United States of America v. Microsoft Corporation, 253 F.3d 34 (D.C. Cir. 2001), was a landmark American antitrust law case at the United States Court of Appeals for the District of Columbia Circuit. The U.S. government accused Microsoft of illegally monopolizing the web browser market for Windows, primarily through the legal and technical restrictions it put on the abilities of PC manufacturers (OEMs) and users to uninstall Internet Explorer and use other programs such as Netscape and Java.[1]
At the initial trial which began in 1998, the United States District Court for the District of Columbia ruled that Microsoft's actions constituted unlawful monopolization under Section 2 of the Sherman Antitrust Act of 1890, but the U.S. Court of Appeals for the D.C. Circuit partially overturned that judgment in 2001.[1] The two parties later reached a settlement in which Microsoft agreed to modify some of its business practices.
History
By 1984 Microsoft was one of the most successful software companies, with $55 million in 1983 sales. InfoWorld wrote:[2]
"[Microsoft] is widely recognized as the most influential company in the microcomputer-software industry. Claiming more than a million installed MS-DOS machines, founder and chairman Bill Gates has decided to certify Microsoft's jump on the rest of the industry by dominating applications, operating systems, peripherals and, most recently, book publishing. Some insiders say Microsoft is attempting to be the IBM of the software industry.
Although Gates says that he isn't trying to dominate the industry with sheer numbers, his strategy for dominance involves Microsoft's new Windows operating system ... 'Our strategies and energies as a company are totally committed to Windows, in the same way that we're committed to operating-system kernels like MS-DOS and Xenix,' says Gates. 'We're also saying that only applications that take advantage of Windows will be competitive in the long run.'"
Softletter estimated that in 1986 Microsoft had 8% (more than $250 million) of total revenue of the top 100 microcomputer software companies. Of the 15 million Americans who used a personal computer in their job, more than 90% used MS-DOS.[3] Gates said in 1984 that applications such as Multiplan and Word were InfoWorld said, "not a big-time operation", but by 1987, Richard A. Shaffer of Technologic Computer Letter compared the company's dominance of operating systems, and consequent benefit to its application software, to a baseball game in which "Microsoft owns all the bats and the field".[4] The Federal Trade Commission began an inquiry in 1990 over whether Microsoft was abusing its monopoly in the PC operating system market.[5] The commissioners deadlocked with a 2–2 vote in 1993 and closed the investigation, but the Department of Justice (DOJ), led by Janet Reno, opened its own investigation later that year, resulting in a settlement on July 15, 1994, in which Microsoft consented not to tie other Microsoft products to the sale of Windows but remained free to integrate additional features into the operating system. In the years that followed, Microsoft insisted that Internet Explorer (IE) was not a product but a feature that it was allowed to add to Windows, although the DOJ did not agree with this definition.[6]
The government alleged that Microsoft had abused monopoly power on Intel-based personal computers in its handling of operating system and web browser integration. The central issue was whether Microsoft was allowed to bundle its IE web browser software with its Windows operating system. Bundling the two products was allegedly a key factor in Microsoft's victory in the browser wars of the late 1990s, as every Windows user had a copy of IE. It was further alleged that this restricted the market for competing web browsers (such as Netscape Navigator or Opera), since it typically took extra time to buy and install the competing browsers. Underlying these disputes were questions of whether Microsoft had manipulated its application programming interfaces to favor IE over third-party browsers. The government also questioned Microsoft's conduct in enforcing restrictive licensing agreements with original equipment manufacturers who were required to include that arrangement.
Microsoft argued that the merging of Windows and IE was the result of innovation and competition, that the two were now the same product and inextricably linked, and that consumers were receiving the benefits of IE for free. Opponents countered that IE was still a separate product that did not need to be tied to Windows, since a separate version of IE was available for Mac OS. They also asserted that IE was not really free because its development and marketing costs may have inflated the price of Windows.
Bill Gates himself denied that Microsoft was a monopoly, stating "Microsoft follows the rules. Microsoft is subject to the rules." He further compared the situation with IBM thirty years prior: "People who feared IBM were wrong. Technology is ever-changing."[7]
District Court trial
The case was initially tried before Judge Thomas Penfield Jackson at the United States District Court for the District of Columbia. The suit began on May 18, 1998, with the Department of Justice joined by the Attorneys General of twenty U.S. states and the District of Columbia. The case organized by the Department of Justice was focused less on interoperability, and more on predatory strategies and market barriers to entry; the DOJ built upon the allegation that Microsoft forced computer makers to include its web browser as a part of the installation of Windows software.[8]
Bill Gates was called "evasive and nonresponsive" by a source present at his videotaped deposition.[9] He argued over the definitions of words such as "compete", "concerned", "ask", and "we"; certain portions of the proceeding would later provoke laughter from the judge when an excerpted version was shown in court.[10] Businessweek reported that "early rounds of his deposition show him offering obfuscatory answers and saying 'I don't recall' so many times that even the presiding judge had to chuckle. Many of Gates's denials and pleas of ignorance were directly refuted by prosecutors with snippets of e-mails Gates both sent and received."
Appeals Court decision
After Microsoft filed its appeal, the U.S. government and the states in the suit filed a petition for certiorari before judgment, a process that would skip the intermediate Circuit Court and send the case directly to the U.S. Supreme Court. Such an action is permitted by a section of the United States Code[24] that gives the Supreme Court jurisdiction to hear direct appeals from the District Court level in certain antitrust cases initiated by the federal government, if "the district judge who adjudicated the case enters an order stating that immediate consideration of the appeal by the Supreme Court is of general public importance in the administration of justice."[25] The states also filed a petition for certiorari before judgment at the Supreme Court, requesting the same direct appeal process without going through the Circuit Court.[24][26] The Supreme Court rejected these requests and sent the appeal to the D.C. Circuit Court.[24]
Settlement
The Department of Justice, now under Bush administration attorney general John Ashcroft, announced on September 6, 2001, that it was no longer seeking to break up Microsoft and would instead seek a lesser antitrust penalty. Microsoft decided to draft a settlement proposal allowing PC manufacturers to adopt non-Microsoft software.[31][32][33]
On November 1, 2001, the DOJ reached an agreement with Microsoft to settle the case. The proposed settlement required Microsoft to share its application programming interfaces with third-party companies and appoint a panel of three investigators who would have full access to Microsoft's systems, records, and source code for five years in order to ensure compliance.[34] However, the DOJ did not require Microsoft to change any of its code nor did it prevent Microsoft from tying other software with Windows in the future. On August 5, 2002, Microsoft announced that it would make some concessions towards the proposed final settlement ahead of the judge's decision. On November 1, 2002, Judge Kollar-Kotelly released a ruling that accepted most of the proposed DOJ settlement.
Impact and criticism
After the 2002 settlement, industry pundit Robert X. Cringely believed a breakup was not possible, and that "now the only way Microsoft can die is by suicide."[40] Andrew Chin, an antitrust law professor at the University of North Carolina at Chapel Hill who assisted Judge Jackson in drafting the findings of fact at the initial District Court trial, wrote that the settlement gave Microsoft "a special antitrust immunity to license Windows and other 'platform software' under contractual terms that destroy freedom of competition."[41][42] Law professor Eben Moglen noted that the way Microsoft was required to disclose its APIs and protocols was useful only for “interoperating with a Windows Operating System Product”, not for implementing support of those APIs and protocols in any competing operating system.[43]
Economist Milton Friedman wrote in 1999 that the antitrust case against Microsoft set a dangerous precedent that foreshadowed increasing government regulation of an industry that had been relatively free of government intrusion, and that future technological progress in the industry will be impeded as a result.
See also
- Antitrust, a 2001 film about "NURV", a large software company that represents a fictionalized Microsoft
- Big Tech
- Browser wars
- Criticism of Microsoft
- Microsoft litigation
- Microshaft Winblows 98, a 1998 video game parodying the Windows 98 interface that featured numerous allusions to United States v. Microsoft Corp.
- Removal of Internet Explorer
Further reading
Articles
- Andrew Chin, Decoding Microsoft: A First Principles Approach, 40 Wake Forest Law Review 1 (2005)
- Kenneth Elzinga, David Evans, and Albert Nichols, United States v. Microsoft: Remedy or Malady? 9 Geo. Mason L. Rev. 633 (2001)
- John Lopatka and William Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 Supreme Court Economic Review 157–231 (1999)
- John Lopatka and William Page, The Dubious Search For Integration in the Microsoft Trial, 31 Conn. L. Rev. 1251 (1999)
- John Lopatka and William Page, Who Suffered Antitrust Injury in the Microsoft Case?, 69 George Washington Law Review 829-59 (2001)
- Alan Meese, Monopoly Bundling In Cyberspace: How Many Products Does Microsoft Sell ? 44 Antitrust Bulletin 65 (1999)
- Alan Meese, Don't Disintegrate Microsoft (Yet), 9 Geo. Mason L. Rev. 761 (2001)
- Steven Salop and R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and the Microsoft Case, 7 Geo. Mas. L. Rev. 617 (1999)
External links
- Final Judgment in U.S. v. Microsoft (injunction including final settlement terms approved by the court) (note that the copy posted on the district court's web site is actually an earlier version that the court declined to approve).
- The United States DOJ's website on U.S. v. Microsoft
- Microsoft's Antitrust Case, Microsoft News Center
- Wired news timeline of the Microsoft antitrust case
- ZDnet story on 4th anniversary of Microsoft antitrust case
- ZDnet story on proposed concessions
References
- https://law.justia.com/cases/federal/appellate-courts/F3/253/34/576095/ 2001, retrieved 2018-06-10^
- Caruso, Denise. Company Strategies Boomerang InfoWorld, 1984-04-02, retrieved 10 February 2015^
- Lining up behind three visionaries Computerworld, 1987-11-02, retrieved 2025-06-08