April 28, 2000 CPT Statement on the Microsoft Case

1. Consumers are harmed by the Microsoft monopoly and Microsoft anticompetitive practices. Prices for Microsoft Windows and Microsoft applications are too high, particularly when one considers the "forced upgrade" issue, the quality is poor, particularly in terms of stability, and there is too little choice.
2. Structural remedies, such as breaking up the company, will benefit consumers. One need only look at the explosion of innovation in Internet based applications, where there is no single firm setting standards, and where competition is intense, for evidence that private monopolies are not necessary for standard setting and interoperability.
3. In the Halloween Document, MS indicated it saw the Internet Engineering Task Force (IETF) in particular, and the Internet in general, as a threat to Microsoft control over relevant APIs. Microsoft is using its monopoly power in the PC OS and PC Office suite markets to undermine applications based upon open standards.

1. Bill Gates and Steve Balmar are both unwilling to admit that Microsoft has done anything wrong.
2. Microsoft has a record of trying to wiggle out of contract provisions, and of acting in bad faith, illustrated, for example, by its dealing with Sun on Java and Real Networks.
3. Microsoft did not live up to the spirit of the 1995 DOJ consent degree. The argument that the Browser was not an application, but part of the operating system, was a bad faith attempt to avoid the 1995 consent order restrictions on bundling. (The MS Browser runs on Unix, Windows, Windows NT, Windows 3.1, and an Apple Macintosh.) Also, Microsoft used its pricing discretion in non OS markets to pressure OEMs not to offer non-MS OS pre-loads.
4. Microsoft responded to the order by the Judge to publish a copy Windows without its browser by providing a 1995 version that would not even work with current hardware (due to lack of current driver support). This action demonstrated contempt for the authority of the federal court.
5. A "conduct only" remedy with Microsoft would require a lot of "adult supervision" by the government, and would be a much more intrusive and administratively burdensome approach than a structural remedy that involved creating separate companies for different parts of Microsoft's product lines.
6. Microsoft is demonstrating it will spend a fortune to lobby the federal government and the Congress on the antitrust issue. Conduct rules will be constant targets for Microsoft's lobbying efforts. This doesn't mean that conduct rules are not useful. But they will be susceptible to being undermined by Microsoft lobbying efforts.
7. A break up would change Microsoft's incentives. Competitors in applications markets (word processors, browsers, mail readers, spreadsheets, presentation graphics, etc) would have a better chance if Microsoft's applications were spun off to a separate company.

1. Recent changes in technology have not made the case against Microsoft irrelevant. If anything, the case is more important today than it was in 1997, precisely because Web based technologies have become more important for a wide range of activities.
2. Microsoft's monopolistic control over the Browser and the Office applications gives it an opportunity to continue its assault on open standards for Web based applications.
3. In high technology markets, there are competitions between similiar products, but also competition that is related to different "layers" of products. The Browser provided a new layer, which was a competitor with Windows (and MS Office) for control over critical interoperability APIs.
4. By spliting Windows from the Browser and MS Office, there will be more competition in the Office applications markets. And more competition in the applications market can lead to more competition in the OS market. If MS Office was to port to BeOS, for example, Windows would face immediate client space competition, because BeOS is a much superior OS on technical grounds, but suffers from the lack of applications. If WordPerfect or the Lotus Office Suite could actually compete against MS Office after a spin off, they too could have sufficient "mind share" to make a port to BeOS interesting.
5. If the Browser is separated from MS Office too, it would be more likely that open standards would be embraced. MS Office is an important authoring tool, and MS Explorer is an important client software. There is much to gain from separating the two platforms, including incentives for greater disclosure of APIs from both platforms, and less reliance upon closed technologies.
6. MS does not dominate the market for software to run new digital devices. This is evidence that Microsoft is not the only company on the planet that can write decent software. The fact that Microsoft eliminates competitors on the Windows PC desktop is not because of superior technology, but because of Microsoft's anticompetitive actions that relate to Windows.

1. Microsoft's biggest problem is a failure to innovate. Since 1995, Microsoft's main achievement in the desktop market has been making copies of copies of Netscape and Eurodra and Real Audio. No "exciting innovation" has ocurred on the Windows desktop for several years? Microsoft not been been a business success outside of products that work best on the Windows platform.

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