(or daily rap and toe)
Reading the Daily Wrap and Flow is a quick and easy way to follow the ebb and flow of the trial. Some times what happens on a daily basis just is not that important. Rather than focus upon "one liners" intended for the press, this section will just try to recap the daily events and put those events into perspective.
October 23, 1998 - Friday - Day off - Week in Review
This week the trial did get under way. Aside from the opening statements, we have only heard from one witness, Jim Barksdale. The CEO from Netscape is an important witness but much of what he has to say is really not very important. Why? Because Netscape and Microsoft did not agree to carve up the market for internet browsers. If they had, both companies might be defending themselves in court.
What is clear is that those two companies did not agree to split the market. Netscape did not take the offer they "could not refuse". They refused it. So. We are left to guess the actual demeanor of that meeting. But, it does not really matter that much. Antitrust law does not really address "hard bargaining", "brown nosing" or "hard ball". Unless it is a clear pattern or practice over time with many players. Of course, Apple, Intuit, AOL and OEMs did take the only offer made by Microsoft.
Microsoft landed itself in court this week because it bundled IE with the OS. This is the key to the DOJ case. This is the act that violates antitrust law.
A comment by Bill Gates did come up in testimony this past week. Bill Gates knew that the easiest way to preclude any competitor from a market is to bundle their comparable product with the operating system. This is a very old marketing trick. Bill Gates knew all about it. Bill Gates knew that if they sold a monopoly product they could eliminate any competition for any other product just by bundling that other product with the OS. Bill Gates used his knowledge to threaten Netscape very early on. The threat is just a threat. But, Bill Gates made good on his threat and did in fact bundle IE with the OS with the express purpose of precluding competition in that marketplace.
Mr. Barksdale's testimony is for the most part just confirming what everyone in the industry already knows. It is almost impossible to sell a product at a fair price when any competitor can force their version of the same product upon the entire customer base.
Microsoft has made itself look very foolish by suggesting in court and in the press that they have done no wrong since Netscape is still able to distribute (without compensation) some of their products. This is an incredible display of arrogance. No person at Microsoft believes that being able to distribute products without compensation is acceptable. Steve Ballmer himself has gone on record as saying that distributing products without compensation is a horrible business plan. Yet, Microsoft through their attorneys expects the consumer to believe that everything is fine as long as Netscape has not be driven to bankruptcy by their acts.
Microsoft forces 100% of their customers to purchase IE and defends their acts in doing so by claiming that Netscape is still able to give their products away.
This position taken by Microsoft is unbelievably stupid. Attacking Netscape or suggesting that Netscape can still do some business so Microsoft should be able to continue to bundle IE with the OS is poor trial strategy. It only shows their unrelenting effort to suppress competitors whether or not such acts violate the law. It just does not matter to Microsoft. This week Microsoft even stooped so low as to disparage the products of Netscape before the press in an effort to deflect the public's view of their antitrust activities. Netscape has not suggested that Microsoft browser is inferior as part of their cooperation with the DOJ. But, Microsoft has suggested that Netscape's browser is inferior as part of their effort to deflect the public view of Microsoft's acts. Typical Microsoft behavior continues during the trial itself.
October 22, 1998 - Thursday - Fourth Day of Trial
Microsoft continued their questioning of Jim Barksdale. It is interesting that Microsoft thinks that what Netscape may or may not have done is related to their liability for antitrust violations. The truth of the matter is that Microsoft is accountable only for what their employees did. There is little that Netscape could have done to implicate Microsoft. And, there is little that Netscape could have done to provide a defense for Microsoft.
Microsoft continues to suggest by their questioning that since Netscape is still able to distribute their browser that no harm has been done. I suppose Microsoft would think that forcing the sale of IE to their entire customer base and letting Netscape distribute without being compensated is fair competition. But, of course that is not the case at all.
I do not think anyone seriously believes that the ability of Netscape to sell their products has not been greatly reduced by the acts of Microsoft. Even Bill Gates acknowledged the difficulty that anyone would have if Microsoft were to bundle IE with the OS. At what cost is not even the issue. Microsoft could clearly increase the package price for both the OS and IE and still force the sale.
The real question is just how much is Microsoft charging for IE. Is the OS $200 and IE free as Microsoft suggests? Or is IE $200 and the OS free? Or, is it somewhere in between. I have suggested upon more than one occasion that the split is 30/70 with 70% of the cost being attributed to IE.
Meanwhile, Microsoft suggests that since Netscape has not been driven into bankruptcy that Microsoft has done no harm to consumers nor Netscape.
October 21, 1998 - Wednesday - Third Day of Trial
Microsoft ordered to open data bases. The judge mentioned that he thought the information might be able to help him decide the case. Sounds like an understatement.
From ZDNet, Microsoft ordered to hand over pricing details
Bill Gates planned to bundle IE from the beginning to preclude competition? The "b" word used by Gates himself and in the context of using that type of packaging to prevent any competitor from offering a product in competition with Microsoft. See Microsoft attacks DOJ case . Bill was correct that bundling does preclude competitors from offering products when used in conjunction with a monopoly product. It is very effective. That is why it is illegal.
When Netscape might have known of this plan or for that matter when anyone might have know of it, is just not relevant. Bundling IE to preclude competitors is a violation of antitrust law. And, Bill Gates should have consulted (and most likely did consult) with his lawyers before implementing any such program. But, it is the intent of the act that makes it illegal and who did or did not know of it is beside the point.
October 20, 1998 - Tuesday - Second Day of Trial
Still on schedule, Microsoft Corporation gets its chance to provide an opening statement. As in most cases, the defendant is at a little bit of a disadvantage. Microsoft would rather not be in court at all. But, they have the opportunity to say a few words. So, they take it. However, since Microsoft does not have any real factual defense to offer, little can really be said.
The beginning of testimony is much more interesting. All direct testimony is prepared in advance and submitted in writing for this trial. This is not the normal process. However, it does work and the judge wanted to speed things along by having this testimony prepared in advance for each witness. This does make a lot of sense. It should be used more often for major litigation.
Jim Barksdale, CEO of Netscape Communications is the first witness. His cross examination began today.
Microsoft tried to challenge the credibility of Mr. Barksdale as a witness and to suggest that Netscape lost market share not because IE was bundled with the OS but rather that Netscape made some mistakes in marketing and technology. Regardless of the accuracy of the suggestions, they are for the most part just not relevant.
Microsoft Corporation is on trial for the acts that Microsoft conducted. Microsoft can not be held liable for acts they did not do nor can they be defensed (or released of liability) by what Netscape might have done. Microsoft would like to suggest that they, Microsoft can violate antitrust law if they can just show that Netscape did the same. Well. Microsoft's lawyers know it does not work that way. Pointing out that someone else committed murder does not excuse your own conduct even if the other party got away with it. This argument is intended only for the press.
The same is true for any impact that Netscape's Technology might have had on the market success. In trial and in public Microsoft would like to show that Netscape lost market share due to its own mistakes and technology shortcomings. Legally, it does not matter. Microsoft is not, nor should it be excused of antitrust violations because of anything Netscape did or did not do in the market or with its technology. Microsoft is on trial for bundling IE with the operating system for the purpose of precluding a competitor from the market. It is not really important whether they succeeded in fact or not. Nor, whether it has already taken place or not. The court is clearly capable of finding that Netscape will be precluded from the browser market if Microsoft distributes IE to all of their customers in advance of any customer being able to decided to also install a similar product from Netscape. Most consumers clearly do not need two operating systems or two browsers.
What is going on here however by Microsoft both in court and in public is a effort by Microsoft to disparage the products of a competitor. It is one thing to argue in court (assuming the cause of any loss in market share is at issue) that Netscape's loss of market share is due to its own mistakes. It is another to publicly announce to the press that Netscape lost due to inferior technology. Those comments are hardly suitable for product advertisements much less statements from attorneys. Microsoft Corporation is known for not having any policy against saying ill will about a competitors product. Many major corporations do. Microsoft does not. And, now we see that even their attorneys use that suggestion in a public statement to help carry out corporate goals. Microsoft does have a right, indeed a duty to defend itself in court. Statements made in court are in fact privileged and need to be aired. However, statements made in public are not so privileged. Yet Microsoft, by their attorneys, have downgraded or disparaged the product of another company, typical Microsoft policy. Microsoft's good will would be better served by focusing upon the acts that got them into court rather than just attack the product of a competitor as if that is some kind of excuse for their acts. It is not.
For Microsoft's attorneys to suggest that now or in the future Netscape lost market share due to technological inferiority or mistakes in marketing is either a sure sign they know little or nothing about marketing products or the effectiveness of bundling inferior products with dominant ones or they are just trying to harm other competitors by saying bad things about their products. Microsoft's attorneys would better serve their client to focus upon what Microsoft did or did not do, not attack the quality of competitors products or to suggest that other companies act as badly and inappropriately as they do.
October 19, 1998 - Monday - First Day of Trial
On schedule the Department of Justice began with opening statements. Opening statements are used to lay out before the court what the party intends to show. Most notable is the focus upon the creditability of a non-witness, Bill Gates. While neither party has named Bill Gates as a witness, his statements in the past takes front stage. This approach is a little bit of gamesmanship and a little bit of substance.
The DOJ would like to force Microsoft to call Bill Gates as a witness so they can cross examine him. They could call him directly, but why waste one of your own witnesses? Each side has been permitted to call only 12 witnesses.
It is also substantive since the statements indicate what the true plans and policies of Microsoft Corporation were. While Microsoft has charged the DOJ with using snippets of e-mail taken out of context to feed the press in advance of trial, Microsoft itself is being charged with trying to change history itself by over emphasizing rather insignificant statements early on and ignoring what most observers of the industry know very well. That is that Microsoft Corporation was late to figure out how important the internet was to their future.
Suggesting that Microsoft was the leader in browser technology and planned to incorporate the browser into their operating system from the beginning is not going to fly. No one in the industry remembers it that way at all. Microsoft was clearly the reactionary in the browser market.
You have to separate out the comments intended for public consumption and the evidence of the case. For the most part, it does not matter when they decided to bundle IE with the OS. The important issue is why they did so. Why they combined those two products will have to be shown regardless of timing. The DOJ will present evidence that they were combined to force the sale of IE. Microsoft will try to show it was only combined as a benefit to the consumer or to make a better product.
What it was not, was a stroke of genius. Bundling products in this manner is an old trick. If you have a monopoly, it is a very effective marketing
gimmick. It does force the sale of an otherwise slow selling product.