made by Microsoft attorneys was a rather strongly worded statement.  Microsoft is a publicly held company.  Statements made in public by the attorneys representing a publicly held corporation can be considered to have influenced not only public opinion of consumers but also public opinion of stockholders.  Anytime false statements are made to stockholders, the company is opening itself up to class action law suits filed by stockholders should those statements be proven false.  Should the court decision go against Microsoft and the stock price be seriously affected by that decision, this statement by the Microsoft lawyers could receive some very serious consideration.  Do lawyers have to be careful how they comment on pending litigation?  Absolutely.  They have to avoid "categorical" type statements that can be easily proved to be false.  If the claim that no admissible evidence has been presented turns out to be false (line up some lawyers and allow them to vote), then the purpose and intent of making the statement may become very important.
 

12:20 PM PST - If Microsoft did not act to preclude competition, they could sell their products.

221. Microsoft is no different from other operating system vendors in adding features over time, and in recent years adding Internet-related features. Sun's Solaris is a good example. According to Sun, "As reliable as the dial tone on your phone, Solaris software is the WebTone for the Internet."179 In telling consumers why they should upgrade to the most recent release of Solaris, Sun highlights its inclusion of Internet-related features:
Solaris Web Start is a browser-based utility that guides users through installation...
HotJava browser is an easy-to-use, customizable, user interface for exploring the Internet and corporate intranets.
Web technologies such as WebNFS software enable file systems to be quickly accessible through the Web using the NFS protocol.180

This is an economist?

Bundling an application with a monopoly product is very different from an economic standpoint.

Bundling always caused the following too results:
1. Bundling increases the cost of the minimum system to cover the cost of the combined products.
2. Bundling forces the sale and possible use of the bundled product, thus limiting the flexibility of the consumer and possibly foreclosing future competing products.

This witness is simply rationalizing competitive responses rather than addressing the economic impact of a monopolist bundling unwanted products with a product that consumers are all but forced to buy.

This trial is about the antitrust activities of Microsoft not the legal acts of companies in other markets.  None of the above require the use of a specific browser for internet activities. Microsoft does. Again, this witness is ignoring the economic discussion related to the acts conducted by a monopolist and instead only attempts to rationalize acts conducted by Microsoft for the specific purpose of precluding competition. Offering a browser is not the same as mandating it sale and use via the application of monopoly power.

12:05 PM PST -  Need I go on?

220. The importance of convenient Internet access is growing, and not just for professionals who use it in their work. Survey research conducted for Compaq Computer Corporation has shown that, over the past year or so, the Internet has become the number one reason why people buy home computers and that 50 percent of home computers are already wired to the Internet.177 In January 1998, the vice-president of Compaq's Consumer Products group was quoted in Communications Daily as saying that Compaq's research has found that in the last 18 months, "Internet access has risen from (the) 7th-highest reason people have bought computers to 'the clear dominant reason' for purchase."178

This is why it is so important that active competition for internet browsers be achieved.
Microsoft has acted with the specific purpose of precluding any and all competition in the browser market by giving away browsers, forcing OEM to distribute its product for a cost to the consumer and forcing the consumer itself to use IE.

There is nothing more harmful to the consumer than being forced to buy a product and forced to use a product.

Mr. Schmalensee would do well to address the economic consequence of forcing all consumers to use but one solution.

12:01 PM PST - This witness continues to justify illegal acts rather than address the economic impact of those acts.

219. At each stage, access to information in these new forms has required new software. Often that software has been a separate product initially, but usually it gets included in the operating system or in other products over time. Integration into the operating system generally has increased reliability and convenience and lowered costs. In most cases I have happily adopted the integrated version. In a few cases I have chosen to continue to use a third party product because it has more power to meet my specialized needs (or I simply find its familiar interface more convenient for me). Even with unused integrated features, however, other users and I suffer no harm from their inclusion. For example, Windows 98 supports hundreds of printers through the inclusion of printer drivers. No user is ever likely to need support for more than a handful. There is no incremental cost to including them (especially now that CDs and large hard disks are so inexpensive), but there surely would be many costs to offering countless different versions of the operating system-points that I return to below in discussing the economics of including features in the operating system.

Having printer drivers available is not the same as forcing consumer to use IE despite their selection of another browser.  No printer driver is forced to be used.  IE is forced to be used by Microsoft.  Options do not justify forced use.

The most important reason why applications are separate from operating systems is simply that it allows individual consumers to pick and choose the best products for their needs.

It is true that each time Microsoft bundles an application or utility with the OS, a potential competitor is harmed.  Stac, Novell, Lantastic, Symantec, Norton and others have been precluded from competition by this act.  The fallacy of this argument is that the consumer is made better off.  This conclusion is false.  Choice is reduced.  Better ideas are suppressed.  But, most importantly, the ability of competing technologies to have a market is foreclosed.  Again, this so-called economist ignores the economic impact upon consumers caused by the bundling of applications with the OS.

This witness needs to address the economic impact of higher minimum prices caused by bundling and the resultant reduction in choices to consumers.

11:45 AM PST - The economic witness avoids the economic issues and only attempts to justify paranoia.

214. Netscape also warned investors that other OS vendors, including Apple, Sun, HP, Digital, SCO, and Silicon Graphics, would eventually incorporate Web client functionality into their OSs as standard features. Netscape admitted that "if these companies incorporate Web client functionality into their software products, they could subsequently offer this functionality at little or no additional cost to customers."175 The development of the Internet and intranets that relied upon Internet communication protocols also made inexpensive network computers with non-Windows operating systems a more viable alternative to Windows.

This paragraph points out why it is so important that the internet browser not be part of the OS.  For one, it is an application.  But, most importantly, almost all consumers do not want applications that run only on one platform.  Both the industry and the consumer are better served by the browser capability being an application and not part of the OS.  Microsoft itself acknowledges this when it writes a version of IE for other platforms.

Again, this witness fails to address the economic reasons for Microsoft bundling the browser.  The reasons were, as Bill Gates said, to preclude competition.  Writing a browser for Solaris and selling it would be legal.  Writing a browser to give it away to Solaris customers while forcing all Windows customers to buy IE, is not.  That is simply an act designed to prevent a competitive market in browsers from existing.  Again, this witness fails to address the economic reasons for the Microsoft acts.  Justifying paranoia is not within his expertise.

11:30 AM PST - Microsoft's economic witness refuses to discuss the economic issues

213. Of course, the unexpectedly rapid growth of the Internet also presented Microsoft with serious competitive imperatives. If other operating system competitors such as IBM or Apple developed operating systems with more powerful Internet capabilities than Microsoft, or did so sooner, Microsoft's operating system could become less attractive to ISVs and to consumers. As early as February 1995, IBM was including Web-browsing software called Web Explorer in the OS/2 package. I understand that James Allchin will testify that Microsoft was aware of this software in the Fall of 1994 when it was previewed. According to a PC Magazine review, "Web Explorer is part of a package of Internet tools and services called Internet Connection for OS/2 that IBM is essentially giving away with the new OS/2 Warp, Version 3."172 The July 1995, LAN Times cited IBM's Vice President of Internet Applications, John Patrick, as saying that IBM intended to compete with Netscape by offering software that enabled users to browse the Web.173 This development was not lost on Netscape. In documents filed in conjunction with its IPO in August of 1995, it warned investors that IBM had already incorporated "client software" in its OS/2 operating system.174

Again, this testimony illustrates the increased burdens to entry into the OS market because of bundling IE.  While IBM may have offered internet capabilities, it also made it easy for any OS/2 user to download the Netscape browser.  Microsoft, on the other hand,  has acted quite to the contrary as has been testified to.  Microsoft purposefully designed Windows so that the consumer choice of browser would be ignored essentially preventing the use of that application on Microsoft platforms.  There is a very big difference between providing an application without cost and forcing all consumers to actually use it AND at the same time preventing all consumers from using the applications they may used.  The difference is called an "antitrust violation".  Again, this witness refuses to discuss the economic factors associated with the specific acts conducted by Microsoft.

11:23 AM PST - Again, again.

212. Microsoft's competitive response to this new technology was consistent with its response to the development of other technologies such as CD-ROMs, hard disks, local area networks, and scanners. In each of those cases, Microsoft incorporated features into its operating system to make it easier for ISVs to write programs to access those new technologies and for consumers to run applications programs that relied on those new technologies. In each of those cases, that incorporation occurred before significant numbers of users had started using those features. Microsoft placed a bet on the future of computer technology and consumer demand. The competitive response did differ in degree. Microsoft reportedly has spent more than $100 million annually in developing Internet-related technologies for Windows, far more than it spent on, say, software support for CD-ROMs. However, the Internet was seen as one of the most significant technological advances in computers since the advent of personal computers.

Microsoft's response with local area networks was similar.  It was designed to prevent Novell and Lantastic (as well as other networking companies) from offering networking services on Microsoft platforms.  To that extent the incorporation of networking into the OS is also a violation of antitrust laws in almost the same manner that the bundling of the browser is.

Suggesting however that all consumers should be forced to buy technology from Microsoft because it helps ISVs is wrong.  Consumers should not be forced to buy technology simply because it helps developers.  That is called subsidizing ISV's by overcharging consumers.  However, this testimony does point out again how increased barriers are placed into affect making it less and less likely that any competition for Windows can emerge.  The more technology is bundled with the OS, the more difficult it is for meaningful competition to emerge.  Mr. Fisher pointed this out.  Mr. Schmalensee also points this out. (It is only his conclusions which do not relate logically with his testimony.)

11:15 AM PST - Yet again, Mr. Schmalensee avoids the economic issues.

211. The decisions to embrace the Internet came during the time that Microsoft was developing Window 95-an operating system that involved major changes in the architecture and code of its operating system based on the combination of Windows 3.x and MS-DOS. These decisions were made before Netscape was visible. Netscape was not founded until April 1994. It released the first version of Navigator, its browsing software, in beta form in October of 1994 and in its final version in December 1994.171 I therefore believe that Professor Fisher is wrong when he says (143), quoting a series of Microsoft documents from 1997, that, "Microsoft made its decision to combine its browser and operating system not to achieve efficiencies but to foreclose competition."

Bill Gates disagrees here.  Bill Gates clearly threatened bundling (he actually used the bundle word) IE with the OS for the specific purpose of foreclosing competition. Bill Gates used economic concepts in this statement.  One would think that an economist would recognize that and address the economic considerations of this issue not avoid them.

11:00 AM PST - Mr. Schmalensee against avoids the economic reasons for Microsoft's acts.

IV. Internet Access Is One of Many Features Microsoft Has Integrated into Windows to the Benefit of Consumers and Software Developers

206. The rapid emergence of the Internet presented Microsoft with opportunities for enhancing the value of its operating system for ISVs and consumers.167 Microsoft could increase the value of its operating system for ISVs by making it easier for ISVs to write applications that used the resources available on the Internet. It could make its operating system more attractive to consumers who wanted access to an emerging source of information, entertainment, and communication. I describe Microsoft's response to these opportunities in this section. In Part A, I review the documentary record that shows that Microsoft's technical decisions to integrate Internet features into its operating system resulted from its recognition of the likely importance of the Internet. In Part B, I explain why the integration of Internet-related functions in the operating system benefits software developers and end users. In Part C, I describe the economic reasons why software firms integrate or bundle features together and why those practices benefits consumers.

The integration of Microsoft Word would satisfy this same logic.  Unfortunately, this point does not explain why IE was integrated but not Word.  The quote from Bill Gates does explain the difference.  The economic difference.  Integrating IE precludes Netscape and Java from providing possible competition.

The point here is not that the integration benefits consumers at all.  All the benefits can be realized without the force sale of IE as shown by the testimony.  An application can provide the benefits.  The only reason for bundling the product is an economic one as explained by Bill Gates.

10:50 AM PST - Mr. Schmalensee ignores economic reasons for acts.  Bill Gates did not.

Paragraph 205 of Direct Testimony. It was for exactly this reason that Microsoft invested in making its software platform more desirable to consumers and ISVs by including features and functionality that would help them better realize the potential of the expanding World Wide Web. In the next section I show that Microsoft has kept its lead in the software platform category by steadily integrating features and functionality that consumers and ISVs desire. Its decision to integrate Internet-related technologies into Windows was consistent with its past efforts to improve its software platform.

Bill Gates disagrees here.  The threat that Bill made to the industry was based upon the economic power that a monopolist has to preclude competition by simply bundling a product with the monopoly product.  Bill Gates did not say he would add features to windows in order to expand the value of the OS to the consumer.  Bill Gates knows that is what applications do, not operating systems.

The fallacy of this testimony is evident by the fact that the witness suggests technical reasons for acts when Bill Gates himself suggested economic reasons for those same acts.  Hint: Mr. Schmalensee is an economist.  He is an expert witness for the economic issues.  This paragraph is little more than an advertisement. He fails to address the economic issues related to this case. He only seems to avoid the discussion of the economic factors.

However, this statement does point out the practice of Microsoft to bundle applications and utilities with the OS to preclude competition from independent developers.  This further increases the barriers to entry for the OS market and precludes competition in closely associated markets.  This testimony illustrates the concept pointed out by Mr. Fisher (I.E. the bundling of IE not only creates a new monopoly by the forced sale but only increases the barriers to entry by raising the ante for any new entry into the OS market place.  Any new OS must also provide a winner of a browser.)
 

9:37 AM PST - The Schmalensee testimony is going to be fun to watch

Mr. Schmalensee clearly understands the computer software industry.  He also clearly understands the economic concepts at play in the industry.  His direct testimony of some 350+ pages is well worth the reading.

The only problem is that his conclusions are not supported by his own testimony. (At least not as far as I have read.)  See the material below as written yesterday.

His testimony goes to great lengths to explain barriers to entry in the computer software industry, tipping, networking, etc.  It is all pretty much there.  However, he falsely claims that it does not apply to the consumer OS marketplace.  His thinking is correct.  But, he always draws the wrong conclusion.  He offers no proof of the conclusions he does make.

This witness will be an interesting one to watch.  When an expert witness fails to support his own conclusions with correct reasoning and logic, that witnesses is subject to an embarrassing cross examination.  You simply can not draw conclusions without logical reasoning.  That approach might work on public bulletin boards but does not work in court.

I will be looking at the rest of the testimony from Mr. Schmalensee.  However, because of his habit of always drawing the wrong conclusions from his detailed testimony, it is very difficult to understand.  His reasoning is illogical.  His detailed testimony strongly supports the DOJ case.  But, his conclusions appear to support Microsoft.  They are only unsupported conclusions disproved by his detailed testimony.
 

January 12, 1999 - Tuesday

5:00 PM PST - Mr. Schmalensee continues to prove the DOJ's case.

"F. Summary
203. In this Section I have shown:
* The stock of applications for Windows is not a "high barrier to entry" either in theory or in practice.

False.  This testimony in fact proves extremely high barriers to entry even short of illegal bundling activity by Microsoft.

* Microsoft's pricing of Windows and its relentless pursuit of improvements to Windows is more consistent with the behavior of a firm facing intense in dynamic competition than one with a secure monopoly.

The behavior of setting price is not proof either way.  Suggesting that Microsoft acts like it has competition is clearly false when it freely bundles product after product with the OS over time and forces the sale of such products upon all consumers at each step.  The browser is only the latest in this series.

* Professor Fisher and Dr. Warren-Boulton have concluded wrongly that Microsoft has monopoly power over the operating system because they have relied on textbook theories of competition that do not apply to, or explain the dynamics of, the microcomputer software industry.

Well. This testimony clearly addresses many of the unique factors but prove that entry into the market is even more difficult than that testified to by the DOJ witnesses.  The barrier is proven to be enormously high.  Add the bundling act with the browser and the sabotage of Java and competition is seriously precluded.  This testimony proves the DOJ's case. It clearly illustrates just how important it is that the antitrust laws make certain that separate products remain separate.

4:45 PM PST - Mr. Schmalensee testifies to ghost competition?

paragraph "202. Microsoft does not raise price even though it apparently could for a very simple reason that Professor Fisher and Dr. Warren-Boulton have assumed away competition exists. Microsoft faces long-run competition from its installed base, pirated copies of its operating system, existing vendors of operating systems, and a long list of potential entrants. Neither Professor Fisher nor Dr. Warren-Boulton have explained and, indeed, cannot explain why Microsoft does not raise its prices and earn the billions of dollars that would be available to it under the theories advanced by Plaintiffs."

Competition from its installed base, pirated copies and potential competitors do not count.  Current competing vendors count.  They only account for 10% or less of the marketplace. Mr. Schmalensee falsely assumes that ghost competition counts.  It does not.  Only real live competition in the consumer OS market counts.  And that is almost non-existent.

This testimony however does illustrate that antitrust action is absolutely necessary to permit any further competition to develop in the normal course of events.  Microsoft's acts have clearly precluded current competition by Netscape and Sun.

4:00 PM PST - Mr. Schmalensee pretty much proves the case for the DOJ.

His testimony clearly points out how hard it is or will be for anyone to compete with a dominate consumer OS even if they did not violate the antitrust laws.  The problem is that almost without exceptions the conclusions he claims to have reached are not supported by the details of his testimony.  Strangely enough the opposite is the case.  Mr. Schmalensee demonstrates the barriers in detail that have prevented any other company from offering meaningful competition to Microsoft.  He sites enormous expenses that need to be covered to move customers from one version from Microsoft to another.  These same expenses restrict competitors products from competing.  He cites the enormous subsidies that must be paid to developers to get them to adopt to new systems (better or not).

Mr. Schmalensee understands the consumer OS market just fine.  However, all of his conclusions are contrary to his testimony and only support the DOJ case.

3:40 PM PST - Mr. Schmalensee against helps prove the DOJ case.

"2. There Is Intense Dynamic Competition for Software Platform Leadership
126. Two facts are clear from inspection of the history of competition surrounding successive generations of software platforms. As with applications software, there is no evidence that consumers suddenly switch to particular operating systems-what is referred to as "tipping"75 in the network economics literature. To the contrary, although rapid technological change in hardware and software makes product cycles short in the software industry compared to many other industries, it usually takes several years to establish a software platform leader. For example, Windows 3.x did not displace MS-DOS as the leading platform, even on new computers, until the end of 1992, over two years after the introduction of Windows 3.0 and seven years after the introduction of the first version of Windows.76 Within a year of its release, Windows 95 displaced Windows 3.1 as the leading platform on new PCs, but it took more than two and a half years after its introduction to capture the majority of the installed base.77 The theoretical notion of "tipping" simply does not provide an accurate, empirically supported characterization of the actual history of competition for software platform leadership."

This paragraph proves that it takes a lot more than simple resources to compete in the consumer OS industry.  Even Microsoft has had a hard time to move customers from DOS to Windows to Windows 95/NT.  This proves absolutely that barriers to entry by anyone else is enormous.  The witness here is consistent in stating the incorrect conclusion.  His testimony here does not show intense competition but rather a very difficult process that any potential competitor must face.  The testimony here is offer to prove competition exist.  Rather it explains why there is very little if any competition in the consumer OS market.

3:00 PM PST -  Mr. Schmalensee demonstrates knowledge of the industry but concludes incorrectly on each point

"C. Pricing and Profits in the Software Industry
83. Two important characteristics of the software industry are common in industries based on intellectual capital. First, many firms try to come up with a "hit" software product, yet few succeed and those that succeed often have a "hit" for only a short while.45 Firms have to expect to receive high returns when they have a hit to compensate for the extraordinary risks of failure. Second, there are extensive scale economies in production. Once a firm has invested in the creation of software the costs of reproducing and distributing that software are very low. The production of software is similar in this way to the production of books, movies, and other copyrighted works.
84. Successful software firms charge prices that are well in excess of the marginal costs of production and distribution. For example, you can download RealNetworks' RealPlayer Plus G2 software from the RealNetworks Web-site for $29.99 charged to your credit card. This method of distribution probably costs the firm only a few pennies per copy. Even if it cost RealNetworks $1 to distribute the program through its Web-site, RealNetworks' price would be 30 times its marginal cost of production and distribution. That would be an extraordinary profit margin in most industries, but it is not at all unusual in the software industry.
However, Microsoft bundles its media player with the OS too thereby forcing all consumers to buy the Microsoft version regardless of their choice.
85. Successful software firms also earn very high accounting profits on successful products. Whether the firm as a whole has a high accounting profit depends on how many hit products it has. If it has many hit products, it will have high accounting profits as a whole. If it has a few hit products and many failures, it may not have high accounting profits. And if it has mostly failures, it will have high accounting losses.

And, of course if it has a monopoly product it is guaranteed profit as long as it can preclude competition legally or illegally.

86. Software firms charge prices that vastly exceed their marginal costs of production-and earn associated high margins on sales-because they have intellectual capital that consumers desire and are willing to pay for until something better comes along. Based on simple textbook descriptions of competition, one could call this control over price the exercise of monopoly power. Of course, it is nothing of the kind, and it would be silly to accuse all software firms with hit products, best-selling authors, studios with hit television shows, or pop stars with hit songs of having monopoly power.46

This is true.  However, the ability to bundle unwanted products with a dominant one is evidence of monopoly power.

87. In many industries, competition drives prices down to marginal costs and drives the rates of return of firms down to competitive levels. In those industries it is appropriate to look at profit margins and properly measured rates of return to assess how well competition is working. In the software industry and other industries based on the creation of intellectual capital, however, competition does not drive prices down to marginal costs or the rates of return of successful firms down to competitive levels. Instead, competition induces investment in the creation of new products and the improvement of existing products to the point where firms can expect that, averaged over all hits and failures across the industry, they will earn a competitive profit after adjusting for the extraordinary risks of failure.
88. One can, therefore, meaningfully examine whether the prices and rates of returns of the software industry as a whole are competitive-in the sense that they encourage efficient entry. One cannot meaningfully examine whether any particular software product has a competitive price or rate of return, any more than one can look at just the winners of the lottery and ask whether they got high returns on their investments in lottery tickets.

This is why an economist must be able to correctly understand the market conditions that apply to the consumer OS marketplace and conclude correctly as opposed to incorrectly just for the sake of defending an antitrust violator.  Mr. Schmalensee understands the issues but then falsely claims they do not apply or show real power in the marketplace.

89. As I discuss in more detail in the next section, Dr. Warren-Boulton has ignored these basic features of the software industry in reaching his conclusion that Microsoft has monopoly power in operating system software because it has high prices and high margins.
This conclusion is incorrect.  The above testimony disputes the conclusion by Mr. Schmalensee and supports that of Warren-Boulton and Fisher.  Microsoft has been show to have abnormally high profits.  Higher than any.  So, clearly they do not have a normal mix of products.  Even suggesting that Microsoft has a big "hit" with windows does not disprove that Microsoft does not have monopoly power in that market.

2:40 PM PST - Mr. Schmalensee's testimony continues to illustrate the harm caused by monopoly power.

"4. Dynamic Competition and the Invisible Hand
79. The dynamic competition in the microcomputer software industry is different from the static competition that one is taught in elementary economics courses, but it is guided by the same "invisible hand" that guides all competition in market economies. And it has the same results. The microcomputer software industry is characterized by high rates of innovation, declining prices (certainly after adjusting for changes in product quality), and expanding output. It is a very healthy industry from the standpoint of competition.40

But, there is no competition in the consumer OS marketplace.  This is little more than a suggestion of what it should be in the OS market.

"80. Software entrepreneurs look for the next application that will define a category, and they seek innovations that will enable them to leapfrog existing category leaders. As a result, the rate of innovation is high,41 with firms competing by adding new features that differentiate their products from the pack.
81. Competition drives quality adjusted prices down.42 Perhaps the best illustration of this phenomenon is based on the price of office suites now compared with their components in earlier years. In 1990 NERA (an economic consulting firm with which I have long worked) used a word processor, spreadsheet, presentation graphics program, and database. The software packages NERA staff used most commonly were WordPerfect 5.1, Lotus 1-2-3 2.2, Harvard Graphics and dBase IV. Together, all four programs cost about $1,450 at mail-order discount prices.43 Today NERA obtains the same functionality from Microsoft Office 97, Professional Edition, which is available as a $199 upgrade from the Small Business Edition that is sold with business-oriented computers from Gateway and Dell, the two OEMs NERA uses most frequently. Even if NERA were to buy Office Professional separately, it would only cost about $490 from PC Connection, a major software mail-order house.44 Moreover, in addition to the four applications already mentioned, Office 97 includes Outlook, which provides software for e-mail, scheduling, addresses and task organization-functions that most NERA staff did not use or performed manually in 1990. And the core applications are greatly improved from 1990, with much tighter integration among them.
82. The output of the microcomputer software industry has expanded enormously over the last two decades. Of course, part of this expansion has involved decreases in the price of computers and related technology. But innovations in microcomputer software also have stimulated the sales of hardware and have helped reduce the price of hardware as a result of scale economies. The quantity of microcomputer software has increased in two dimensions. First, existing applications such as word processing and personal financial software packages do more with every release. Second, new and creative applications are constantly developed and introduced to consumers."

Yes.  But this is not so in the consumer OS marketplace when a monopolist controls the ability to preclude any and all upcoming competition.

This is testimony of how the consumer OS market should be perhaps but is not due to monopoly power.  Microsoft is the only company that can innovate due to the dominant power it not only holds but abuses despite violations of antitrust laws. His testimony continues to point out why Microsoft's power is so great.  Unfortunately, here he falsely concludes that competition exists where it clearly does not.

2:30  PM PST - Mr. Schmalensee continues to raise industry factors but then falsely concludes they do not apply

The following is taken from Mr. Schmalensee's direct testimony.

"3. "Tipping" and "Lock-in" are not Evident Problems
75. Some economists have suggested that extensive network externalities in the microcomputer software industry make this industry prone to "tipping" and "lock-in."36 But they have relied on certain highly abstract economic theories that imply no more than that "tipping" and "lock-in" are possible-and even then only under a set of specific assumptions seldom if ever encountered in real-world industries. No one ever has shown that "tipping" and "lock-in" have any practical relevance to the microcomputer software industry, and a review of the history of this industry-in which constant innovation has played a key role-shows that they decidedly do not.

This is a false conclusion only offered by a Microsoft witnesses attempting to disprove the known impact that tipping has on the consumer OS marketplace.  Any software developer can testify that a primary reason why the windows platform is selected is simply because everyone else before him has made that choice a valuable one.  Mr. Schmalensee has correctly observed that tipping is a factor but incorrectly concluded it is not present in the consumer OS marketplace.  It clearly is.

76. The word "tipping" is used to imply that there is an extremely rapid change to, or adoption of, a particular product that becomes a leader, generally because of network externalities.37 According to the simplest (and, unfortunately, most common) version of this theory, once a product gets more users than another product, it becomes more valuable and sets off on the path to dominance. Because it is more valuable, it gets even more users and then becomes even more valuable. Its small lead explodes into a massive advantage. As a result, it quickly captures the category. Although positive-feedback effects of this sort are no doubt present to some extent in the microcomputer software industry, the history of competition in microcomputer software products does not reveal any evidence that "tipping" is an important phenomenon. People tend to use the best product in this industry, as in most other industries. Firms that gain an advantage typically do not capture anything close to 100 percent of sales rapidly or before another generation of innovation threatens to unseat them.

Perhaps without the presence of exclusive marketing agreements and exclusionary marketing agreements, this conclusion might be correct.  But, the witness fails to correctly evaluate the impact of these other factors upon the normal result that would or could take place in their absence.  Mr. Schmalensee has intentionally avoided discussing the impact of such contracts in countering normal events in the industry. .

77. Some economists have also argued that the software category leader gets "locked-in" and that its dominance will persist. "Lock-in" results from very high switching costs. In theory, this might come from network effects that make it costly for individual users to switch unless many others also switch. 38 But history provides no support for this "trapping-state" view of the world. There is essentially no evidence that software category leaders get "locked-in." On the contrary, software category leaders get displaced regularly.
Unless competing companies are prevented from selling their products as Microsoft has prevented Netscape?

78.
Interestingly, one of the major PC software categories in which the leader has been in place the longest does not have very important network effects. Quicken was introduced in 1984 and became the leading personal finance software package several years later.39 It has survived challenges from Microsoft Money, Computer Associates' CA-Simply Money and Micro Education Corporation of America's Andrew Tobias' Managing Your Money. Yet, until very recently, there were minimal network effects associated with Quicken. People generally do not exchange personal financial software files, so consumers do not benefit from additional users. (Network effects may arise indirectly from banks standardizing on a package, but relatively few Quicken users did home banking until recently.)

The witness agrees here with the testimony from Intuit.  The CEO from Intuit correctly identified the reality that they do not have high barriers to prevent customers from switching to competing software.  However Mr. Harris correctly noted that the situation is very different with Windows.  The lock in to Windows is enormous.

The claim from Mr. Schmalensee that this is not the case only proves that his testimony is false in this regard.  Each individual consumer knows based upon their own experience that they just do not have any realistic ability to switch to another OS.  Applications are not available or extensive retraining is required.  The "lock in" power is enormous and highly effective to prevent any consumer from switching their OS even if a competitor were successful in entering the marketplace.

The importance of this lock-in has even been increased by Microsoft bundling IE with the OS. Mr. Fisher correctly disclosed this increase in barriers to entry and the customer lock-in caused by forcing all consumers to buy both the Microsoft OS and the Microsoft browser.

2:09 PM PST - Additional fallacies disclosed with the testimony from Mr. Schmalensee.

"paragraph 74. These tables and the underlying case studies reveal several regularities that are consistent with the pattern of dynamic competition I sketched at the start of this section.35
* A leader (defined as having a share of at least 25 percent of category sales) usually emerges.
* For a product that eventually becomes a leader, leadership can take several years to achieve.
* Category leaders usually are considered to be the best or among the best products by reviewers.
* Category leaders are usually displaced when a significantly better product emerges."

This may be true unless the costs for consumers to switch greatly outweigh the relative merits of the superior system. This conclusion also assumes that the former leader does not maintain exclusive marketing agreements such as those held by Microsoft. Microsoft, via its monopoly power has even demonstrated the ability to gain exclusive agreements for products in new markets replacing Netscape without regard to the quality of the product.

This testimony further invalidates his testimony.  His conclusions are devoid of the economic realities relative to the existing case.  Better products normally do emerge.  However, exclusionary contracts and illegal acts by Microsoft to prevent AOL, Intuit and Apple from doing business with Netscape will clearly overcome any advantage that they may have based upon merit and/or any advantage they may have based upon a prior presence in the marketplace.

Mr. Schmalensee fails to see this concept in place with the current facts of the case before the court.

This is why Mr. Schmalensee spends so much time trying to convince the court that IE is a better product.  But, no such showing is evident in the testimony.  AOL, Intuit and Apple each have testified that the monopoly power of Microsoft was the deciding factor in each of their cases.  Technical merit was not.

2:00 PM PST - Mr. Schmalensee helps prove the DOJ case

Testimony from Mr. Schmalensee helps prove that consumers face enormous expenses before they can switch their OS.  This expense adds additional barriers to be faced by potential competitors to the Windows OS.

"2. The History of Dynamic Competition in Software Categories

paragraph 68. To test this model, colleagues at NERA working under my direction conducted detailed case studies of competition in several major software categories: word processing, spreadsheet, database packages, graphics packages, and personal financial software packages.31 I report the major finding for word processing in some detail to demonstrate my approach. I then summarize the results for all of the categories examined.

a. Word Processing

69. The history of word processing software shows that there were three category leaders between 1983 and 1998: WordStar, WordPerfect, and Microsoft Word. In each case, there seemed to be some consensus among reviewers that the category leader was the "best" or "one of the best" products for typical users. Many users ended up switching software packages during the transitions between category leaders. Although software vendors tried to reduce the cost of switching by providing increasingly sophisticated conversion features and alternative interfaces for those making the switch, anyone who has lived through this history knows there was always a short period of pain associated with switching packages. I speak from personal experience, having used four different word processing packages in the last 10 years."

Thanks for the testimony on the costs for consumers to switch their OS.  Changing a word processor is not even close to the time and expense required to change the platform.

1:11 PM PST - A key conclusion from Mr. Schmalensee's is completely false.

"Page 29: b. Switching Costs Are Not a Substantial Entry Barrier

Para 59. Firms that attempt to displace a category leader must persuade consumers to switch from the category leader. Consumers face two kinds of switching costs: (1) they have invested in learning how to use the existing software, and they may have to incur additional investment in learning a new product; and (2) they may have programs and files that they need to convert to the alternative software. The existence of switching costs discourages entrants from developing "me-too" products, although software clones are sometimes introduced. But to achieve more than modest success, entrants have to develop a product that is sufficiently better than the leader's product to persuade many consumers to switch. Given the real-world costs of switching, this "barrier" does not necessarily represent any economic inefficiency. More importantly, switching costs seem low in microcomputer software. History has shown that when faced with a superior alternative, software users switch and do so in droves.25"

This is a false conclusion. Switching costs for consumers all but preclude any consideration that they may want to entertain.  The general ability of users to switch some applications does not apply to consumers using a consumer OS product.  This testimony fails to even begin to address the reality of this situation.  Because of this failure, the testimony is fatally flawed.

11:00 AM PST - Mr. Schmalensee's testimony is highly disjointed and illogical.

I am in the process of reading the direct testimony from Mr. Schmalensee.  I must admit that it is almost impossible to understand his thinking.  He appears to suggest that the AOL-Netscape merger somehow causes or justifies the act engaged in by Microsoft to preclude Netscape from the marketplace.  He appears not to understand that Microsoft acted first and then the merger was announced.   He also seems to fail to understand that competition regardless of its possible strength does not excuse violations of antitrust law.  But, the real problem is that the competition he appears to be pointing at does not even exist.

The cross examination of this testimony is going to be quite interesting.

8:00 AM PST - Mr. Schmalensee's testimony is highly misleading

Mr. Schmalensee's vain attempt to show competitiveness in the consumer OS marketplace presents a chart listing 4 operating systems together with their applications and total user count.

Unfortunately, he forgot to include DOS, Windows 3.1, Windows 95, Windows 98, Windows NT 3.51 and Windows NT 4.0.  I guess he completely forgot which case his testimony was being prepared for. Not only does he omit the consumer OS subject to this case in the comparison but he includes operating system which do not compete with Windows.

Since he has apparently used this information to base his opinions on, his entire testimony is invalid.

January 11, 1999 - Monday

10:00 PM PST - Sometimes false testimony is just that, "false".

I have just been reminded by a reader of this web site that he is being forced to buy a Microsoft operating system if he wants to buy a new computer.  Gosh.  And, to think that a high paid economist in the Microsoft antitrust trial claims that Microsoft does not have a monopoly much less monopoly power.

Let me tell you something about witnesses.  Once they are proven to be incorrect, their entire testimony should be and is often discarded as "false".

The testimony from the economist hired for this case falls into that category.  The fallacy of a basic premise of his testimony is proven false with a single trip to just about any computer store in the country.

Mr. Schmalensee is simply not to be believed for any purpose.

9:00 PM PST -  A closer look at Mr. Schmalensee testimony.

I will be spending a fair amount of time over the next few days reviewing in detail the so-called testimony from Mr. Schmalensee.  However, his testimony is fairly easy to characterize.

1. Mr. Schmalensee appears to think that all decisions in the computer software industry are purely based upon technological considerations.

While this position may be the only legal one that Microsoft can take it clearly does not represent reality. While AOL clearly testified that placement on the Windows desktop was very important to them, Mr. Schmalensee claims that no such consideration took place.  This invalidates his testimony.  No legitimate economist would dispense with the important of exposure to most if not all potential customers so lightly.  His only testifying this way to down play the illegal act of trading a card that only Microsoft has to gain the removal of a key Netscape account.

2. Mr. Schmalensee appears to think that just about anyone can write an OS and compete heads up with Microsoft.  All they need is a little money and good software.  This suggestion of his is absurd.  For one, he is not qualified to speak to this issue.  And, two, major corporations such as IBM have found that is just not the case.  The failure of IBM proves that exclusive marketing agreements, predominance in the market and a whole range of other factors make it very hard for any company to offer competition.  He falsely argues that Linux and OS/2 offer any meaningful competition today.  They may exist and in fact continue to exist.  But, for him to suggest they are meaningful competition in any sense today only shows how untruthful his testimony is.

3. Mr. Schmalensee seems to suggest that since Netscape may have offered competition in the future that Microsoft was justified in forcing a zero price in the market for browsers.  He also falsely assumes that the Netscape browser is somehow able to compete with Windows when it can not be sold but rather must be distributed without compensation.  This assumption on his part invalidates his entire testimony.  He fails to account for the realities in the industry that no product can possibly offer competition on an ongoing basis if it can be sold on a profitable basis.

It may not be true today that the technology offered in competition by the Netscape browser causes its demise (although he already argues that is the only reason IE is successful), but any economist will accept the argument that over time only profitable products will continue to gain the necessary funds for on going development.

You can be assured that a year or two from now Mr. Schmalensee will argue that the only reason that all consumers have IE is purely because Netscape failed to keep up with the developing technologies.

Maybe someone should point out to him that consumers have no choice but to buy, install, maintain and in fact use IE regardless of their needs or desires.

I wonder if his economic training is sufficient to understand the impact that such abusive acts by Microsoft have on the future of competing technologies?  His testimony attempts to prove that he does not understand such concepts.  He even goes so far as to suggest his baseless economic analysis disproves the direct testimony of witnesses from AOL and Intuit.

I find his conclusion that Microsoft does not maintain significant monopoly power to only prove his testimony is false.  Without monopoly power, bundling products just does not work.  Without monopoly power, a zero price can not be maintained indefinitely in the browser market.  Yet, Microsoft claims to be able to do just that.

He even makes the most absurd conclusion that a zero price is not predatory for browsers.

Maybe he should consult with a real economist that could explain to him how ongoing R&D is supposed to be undertaken if no product can ever be sold.

Mr. Fisher was absolutely correct when he concluded that the bundling of IE with the OS further increased the barriers to entry in the consumer OS marketplace at the same time it effectively removed any current competition in the internet browser market.  In contrast, Mr. Schmalensee claims not to understand these barriers at all.  He understands them very well.  He just ignores them when testifying about the realities of Microsoft's monopoly power.

Perhaps Mr. Schmalensee would benefit from a trip to a local computer store.  While there he could list all of the alternative operating systems he could buy with a system and the various applications he can pick from to satisfy his needs.  Who knows, maybe he will find some products that no one is aware of.  Sometimes consumers have no problem observing the obvious.  But, I have never imagined that a trained and educated economists could possibly fail to make the same observations.

As is always the case.  If the basic facts upon which you base your assumptions are incorrect, then the entire analysis is flawed.  This has never been more true than in the case of Mr. Schmalensee testimony.

Let's look at the monopoly question over the coming days.  But, consider only real competition, not fake stories or ghost stories or radical projections of unlikely events.

And, lets look at the economic effect of acts actually performed by Microsoft and their impact upon the markets in question.  And, lets look at the real reason why companies do what they do and enter into agreements rather than adopting a sophmorish conclusion that the only reason software sells is based purely upon merit.  If anyone disagrees with that premise, it must be Bill Gates.  No one else in the industry believes that either.  It is simply not true.

Bill Gates knew full well why he made the threat to bundle IE with the OS.  Mr. Schmalensee claims to not understand the basic economic principals behind that threat.  To that extent Mr. Schmalensee is offering false testimony.  He is not testifying as to his true knowledge and understanding at all.  His is only carefully selecting what he says to the extent that it confuses the economic reality of the industry.
 
 

6:30 PM PST - Mr. Schmalensee fails to understand the industry and what makes a monopoly.

The following text if taken from the executive summary of Richard L. Schmalensee.  My reply is in blue italics.

1. Consumers have benefited from lower prices, greater output, better software and higher rates of innovation as a result of the actions taken by Microsoft that Plaintiffs seek to enjoin.

This conclusion is written to suggest that the DOJ is seeking to enjoin Microsoft from producing beneficial products.  This is false.  The DOJ is only seeking to enjoin acts which violate antitrust laws.  There is a very big difference between the two statements.  In fact, the acts of Microsoft have driven prices below zero precluding a valid market for browsers, tried to prevent all output from Netscape, attempted to prevent software from being used by customers (regardless of its benefits) and tried to suppress all innovation coming from Netscape by "snuffing out their revenue source".

Microsoft assumes here that only Microsoft Corporation is capable of supplying products that benefit consumers.  In fact, it has acted to suppress all products not being sold by Microsoft.

1. Microsoft does not have monopoly power over the PC operating system software category. Microsoft cannot, and has not, excluded competition from this category. Microsoft cannot control prices in this category because it is constrained by competition from its own installed base, piracy, competition from other operating systems, and, most importantly, the long-run considerations that drive all pricing and innovation in the microcomputer software industry. Nevertheless, Plaintiffs' claim that Microsoft has monopoly power in the PC operating system is a red herring: it is irrelevant to most of their allegations that Microsoft engaged in anticompetitive conduct.

This conclusion is devoid of any economic reality.  In fact, the Y2K problem all but prevents any competition from its own installed base.  This is false competition.  It is nothing more than fabricated testimony.  Microsoft does not compete with piracy.  This does not mean that piracy does not exist.  But, rather that it is a false argument. Other operating systems provide very little if any competition.

Microsoft needs to show real competition not just write up a few ghost stories.  Where are the competing products and applications found in the computer store?  If they are not in the store, they do not exist.

 2. Plaintiffs' allegations that Microsoft engaged in anticompetitive conduct hinge, instead, on their plainly false claim that the Windows operating system is a choke point for software distribution. Microsoft does not have monopoly power over the distribution of software for On-Line Services (OLSs), Internet Software Providers (ISPs), Internet Content Providers (ICPs), or Independent Software Vendors (ISVs). Microsoft therefore did not have the economic power to foreclose Netscape from distributing its Web-browsing software.

It may be true that the choke point is not 100% effective.  However, a number of witnesses have already testified that Microsoft does indeed control an extremely valuable and exclusive ability to determine the commerce in a number of related industries.  This power is in addition to the raw monopoly power of its dominant operating system.  In fact, Mr. Fisher was correct in observing that by bundling IE with the OS this power is increased as a direct result of an act by Microsoft.

3. Microsoft did not, in fact, foreclose Netscape from distributing its Web-browsing software. Netscape secured many millions of additional users of its Web-browsing software over the last three years. Many of those users obtained the software through channels Plaintiffs claim were foreclosed to Netscape. Netscape's percentage share of users decreased because of its own business and technical mistakes, and because Microsoft's Web-browsing software improved dramatically.

Microsoft's suggestion that it failed in completely removing Netscape from the market is not a defense.  Does Mr. Schmalensee really think that Microsoft forcing all consumers to buy, install, maintain and use IE is equivalent to Netscape finding a way to give away its products?  This is just false testimony.  His conclusions suggesting Netscape is loosing business due to non economic causes not only leaves his area of expertise but proves that Mr. Schmalensee is falsely testifying as to the economic consequences of the acts of Microsoft.  His suggestion here is incorrect.  It is devoid of an economic basis and in fact is the wrong conclusion that would naturally be drawn by an economist.  The strengthen of the impact might be in question but the direction of the force is not.  He has failed to see the reality of the situation.

4. Microsoft engaged in pro competitive integration of Web-browsing functionality into Windows, not anticompetitive tying. Just as Microsoft has provided end users with steadily improving operating-system software by integrating many other features and functions into the operating system, Microsoft provided end users with better operating-system software by integrating Web-browsing functionality into Windows.

Well.  Microsoft has bundled other applications and preclude competition before.  However, it is false to suggest that IE has been integrated with the OS.  Bundling more and more applications into the OS is not improving the OS at all.  It is only bundling applications.  For example:  IE is the same product on Solaris as it is on Windows 98.  Microsoft has to insist upon that.  Otherwise, it would not browse correctly.  Thus, nothing that IE does can be an OS function.  Therefore, it can not expand what the OS does.  IE has simply been bundled with the OS in order to achieve the economic result of removing competition from the market.  This is a simple concept which Mr. Schmalensee, an economist, claims to not understand.

5. Microsoft's actions are more consistent with the hypothesis that it engaged in aggressive competition that has benefited and will continue to benefit consumers than with the alternative hypothesis that Microsoft engaged in predation. Microsoft invested heavily in integrating Internet-related technologies into its software platform and making its Web-browsing software the best available to consumers, OLSs, and ISVs. As a result of these actions, Microsoft expects to sell more copies of Windows, expects to preserve its technological leadership in software platforms, and expects to earn revenues from Internet-related products and services.

This conclusion is proven false by the statement of Bill Gates himself.  Maybe Mr. Schmalensee should take a few economic lessons from Bill Gates.  Mr. Gates clearly understood the economic consequences of bundling IE with the OS.  And, did not Bill Gates fail to get a degree?  A professor really should be better able to understand these elementary principals.

6. Microsoft's success in getting consumers to use its Web-browsing software has not prevented Netscape from developing a competing software platform by itself or in combination with Sun. Netscape had more than 28 million users of its Web-browsing software in the third quarter of 1998. Sixty percent of business users employ Netscape's Web-browsing software primarily, according to Zona Research. Netscape has more than enough users to persuade ISVs to write applications for its Web-browsing software if Netscape makes that software into an appealing and promising software platform.

This claim is absurd.  Only Microsoft would reserve to itself the right to force the sale of its products upon all consumers yet argue that competitors are still free to give away their stuff.  In fact this claim (not within the realm of his expertise, by the way), is inconsistent with this other conclusion that Netscape has failed due to technological inferiority.  The reality is only that Netscape has yet to be completely precluded from the market despite Microsoft best efforts to eliminate it from all sources of revenue.  This suggestion does not defend Microsoft.

7. The planned acquisition of Netscape by AOL and AOL's alliance with Sun shows that it is not plausible that Microsoft engaged in the predatory strategy claimed by Plaintiffs or that such a strategy could succeed. AOL could help Netscape and Sun develop a competing software platform and thereby defeat Microsoft's alleged predatory strategy by using Netscape's Web-browsing software for AOL's subscribers. In this event, Netscape's share of Web-browsing software use would increase to more than 65 percent and it would have more than 42 million users. Microsoft's share would fall to 33 percent. The financial gains to AOL of helping Netscape, by itself or in combination with Sun, to develop a competing software platform would dwarf the value of the few additional subscribers AOL obtains through the On-Line Services (OLS) Folder on Windows—if, indeed, Netscape and Sun could develop a desirable software platform for end users and ISVs.

This is false testimony.  Bill Gates himself disagrees here.  Bill Gates clearly laid out the companies plan to prevent competition.  Mr. Schmalensee is engaging is a pure fabrication of an unlikely scenario.  1) AOL has already suggested it would most likely not drop IE. 2) Microsoft is forcing all consumer to buy IE regardless of what other applications they may obtain.  Mr. Schmalensee is clearly outside his expertise here.  He has absolutely no expertise to predict how various players in the industry may or may not offer competing products to Microsoft in the future.  Even if he had this expertise, which he clearly does not, it would not be relevant.  Microsoft's acts are either legal or illegal based upon the presently held monopoly power.  They are not excused by possible future events or even paranoia that Bill Gates may or may not have.  They are tested in the present.  And, not excused by a possible future.

8. Plaintiffs' proposed remedies would harm consumers and competition. Such proposed remedies are designed to do exactly what the antitrust laws were designed not to do: to help a specific competitor at the expense of consumers. They would reduce output, raise prices, and temper the competition between Microsoft and Netscape that has resulted in rapid improvements in Web-browsing technology.

Mr. Schmalensee needs to do a much better job of explaining how giving consumers a choice in the market is supposed to harm them.  Courts have never so concluded.  Economically speaking this is devoid of reality.  This conclusion is simply not based upon economic thinking at all.  This conclusion is little more than disjointed phrases designed to somehow mention a bunch of words and end in a so-called conclusion supporting the defendant, Microsoft Corporation.  The only problem is that is that it does not convey any intelligent thought.  If he is alluding to the possible inclusion of the Netscape browser with Windows, then he has proven harm to consumers by Microsoft bundling IE with the OS.  Bundling IE with the OS as Microsoft has done does in fact help a specific company (Microsoft) at the expense of the consumer.   This is precisely why the DOJ is filing its action.

Here Mr. Schmalensee has proven the DOJ case for them.
 

5:30 PM PST - Mr. Schmalensee is already seriously in error.

"2. I have concluded that there is no basis for Plaintiffs’ contentions that Microsoft has engaged in
          business practices that are likely to harm consumers. I summarize my reasons for reaching this conclusion in the following nine parts of this Executive Summary."

The above is taken from the Executive summary of Mr. Schmalensee.

This claim of his is patently absurd.  Why?  Because I, for one, am a consumer and already feel harmed by Microsoft.  But, each consumer can answer this question for themselves.  If Microsoft will tell consumers how much they are being charged for IE, then each individual consumer can decide if they feel harmed by Microsoft's actions or not.  If Microsoft continues to claim the product is free, that deceit will affect the ability of consumers to decide whether they feel harmed or not.  But, all Netscape customers clearly feel harmed.  And, all consumers who do not use a browser should also feel harmed.

I,  for one, am in fact harmed.  I must either stop using Microsoft software altogether or forgo my right to pick and choose my applications.  For me to forgo all Microsoft software is very expensive.

I guess Mr. Schmalensee failed to talk to a single consumer in drawing his conclusions that one one is harmed.  He clearly did not talk to me.  I think he just assumes that Microsoft software is so beneficial that denying alternative products must offer a net benefit all 100% of all consumers.

This conclusion is not only false, but is also rejected by the courts.  The courts always assume that realistic choices available to consumers offer benefits and the lack of choice harms consumers.  They draw that conclusion because that conclusion is the correct one.
 

3:30 PM PST -  Microsoft's first witness to take the stand shortly

Lets take a look at the conclusions reached by Richard L. Schmalensee.  I say conclusions because he will have to provide evidence supporting these statements. Full direct testimony is available here.

1. Consumers have benefited from Microsoft's actions.

Microsoft needs to explain how a consumer is benefited by being forced to buy IE when they do not need a browser or prefer another brand.  Consumers will have to be separated out in this discussion.  The benefit to consumers who previously bought IE is very different from that to consumers who use another product.  Maybe the witness can explain how consumers benefit from being forced to switch applications?

2. Microsoft doesn't have a monopoly over the PC software market.

Perhaps not over all products in the marketplace.  But, the allegations relate to the consumer OS marketplace.  This economist needs to explain how if 90% of all PCs are shipped with Windows installed, this is not a monopoly.  (Does he think that anything short of 100% is okay?)

Just how is this economist going to prove that no monopoly power is present?  Is he going to suggest that even if consumers have no choice when they buy a PC, that it still is not a monopoly?

More than one company has abandoned any idea of competing with Microsoft because of the enormous power held by Microsoft and the barriers in place preventing competition.  Mr. Schmalensee will have to prove that all of these experts in the industry did not understand how easy it must be to compete against Microsoft.

3. Windows is not a choke point when it comes to software distribution.

It may not be for all applications.  However, it pretty much prevents any market from existing for applications bundled with the OS including: browsers, solitaire card games, backup software, peer-to-peer networking for PCs, disc compression, defragmentation and numerous other utilities.

A choke point does not imply complete elimination from the marketplace.  But, bundling any application with the OS all but prevents any meaningful market from existing.  Denying realities of the marketplace only degrades the creditability of Mr. Schmalensee.

4. Microsoft didn't prevent Netscape from distributing its browser.

It is true that Netscape can still distribute its products.  But, it can not sell them.  Does Mr. Schmalensee think it is okay as long as the ability to give away product or distribute without compensation has not been completely accomplished?

The question before the court is not whether the act was complete or even permanent.  The question is whether Microsoft used its monopoly power to significantly reduce the ability of Netscape from selling its products by the ruining of the market.

5. Including Web functionality into the OS improves the platform and therefore is pro competitive.

Including Microsoft Word would also improve the platform, but that does not mean the act is pro competitive at all.  The choice between pro competitive and anti-competitive is based upon the impact the act has on competition.  If it precludes competition as in removing the ability of similar products from having a value on the marketplace, it is anticompetitive, not pro competitive.

Pro competitive means better features or better prices, not the removal of a marketplace by bundling a product with a monopoly product. A better browser marketed fairly is pro competitive.  Bundling a browser with a monopoly product for the express purpose of preventing competition is not. (Note the threat issued by Bill Gates himself in 1994.  He said he would just bundle their browser with the OS should anyone think of developing a browser for windows.  Mr. Schmalensee claim here is disproved by Bill Gates himself.)

6. Microsoft's Windows is successful in the marketplace because the company keeps improving it.

One can assume that the product has been improved although that is not the reasons why Windows remains the only choice to consumers.  Why Windows is successful is not really at issue in this trial. Being successful is not a violation of the law.  Using the monopoly power that comes with that success is the problem.

In the past, many acts by Microsoft served to prevent competition in the OS marketplace.  Those acts are not really in question with this litigation.  The allegations in this case are that the monopoly power of windows was used to preclude competition in the browser marketplace.  Testimony from AOL, Intuit and Apple on this point prove that the upcoming domination of IE is not based upon merit but rather upon illegal acts.

7. Netscape has not been hindered by Microsoft and has enough users to attract developers.

Microsoft has forced AOL, Intuit and Apple to cease doing business with Netscape.  The fact that Microsoft has not completely removed the ability of Netscape to attract developers is not a defense.  It does not matter that Netscape's ability was not completely removed.  It only matters that Microsoft's acts did in fact make it much harder for Netscape and that Microsoft used its monopoly power to do that.

However, the attitude of Microsoft is clearly expressed here by Mr. Schmalensee.  Microsoft should have the right to force all consumers to buy and maintain the browser from Microsoft, but Netscape is only permitted to give away its technology or be completely removed.

This conclusion is only saying that at this point Netscape has not been completely removed.  Nice statement but does not offer any legal defense for antitrust violations.

8. AOL's pending purchase of Netscape could threaten Microsoft's position.

So what?  General Motors could threaten Microsoft's monopoly too.  So could AT&T.  Future possible threats from other companies does not justify any act by Microsoft.  In fact, the antitrust laws are in place so that future competition can serve the vital function it is supposed to serve.  Possible competition never excuses antitrust violations.

The truth is that neither AOL nor Netscape offers an operating system to the market.  The fact that another browser on the market could in the future offer competition is the way it is supposed to be.  It in no way provides a defense for antitrust activities engaged in by Microsoft.  Whether the paranoia of Microsoft is justified or not is just not relevant.  All products are supposed to have competitors not the other way around.  Competition implies that other products are in fact available to consumers.

9. Remedies proposed by the plaintiffs would hurt consumers and competition.

For this one, I have to see the details.  This economist must really explain how giving consumers the choice to buy their own products will hurt them.

This is just a precursory response to Mr. Schmalensee conclusions.  However, I doubt that anyone in the industry believes these statements.  Oh.  I know some will claim they do as they try to protect the unfair and anticompetitive practices of Microsoft, but at this point, I find nothing said by Mr. Schmalensee to be creditable.  At this point he does not seem to understand much about the computer software industry nor economics.

Microsoft has the absolute right to hire an economist to testify on their behalf.  But, their testimony has to make sense.  I look forward to reading this testimony more carefully in search of economic principals that do make sense.  And, I look forward to reading this testimony in search of his understanding of the computer software industry.
 

12:30 PM PST - Court decides to keep the public in the dark

This decision to hold a non-public session is not necessarily bad except in the interests of consumers.

Holding key information away from consumers invalidates much of what they may say they support.  Consumer studies recently released suggesting support for Microsoft are reduced in their importance whenever the consumer is prevented from having key information.

11:28 AM PST - Court considers motion to keep pricing information from the public

Upon occasion it is important to keep information secret.  OEMs may not want the price they pay to Microsoft to be public knowledge and Microsoft does not want any information to be available to the public.  Or, OEMs are simply asking as a "favor" of Microsoft.

However, the consumer does have certain rights to information in antitrust matters.  The early spat between the parties and press over depositions being publicly available is indicative of these rights.

It is even more important in this case because Microsoft claims to not have monopoly power and claims to not be charging for IE.  Anyone who has read my articles on this site knows that I find the zero price claim completely bogus.  Just because the price is not disclosed by Microsoft in no way proves it is zero.  In fact, evidence submitted so far in this trial strongly suggests that Microsoft in fact raises the price of windows to OEMs as features are added over time.  Of course this is the case.  And, of course, IE is an added feature if nothing else. (It is an option of a monopolist to overcharge for one product and given another one away.  Or, just charge a fair price for both products and bundle the sale.   There is no necessity to give away a product bundled with the monopoly product.  Microsoft has not and is not doing that.  They are charging all consumers for IE.  The only question is "how much?".)

But, Microsoft obviously feels that in order to keep the consumer from complaining they must be kept in the dark as to some of these key issues.  I fail to see why.  Certainly, all of the major players in the industry know pretty much how much they and other companies pay Microsoft.  I doubt if any of them would be surprised by any numbers released.  Individual consumers might be, but not those in the industry.  So the claims in court are being offered to hide the truth from consumers rather than to protect any so-called secrets from competitors.

Microsoft wants the legal right to force the sale of IE upon all consumers AND the legal right not to tell the consumers how much they are paying for IE.  "Consumer fraud" does not work otherwise.
 

Daily Wrap and Flow - Week Eleven
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