7-Sep-01
Justice Drops Microsoft Breakup

The Department of Justice has streamlined it's case in favor of getting serious penalties in place quickly.

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The Department of Justice has stated it will not ask for a breakup of Microsoft, nor will it pursue the matter of "tying" the Web browser to Windows.

The DoJ also asked for an expedited discovery phase to make available documents and records that detail Microsoft's continued violation of anti-trust laws since the original guilty verdict. These will be used to ask for a harsh penalty.

The DoJ did not originally wish to ask for a breakup, but was forced to do so by the 19 States' atorneys general. Judge Jackson also was not in favor of a breakup, but felt he had no choice but to go along with the DoJ request due to Microsoft's behavior during the trial.

The States have now moderated their position on this issue, so the DoJ is free to ask for remedies in line with Judge Jackson's own recommendations, which include:

  • Microsoft must make its APIs (Application Programming Interfaces) fully available to competitors. This could include its application (Word, Excel) file formats. Currently Microsoft claims these are "open", but in reality critical parts are secret, reserved for Microsoft use only.

  • Microsoft is to be prohibited from employing designs which break non-Microsoft products. Deliberately disrupting competitors products with otherwise unneeded changes to Windows has been a key Microsoft competitive technique.

  • Microsoft is to be prohibited from entering into exclusive distribution agreements with third parties, and from taking action against companies that distribute other vendors' software.

  • Microsoft must allow computer vendors to decide what other operating systems will boot on their computers, and what will be included in the Windows boot sequence and in what order, and to control what appears on the Windows desktop. Currently these are all tightly controlled by fine print in their secret OEM contracts for Windows.

In view of Microsoft intensifying its anti-trust behavior since the guilty verdict, these penalty items may be tightened up and more penalty items may be added.

California and New York have stated they will demand additional sanctions related to features of Windows XP that violate anti-trust law. Microsoft has been doing everything it can to accelerate the release of Windows XP and stall the legal process in full realization that XP contains serious violations of anti-trust law. They figure if it's already shipping, the courts will have a hard time pulling it back.

Analysis

Dropping the breakup request was expected. It would give Microsoft an opportunity to drag the case on into more appeals and would end up giving us two monopolies in place of one.

Dropping the browser "tying" charges was also considered likely because it would be time consuming to prove under the strict rules the Court of Appeals had stated for such proof. With eight counts of conviction unanimously upheld, the tying issue was not of particular importance in getting a strict remedy.

Some have criticised the DoJ for dropping a powerful bargaining point, but this is not valid. The DoJ is required by the court to make a final statement of it's intentions for ending the case on the 21st of September.

While a breakup would be fun to watch, I am on record against it. It would give us two monopolies in place of one, and the two would collude in secret (and in violation of the law) to aid each other in preserving monopoly power. Better to keep them in one place where we can keep an eye on them.

Bill Gates has already been selling down his shares of Microsoft (as his wife increased her shares to compensate) so he would be below the threshold forbidding him from sitting on the board of directors of both companies resulting from a breakup. You can easily see what he's up to.

Whatever penalties are imposed, they will have to be carefully monitored and aggressively enforced. We are dealing with a company that has no concept of ethics and no respect for the law, government, or its own customers.

What will Microsoft do after the remedies are imposed?

This is an easy one. They will re-word the descriptions of what they are doing, and re-word their contracts just as they did after the Consent Decree. Then they will continue the behavior they have been convicted of. When the Department of Justice protests, they'll say, "so sue me".

Microsoft really has no choice. Their whole financial structure is based on a high growth rate and monopoly profits. They have never been successful in markets where they could not leverage their monopolies, and now it will be even harder because the whole world is suspicious of them.

How will it end?

Microsoft will drag this case through the courts for a decade, but they will be progressively strait jacketed until they can't respond adequately to changes in technology. Private anti-trust lawsuits (over 100 pending) will add to the burden, and Europe (where anti-trust laws are even stricter) is now going ahead with its own case.

Because Microsoft stands convicted for abuse of monopoly, the private anti-trust cases need only prove harm, not guilt, and triple damages may apply. Further, the Department of Justice could easily launch another anti-trust asault based on product tying or conditions of Microsoft's OEM contracts, parts of which appear clearly in violation of anti-trust law. There is certainly enough evidence to do so.

As the going gets tougher, Bill Gates and Steve Balmer will bail out and the company will lose focus. Microsoft's remaining "partners" and businesses that have committed to .NET will suffer acordingly.

- Andrew Grygus

Links

  • USA Today - Microsoft not out of the woods yet.
  • Linux Today - DoJ Decision is Good for Linux (with responses).

©:Andrew Grygus - Automation Access - www.aaxnet.com - aax@aaxnet.com
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