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The Department of Justice vs. Microsoft
Updated 3-27-99
(don't forget to read the caveats!)

DOJ vs. Microsoft
Interesting observations by me. Again, note this is my personal opinion, and does not reflect the opinion of any past, current, or future employer. I think that any unbiased, logical person can follow my argument and logic regarding this case.

Timelines:
1991 – FTC begins to investigate claims that Microsoft monopolizes the market for PC operating systems. Humm……so this started way back then?

1993 – FTC deadlocks to file formal complaint against Microsoft, closes investigations. But DOJ antitrust investigators begin independent probes…..

1994 – Microsoft changes contracts with PC makers, satisfying both US and European antitrust investigations.

1995 – Judge Stanley Sporkin rejects 1994 settlement. But in June, U.S. Court of Appeals reinstates the very same anti-trust settlement. Basically, Sporkin got "Bitch Slapped" by the U.S. Court of Appeals and essentially told he was an idiot for coming up with his conclusion.

1997 – DOJ sues Microsoft, saying bundling Internet Explorer on PCs loaded with Windows 95 violates the 1994 consent decree.

December 1997 – Judge Penfield Jackson issues injunction forcing Microsoft to stop requiring PC makers to install its web browser on computers. Microsoft files appeal to a U.S. Federal Appeals Court to life Jackson’s temporary injunction.

April 1998 – Attorney Generals from 13 states seek injunction to stop shipment of Windows 98 to PC makers.

June 1998 – A U.S. Federal Appeals Court overturns a preliminary injunction, which had barred Microsoft from bundling its Internet Explorer with Windows 95. The appeals court decided that a lower court made both procedural and substantive errors in imposing the injunction. Basically, for the second time, a Judge, the DOJ, and all those opposing bundling of Internet Explorer get "Bitch Slapped" and essentially told they are idiots for coming up with their conclusion.

The U.S. Court of Appeals panel also warned that judges should tread lightly when ruling on such issues. "The limited competence of courts to evaluate high-tech product designs and the high cost of error should make them wary of second-guessing the claimed benefits of a particular design decision," wrote U.S. Court of Appeals Judge Stephen Williams, who was joined by Judge A. Raymond Randolph.

One of the government’s key arguments was that Microsoft also sold its Web browser separately and therefore they were separate products. But the court said an "integrated product" was one that that combines functionalities in an advantageous way for the purchaser, regardless of whether components were also sold separately.

September 1998 – Despite being "Bitch Slapped" by the Court of Appeals, Judge Jackson rules that Microsoft must stand trial on Justice Department and state allegations that it illegally maintained a monopoly in its operating system software and illegally tried to extend that monopoly to Internet Web browsers. The DOJ presses on with the anti-trust case. Don’t forget, if Microsoft should lose this case which will be decided by Judge Penfield Jackson, Microsoft will then most probably appeal this to the Court of Appeals. The same Court of Appeals that has been doing the "Bitch Slapping" of Judges and the DOJ, the same Court of Appeals that has said, ‘an "integrated product" was one that that combines functionalities in an advantageous way for the purchaser, regardless of whether components were also sold separately, the same Court of Appeals that keep rolling their eyeballs up when they see what the DOJ and other lower level, non-technical judges are saying.

1. DOJ, Netscape, Apple, and other Microsoft competitors are claiming Microsoft has an illegal monopoly.
2. DOJ and Microsoft competitors are claiming that Microsoft should not bundle Internet Explorer, that it is "anti-competitive."

Observations by me on monopoly accusations:
A monopoly decreases output and increases prices. REMEMBER, the majority of this case is about the "monopoly". Let’s explore the monopoly accusation. Windows 98 costs about $90 or so. Back in 1990, if you wanted to run Windows 3.0, you had to get DOS and Windows. Cost for DOS and Windows 3.0? Probably about 90 bucks. Cost today for Sun Solaris if you want to run it on your Sun Workstation? Sun wants $450 for it. Why does Sun charge so much? Because they can. If you buy a Sun Workstation based on their chipset, only the Sun operating system runs on it. Oh, and it also comes with Sun’s browser included in Solaris. You don’t get it separately……it is included with the operating system…

Now, here’s the big question. Does the table above indicate monopoly behavior? Answer: No. For about the same price in dollars, you get a zillion times more functionality. Today, virtually NO ONE would choose the 1990 operating system vs. the 1998 operating system. If ya don’t like Bill Gates and Microsoft, then go buy a Mac, they build pretty much the same stuff into their operating system. Apple reported a profit of 106 million bucks on October 14, 1998,^, which to me indicates they are healthy. Or go buy a Sun Workstation. Sun also is making a good profit these days. Or go buy a machine and run that freeware operating system Linux. I just bought a PC last week at the local PC store with a bare hard drive, and no operating system on it. I can put whatever the hell operating system I want on that my new PC. Monopoly, there ain’t no damn monopoly. The Linux geeks are programming 18 hours a day, seven days a week to try to kill Microsoft Windows NT. Microsoft developers are developing and testing Windows NT code, with each developer working 19 hours a day to make sure Linux doesn’t kill off NT. The end result? WHO CARES??  Whoever wins, Microsoft or Linux, the consumer will be better off, because the consumer will get more for less than the year before. When programmers/developers start working 6 hours a day, four days a week, with long vacations like POLITICIANS do, then I say there is evidence of a monopoly. But that ain’t the case today. Everyone in high tech is working their ass off 70+ hours a week. And those who work hardest and smartest, will win in the end. It’s the American Way.

Let’s look at another example:

Conclusion: Gas Company appears to be a monopoly.

Let’s look at another example:

Conclusion: Looks like Electric Company is a monopoly

Let’s look at another example:

Conclusion: Looks like phone company is a monopoly. (Okay, you might say you do get caller ID in 1998. But all the telemarketing companies that call you at night and irritate you turn blocking on, so it is a useless feature in my opinion. Plus it cost more, it ain’t bundled for free. Okay, maybe you might get voicemail. But your total cost for services is more in 1998 is my point)

Let’s look at one more example:

Conclusion: Doesn’t look like monopolistic behavior to me. I as a consumer get more functionality, for less cost, instead of less or equal functionality for a higher price as typical monopoly behavior would indicate. I as the consumer am pretty happy about getting more for less. So what if other competitors get killed off, do I really care as a consumer as long as I am getting more for less? Wouldn’t it be great if I could get a 1998 car with all the new 1998 functionality for 1990 prices? Why wouldn’t I have the same satisfaction with operating systems?  Or Office Suites?

But What if Microsoft Kills off all Competitors, Won't Innovation Die and Prices go up?
So, the DOJ COULD say, "Well, if Microsoft keeps doing so well, eventually they will be in a position that they won’t have to improve their operating system or Office suite because there is no competition, because they killed off the competition." That is a big assumption. Plus, even if Microsoft killed off everyone, innovation would continue at a rapid rate to the existing customer base. WHY? Because, you boneheads at the DOJ, and all you wacko economist, and all you idiot newspaper reporters that believe that Microsoft will act like a traditional monopolist, remember this crucial fact: Microsoft needs to upgrade their existing customer base in order to get revenue to keep the software factory running. If you got 200 million people running Windows 2002, you gotta come up with a killer Windows 2004 with scores of new features because of the HUGE revenue opportunity that is sitting there if you can innovate and keep the price cheap enough so people will willingly upgrade. If do don’t come up with a killer upgrade and price it cheaply so consumer will buy it, revenue doesn’t come in. Stock price goes down.  The factory stops. Competitors move in. End of Microsoft.  And someone else takes over the throne.

1. DOJ accuses Microsoft of trying to "divide the browser market" by meeting with Netscape, and accusing Microsoft of trying to collaborate and split-up the market for browsers. One of the DOJ’s remedies for this? Have Microsoft also ship Netscape’s browser with every copy of Windows 95/98 and Internet Explorer. EXCUSE ME, JUST WAIT A FUCKING MINUTE. What if I decided to write a better browser than BOTH Microsoft and Netscape, and I accomplished it? Didn’t the DOJ just conspire with Microsoft and Netscape to ensure that I could, by Netscape’s argument, never, ever compete against Netscape and Microsoft’s browsers unless Microsoft included MY new browser also in Windows 98? What if my neighbor also wrote a browser that was better than Netscape and Microsoft’s, AND better than mine. Shouldn’t he/she ALSO get their code shipped in Windows 98 for free? By the DOJ’s logic, shouldn’t ANYONE who writes any of browser program get theirs included in Windows 98 also? Why the HELL does Netscape become the "favored child" and get their code bundled with Microsoft. Could it be……politics? In the meantime, I think I will write a browser and sue the DOJ for conspiring with Netscape and Microsoft to divvy up the browser market……
   
2. Netscape claims by having Microsoft include Internet Explorer with Windows 98 is hurting their distribution. Yet, Netscape in court testimony, claims that 159 million copies of Netscape will be distributed over the next year, and so far 26 million Netscape browsers downloaded between January 1998 and August 1998. Doesn’t seem like a distribution problem to me. Does this seem like a distribution problem to YOU?
   
3. When your computer illiterate Dad/sister/friend buys a new computer, do you want them to be able to just turn the computer on and make it work,

OR

do you want them to call you up in the middle of the night asking you, "how do I install this browser thingy to connect to the Internet?" "What does this mean in the manual to ‘go to Internet download your choice of browser’ mean?" Believe me, integration of Internet browsers is a good thing, otherwise those of us who help people with computers will be tortured to death with help desk calls asking us how to connect to a bulletin board at 28.8 to download a browser that could have been included with the operating system.

4. Integration of Internet Explorer into the operating system is a good thing. I have a friend who develops software in C, C++, VB, etc. In his application that he wrote, his customers can use the application to look at data on a local or networked database. But let’s say that customer needs the application to go out on the Internet and view some reference data. A software developer can then write four lines of code into their application, which will fire up the browser inside the application, so the customer never realizes that there is a separate browser on the machine. The customer never sees another application started on their computer, it all appears as one. The developer never has to worry whether or not there is browser software loaded, never has to write a bunch of code, doesn’t have to write their own browser software. It is just there in the operating system. His application will easily run on Windows 95/98/NT with no other modifications or installation of other programs. If you have to install this application on 500 computers, nothing else has to be done except run SETUP.EXE.
   
5. DOJ folks supposedly met with foreign governments talking about Microsoft’s "monopoly practices". WAIT. Isn’t Microsoft a USA company? Aren’t they crushing the Japanese/Italians/French(especially the French)/Germans/etc. in the operating system and software market? Isn’t this a good thing than an AMERICAN company is leading the world in software development, and not some group of anti-American zealots? Could it be that the DOJ is spending OUR tax dollars to conspire with FOREIGN governments on bringing down the USA-based company that is determining how information will be disseminated in the 21^st century? If anything the DOJ should be defending Microsoft against the invasion of these foreign bastards, so the good old USA continues to lead in information technology.
   

Apple saying that Microsoft threatened them
Apple claims that Microsoft threatened to pull the plug on Office for the Mac. Uh…….what does this have to do with a monopoly or bundling? Can’t a company say, "I will do X, if you will do Y"? Isn’t that how business is run these days? Besides, there are millions of Macs in use today. Most of them run Microsoft Office. If Microsoft pulled the plug on Office for the Mac, then Microsoft would be leaving hundreds of millions of dollars in Office for the Macintosh upgrades on the table. Do you think that Microsoft would actually LEAVE MONEY on the table for other software companies to swoop in for easy pickings? No, because Microsoft is the epitome of a capitalistic company, they would not be stupid and leave upgrade money on the table. And, Microsoft would have a hard time selling Office upgrades on the PC to big corporations if the file formats were incompatible with the Macintosh. Big corporation get very whiny when you can’t exchange info between Macs and PCs.

Microsoft threatening to kill off other companies
Microsoft responds back in internal company emails in reference to Netscape, "We are going to cut off their air supply". The DOJ, Netscape, and press play this up pretty well. Well duh, if a Microsoft competitor like Netscape basically says that they are going to come in a kick Microsoft’s ass and make MSFT stock price go down so those Microsoft employees can’t send their kids to college," what did you expect the response to be? "Oh, yeah, just come in a crush us, we are too big and clumsy, and you guys are the new kids on the block, just take us down?" Microsoft responded back like any other good, aggressive, well-managed company would, getting the troops fired up to work 100 hour work weeks, "Let’s kill off those Netscape bastards, we owe it to our stockholders and our children to make sure we survive this battle". What did you expect the kids from Redmond to do, especially when the gauntlet was flung down to them from Netscape and the press? Do you want your mutual funds investing in companies that aren’t aggressive about beating the competition?

Free Internet Explorer is bad
Government and Netscape are complaining about Microsoft giving their browser away for free. Stop right there. Netscape started out by giving their browser away for free. Then, after getting some momentum came back around and tried to charge for it. Kinda like giving someone their first couple of lines of coke for free, and then say, "Hey baby, the rest is gonna cost you". Microsoft responded back by saying, okay, we will give it away for free also, plus we ain’t ever gonna charge for it. Ain’t this a good thing for consumers, getting shit for free? As a consumer, wish I could get ALL my software for free.

Senator Orrin Hatch’s Priorities
Orrin Hatch, dude from Utah– He’s one of those guys helping to headup the investigation of Microsoft’s supposed illegal monopoly and illegal bundling of Internet Explorer. It just so just happens that Novell, Word Perfect, and Corel are all based in Utah. Companies that have made critical business blunders in their efforts to crush Microsoft. Now, I maintain that instead of Orin Hatch spend time investing Microsoft, perhaps he should spend time investigating abuse of women and their daughters who are involved in polygamous marriages in his home state. Salon Magazine has a very interesting article on this topic. Salon talked with co-founder Rowenna Erickson about what members of her support group(Tapestry of Polygamy) say is an often abusive and poverty-stricken lifestyle that, under the umbrella of religious belief, relegates women to the role of subservient breeding machines and leaves children virtually fatherless. Fathers are arranging marriages of their young daughters to older male friends of the fathers. (meaning 18 year daughters are farmed out to 60 year old men). As a politician, he should be caring about the people in his state, rather than supporting companies whose business plans were flawed to begin with. Checkout: "Sins of the fathers" at http://www.salonmagazine.com/mwt/hot/1998/07/28hot.html

And please don’t give me that religious freedom bullshit makes it okay to have multiple wives. If so, I will start my own religion and make it that a religious belief that ignoring speed limits on highways is one of my first commandments.

One last comment:  Here is the outrage.  The DOJ is spending millions and millions of YOUR TAX dollars on this lawsuit on lawyers, PR, etc.  Wouldn't you rather the government spend that money on getting some extra computers in your elementary schools for your kids, or feeding the poor, or helping the homeless.  Instead, that money is being spent on an ARMY of $400 an hour, scum sucking, muck raking, computer illiterate lawyers and consultants to help make the DOJ's case against Microsoft?   Your kid could be the next Gates/Dell/Grove/Winblad/Case if the government spent money on computers for schools, instead of litigation on behalf of companies that suck.

READER RESPONSES:

Okay, I got my first response back from a person who wishes to remain anonymous.  His reply?

"I read it all.  You suck!!!"

Okay, that is obviously a person that didn't read the disclaimer..........now that we got that out of our system,

The second response that I got was from a person who wishes to remain anonymous, so we will call the person,  "Guru_of_many_Things"   responded back with some thoughts that fit in the "Intelligent, Logical, Coherent" category:

Guru_of_many_Things sez:

1) Netscape never had a market to begin with. Mosiac was free. The public
perception of the value of a browser was: $0. I always wondered what they
were thinking and what the press was so excited about. There was never
going to be significant revenue generated from a browser. It was inevitable
that either web browsing would never become real popular or that it would
become a standard part of the OS. Stuff that everyone wants and needs
becomes part of the OS. That's what customers want. Duh.

2) But, this is the most important aspect of the trial: Netscape, Apple,
etc. are sliting their own throats. This is a VERY slipperly slope. If
they are successful at getting the courts to rule against bundling and
integrating new technology into products that have major market share then
our competitors better hope that either no new technology is ever invented
or that they never become successful and gain major market share. Fucking
amazingly dumb. This could actually cause the US to lose its leadership
position in the software space, an area that we dominate because it is fast
paced, creative, and highly competitive. This ain't like cloning hardware
or streamlining well understood processes (things the Japanese are good
at). This is creative and if the courts start sticking their ugly legal
fingers into it they're going to suck the lifeblood right out.

Oh, and BTW, opinions are like assholes -- everyone has one.

Good points by "Guru_of_Many_Things".  I guess if Netscape were able to keep their 90% marketshare of browsers, then by the DOJ's argument that Netscape could not bundle a newsreader or mail client with their browser?  You would have to buy that separately?  If AOL continues to lead in online services and gets 90% marketshare, they can't bundle new features, they have to wait for MSN and Yahoo to catch up?

BORK is a DORK, cause he is getting PORK from Netscape(1/3/99)

Interesting Article on www.Slate.com by the Editor, Michael Kinsley.  Only problem is ya gotta pay for the site.  So I will attempt to summarize here some of the points of the article. Then maybe you will go out and subscribe and read some great articles.

Anyways, Kinsley writes on Dec 10, 1998 a great article about Bork.  Twenty years go, Kinsley reviewed Bork's book, "The Antitrust Paradox" for the New Republic, and gave it a favorable review.  Now, Kinsely tries to reconcile what Bork's belief's was back when he wrote his book on antitrust, and what Bork is doing now that is a paid shill for Netscape.  

Now Bork Writes:
"The problem is Microsoft's tactics in maintaining their [monopoly], which included an attempt to crush Netscape. You recall in that meeting ... they were pretty rough and they threatened. Marc Andreessen, the technical man from Netscape, said later that it was like a visit from Don Corleone. He expected to find a bloody computer screen in his bed in the morning."--Robert Bork, interviewed on CNN (1998)

But 20 Years ago in his book, he writes something opposite:
"Unsophisticated theories of predation abound, leading to drastic overestimations of its likelihood. The most common 'theory' views firms in the market as if they were thugs in a dark alley; evidently a large firm has more muscle and can beat smaller firms to death. ... Such remarks, though they represent popular 'learning' on the subject, do not reflect theory but are only foolishly inapposite metaphors that ignore the constraints the market places upon firm behavior."--Robert Bork, The Antitrust Paradox (1978)   

Kinsley says that Bork "wrote the book" on antitrust law.  Back in 1978, Bork keep asking the questions as to why the law should stop a company from doing consumers the favor of giving them something for free.  (Apparently until 1978, Detroit Edison gave away free light bulbs until they were stopped by an antitrust suit.   How many consumers would object if you could walk down to your local power company and get FREE light bulbs?  You would never have to pay for a light bulb again as long as you lived!)  Bork argued that most antitrust laws protected competitors than protecting competition, and punished behavior that was good for consumers. (sound familiar?).  So now, today, the government is saying that giving away a free browser, like giving away light bulbs, should be illegal.  And today, Bork is on the government side, and he doesn't renounce his influential book.  GO FIGURE THAT OUT.

Quote from the 1978 Bork book.  "Every product or service could be broken down into smaller components cable of being sold separately.....There is no way to state the 'inherent' scope of a product".  Humm....isn't he one of the guys trying to define the scope of what is a browser and what is an operating system??

Classical economics says that the extension of a monopoly from one product to another is considered to be impossible.  For example, Kinsley writes that if you have a monopoly in hammerheads and can extract all monopoly profits, would it benefit you to get a monopoly in the hammerhead handles also?  The answer is no, because you have nothing to gain by seizing the market for handles.  You are getting max profits out of the product.  Therefore, it never pays to do, and it never happens.  There is another good example in the Slate article.

So, Bork gets a chance to reply and present his case.
On Dec 29, 1998, he attacks Kinsley by saying, that since Slate is owned by Microsoft, and that Microsoft minions are masters of the ad hominem.  He also slams Kinsley by saying that he calls the review of his book 20 years ago, and it was one of the "less comprehending" assessments of the book.  Bork then defends his position as a protector of Netscape and competition.

Kinsley gets a chance to reply to Bork's reply. (something that you get when you are editor.  Like me...heh heh heh..)
Replies that he consulted no one at Microsoft about the article, except for the Microsoft Website(as well as the DOJ website).  Also mentions that since the DOJ is trying to make Gates seems like a villain, that is is funny that Bork is suggesting that ad hominen attacks are a Microsoft specialty. [POW!] 

Bork said that Microsoft also tried to hire him, and he told MS that if the MS lawyers convinced him that MS was right, he would stay out of the case.  So he could pick MS, stay out of the case, and get no money, or pick Netscape, and ream Netscape for consulting charges.  Kinsley replies back something like, should I pick the no money option, or should I pick the cash option??? Which would be better for me as Bork the Consultant?[SOCKO!]  I wonder if Netscape tried to buy Bork with Netscape stock options?  We won't know....because Bork won't say what Netscape is paying him.....

Kinsley also says that in Bork's original argument, that predatory pricing can't work, and shouldn't be illegal, because it will always cost the predator more than the intended victim, because the predator is selling more units during the price war in which both parties are losing money.  And if Bork says what is different today is that marginal costs for software are nil, Kinsley then says that zero marginal costs, if anything, out to make it even harder to drive a competitor from the vield with devastating loses.   [BAM!]

Great article, among many others in Slate. 

Update:  March 28th, 1999.
Okay, so it looks like the trial isn't going great in terms of how much negative publicity that Microsoft has received.  The DOJ lawyer dude did a good of making the Microsoft witnesses look like they were not sincere.  But the issue still remains, "How did Microsoft hurt consumers?"  I didn't see any consumers get on the stand and say, "Ya know, Microsoft is bundling too much free stuff in Windows, I want them to give me less stuff".  What I did see is a bunch of competitors that are a bunch of crybabies.  I thought Microsoft would have been really ready to kick some ass at the trial, but they kinda sucked in terms of how they portrayed themselves.

The DOJ and Attorney Generals that are involved with the case supposedly are coming up with their "remedies".  One is to force Microsoft to license the code to Windows, so someone else can modify and sell the Windows operating system..  Let's look at the utter stupidity that happens when Lawyers get involved with  high tech.   If this were to happen, then:

1.  People who currently write software programs that run on top of Windows currently spend 1-2 years to come up with an upgrade and new features.  So now if there are two different versions of Windows, this means that testing/quality assurance has just DOUBLED.   Because if I am Adobe, Lotus, Novell, etc, now when I come out with a new version, I must test on two different platforms every possible iteration that could happen.   You see, ANYONE can write code.  But, the tough thing is debugging the code so that you can sell it to millions of people and not have to worry about product support calls.  I now need twice the amount of testers.  So now it takes another year or so before I can ship a version of my software that will run on both versions of Windows.    So I as a software developer now make LESS MONEY, and it takes me MORE TIME, to ship a product.   Now that will be real good for our economy.

2.  People who write device drivers(for your monitor, CD ROM, printers, scanners, faxes, etc.) will also now have to test twice as much, and write two different versions of their software, one that is certified to run with Windows A, and one with Windows B.

3.  When you parents go out to buy a software program, now they have to worry about whether it will run good with Window A or B?  

Conclusion:  If your Attorney General in your state is among the 19 states in the lawsuit against Microsoft, vote their stupid, time consuming, publicity hungry, crybaby ass out of office next election.  Tell them they should spend their time and money prosecuting deadbeat dads, crooked politicians, and violent gang members.