Antitrust for Dummies
Levy, Robert A. & Reynolds, Alan
~ he good news about the Microsoft case is that it is no longer in the hands of one Thomas Penfield Jackson. Jackson, you may recall, is the federal judge in Washington, D.C., who ruled...
...Naturally, one way to reduce the market share of a popular product is to make it less attractive...
...on the new allegations...
...By mandating a reduced price for Windows if the browser or other "middleware" is removed, Jackson thus effectively prohibited Microsoft from including Internet Explorer for free, or adding free features such as voice recognition, Web securi~, or virus protection...
...Microsoft should have prevailed under either standard...
...Although Apple's Mac OS supports more than 12,ooo applications," said Jackson, "even an inventory of that magnitude [does] not...present a significant d~is decision, and the D.C...
...Justice rebuked Microsoft for insisting that computer manufacturers must not delete certain icons from the Windows opening screen...
...Old-fashioned poisons get rid of them--but only temporarily, and they are a hazard toyou " ~ and to your pets...
...If you count Apple and exclude NT workstations (as the government excluded Sun workstations), the \Vindows 95/98 share drops to only 66 percent of the worldwide stockpile of computers...
...But there was not a shred of evidence introduced in Jackson's court to substantiate that claim...
...Admiral Nelson's Telescope TM #1069F801f _9 The optics of Admiral Nelson's Telescope" are "25x30" which means 25x magnification and the great light gathering capacity of a 30-ram objective lens...
...In other words, the two products were sold as a single package and any buyer who wanted to acquire Windows would have to take Internet Explorer as well...
...This would The American Spectator _9 No v e m b e r 2 o o o 55 not cure the problem: A new Windows company would still have the same market share, and a separate applications company would still have the most popular office suite...
...Here is what Jackson did: Ran a trial corrupted by procedural irregularities...
...They will certainly diminish the unless...all means of End-User Access to the Middleware Product can readily be removed by [computer manufacturers...
...For example, some expect that non-PC devices for going online--wireless PDAs, cell phones, Intemet "game" consoles, interactive TVs, etc.--will outnumber PCs within two or three years...
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...No longer would the company be concerned that its action might shrink the market for applications so'rare...
...Jackson actually found that "Microsoft's license agreements have never prohibited [computer makers] from pre-installing programs, including [Netscape's] Navigator on their PCs and placing icons and entries for those programs on the Windows desktop...
...The Episcopal" is the first choice of geologists, biologists, numismatists, philatelists, engineers, and just anybody who likes to see the infinite detail in his/her surroundings...
...Like any trial judge, Jackson had to engage in fact-finding and make conclusions of law based on those findings before proceeding to the remedies stage...
...It is 20-times b r i g h t e r than automobile h e a d l i g h t s , more luminous than aircraft l a n d i n g lights...
...Nelson's Telescope for $9.90 or one Night Pietcer II for $9.95 or three Night Pierce~ II tmita for $19.90), plus sales tax for CA deliver~ You have 3(ktay return and oneyear warranty...
...Compare that to s t a n d a r d binoculars which give you only 6x or 8x magnification...
...Like the tying charge, the Justice Department's other claims were also dubious...
...Moreover, because "middleware" can include just about everything, Jackson's remedy would preclude Microsoft from integrating any features that could not, as a technical matter, be easily removed...
...And others see the future differently...
...Because AOL-Netscape and others can continue offering free browsers to computer manufacturers, Microsoft would be hopelessly disadvantaged...
...A judge exercising more diligence thin1 Jackson would have found Microsoft's "market share" to be considerably less than 9 ~ percent...
...That's where Jackson's "conduct" remedies come in...
...For instance: Buy a $69.95 item and a $49.95 item and get another $49.95 or lesser-priced item FREE...
...Rodel- ~ . . . . . sonix m works on a l ~ ~ m different p r i n c i p l e : It ~ ~ o ~ ' ~ ) ~ delivers atre- ~" mendons blast of u l t r a - .Rodelsonix IX ~"/s an industrial-typo S 0 u n d - - unit, the most powerful you can get...
...Admiral Nelson's telescope was made of brass...
...Those two holdings cannot coexist...
...In fact, the dismemberment remedy is unrelated to any complaint aired at the trial...
...But second, Jackson declared that Microsoft did violate section z, which addresses attempts to monopolize...
...That pro-competitive practice could not violate antitmst laws...
...The Justice Department also contended that Microsoft's contracts with Intemet service and content providers (ISPs and ICPs) were exclusionary- that is, they were designed to prevent ISPs and ICPs who dealt with Microsoft from also dealing with Netscape...
...And pending the split, Microsoft would be shackled by a number of restrictions on its conduct...
...Meanwhile, consumers will pick up the tab as companies devote more of their resources to politicking, and less to the kinds of integrated products that, until now, have characterized the software industry...
...Computer manufacturers would be free to hide the Windows screen, launch a different operating system, and transform the desktop into an advertising billboard--thus destroying the standardization that has been a springboard for software developers and consumers alike...
...Rodelsonix IJC ~ is an industrial-type unit designed and engineered to be effective in restaurants, factories, and food-processing p l a n t s . It p r o t e c t s up to 10,000 sq...
...Yet Mac, Linux, Palm, and Sun's Solaris are all doing quite well...
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...Bureaucrats will supervise the allocation of those employees--sales, marketing, programming, product development, research, procurement, legal, and accounting-as well as the allocation of real estate and intellectual property...
...Computer makers are also free to add icons to the remaining 85 percent of the screen, install rival software, and make Netscape the default browser...
...Jackson, although holding Microsoft as a monopolist to a higher standard, found that "consumers in 1995 were already demanding so'rare that enabled them to use the Web with ease...
...nd that c~compasscs ever 7, dcsktop operating system X.licrosoft c\er made-inchlcling \\'indows NT for powerful xx orkstations and milhons of old computers still using DOS or \Vindows 3 x. t~br thc go\ernment to include Windows NT for workstations in Microsoft's share was particularly devious...
...But because politicians are just order takers, we get the kind of government we ask for--including oppressive regulation...
...Microsoft's restrictions are no more burdensome than those imposed by a car dealer who pre-sets the stations on your radio, or refuses to remove the hood ornament...
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...Instead, he simply assured Microsoft that he "would not be making any findings" and "would not predicate any relief"-- i.e., remedies-- based ROBERT A. LEVY is senior fellow in constitutional studies at the Cato Institute...
...If his remedies are effectuated, company employees, like expendable chess pawns, will be deployed to advance the government's dismemberment scheme...
...Our manufacturer has created a faithful replica of this famous scope...
...Both a d a p t e r s are included, of course...
...Was the meeting a setup...
...pets--that disrupts the nervons sysmm of those pests...
...Jackson's final judgment showed his complete acceptance of the government's flawed arguments...
...95* r ~ emove the Episcope" ,IL~kfrom its fitted leather case and it's a 30-power microscope...
...You can even adjust it to keep larger pests, such as raccoons or rabbits, at bay...
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...After all, Sun X licrosvstems' workstations (and all App]e computers), because they wcre not Intc]-based, were arbitrarily excluded as Microsoft competitors...
...The remedy Jackson ordered was nothing less than Microsoft's dismemberment--that it be split into two smaller companies...
...Circuit ruled that adding Internet browsing capabilities to Windows did not constitute illegal tying, the government vastly enlarged the scope of the trial...
...With its red gel, the Night Piercer II" can be a l i f e s a v e r in any emergency...
...Admiral Nelson's Telescope" measures about five inches in its "collapsed" position...
...Furthermore, a company that sold nothing but Windows might well charge a higher price...
...When the D.C...
...Like most of the proposed remedies, this one would be good news for competitors but bad for competition...
...listen to the commentator when you watch the ball game or any spofdng event--and much more...
...N i g h t P i e r c e r I I TM #1088F801e A s p y g l a s s in the g r e a t n a v a l t r a d i t i o n . . . Adm Nelson's Telescope TM (with table-top tripod) just $59...
...It comes with ing unknown t e r r i - a super-bright lO0-watt t o r y and f o r any helogen bulb and red gel c o n t i n g e n c i e s a t for use as warning light...
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...fi'dVerhills o 2360 Third St., San Francisco, CA 94107...
...In its initial complaint, the Justice Department said that Microsoft had illegally "tied" the Internet Explorer browser to the Windows operating system...
...56 ;No v e m b e r 2 o o o " The American Spectator More t h a n j u s t a t e l e s c o p e . . . m o r e t h a n j u s t a m i c r o s c o p e . . . Episcope TM (the complete vest-pocket optical system) still o n l y $59...
...You'll get many years of 8ood use and enjoyment from it...
...ALAN REYNOLDS is senior fellow and director of economic research at the Hudson Institute...
...This finding isn't a fact at all...
...There is simply no link between the breakup scheme and specific legal infractions theoretically in need of redress...
...The only rationale for splitting Microsoft in two was a claim from the software lobby that intimate knowledge of Windows gave Microsoft an edge in applications...
...First, he held asked to do something so foolish, indeed so transparently suicidal, seems not to have occurred to Jackson...
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...According to Justice, Microsoft had included the free browser not to make Windows more attractive, but for the sole purpose of ending a vaguely-described "middleware threat" from Netscape's browser and Sun Microsystems' Java programming language...
...A twist of the wrist converts it to a 3x telescope, or a unique 3x telescope-loupe...
...Circuit overruled Jackson, holding that bundling Iuternet functions with tire operating system would suwixc antitrust scrutiny if it resulted in a "product that combines functionalities...in a way that offers advantages unavailable if...bought separately and combined by the purchaser...
...it's now being made only 2 ~ long...
...Foreclosing Netscape's distribution channels was central to both charges...
...Adding Internet functionality to an operating system was just one more instance of product improvement through integration...
...Jackson gave the company less than five months to prepare for trial on the original charges, and even less time to defend against the charges Justice later added...
...Circuit, rejecting that court's focus on "plausible" consumer benefits and instead sticking to a different standard that had been approved by a previous decision...
...you crisp reception over the entire AM and FM bends and the audio portions of all VHF TV channels--2 to 13...
...An by one of Asia's finest lens optical miracle...
...Jackson asserted that the large stockpile of Windows and DOS applications makes it impossible for non-Microsoft operating systems to gain a "significant" number of customers...
...Car dangerous neighbor- Starter IF measures 8.5" x hoods---or are depen- 2" x 2" and weighs only 27 dent on the kindnes~ of oz...
...But if the government possessed evidence of an illegal market splitting proposal by Microsoft, why did it take another three years for the Justice Department to press charges...
...9s* W hen H o r a t i o ~ d ~ ~ Nelson f o u g h t the b a t t l e of Trafalgar, he used a telescope just J ~ ~ ' , . J a ~ , J like this to monitor the movements of the French-Spanish fleet...
...This replica is heavily chrome-plated for extra beauty and protection...
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...makers...
...he central issue in the case, of course, concerned Microsoft's inclusion of a free Intemet browser in its Windows operating system...
...But Jackson didn't prove equal to these tasks...
...it's a forecast...
...He contended that Microsoft asked Netscape to abandon its forthcoming browser for Windows 95, noting that "had Netscape accepted Mierosoft's offer, nearly all of its share ['well above seventy percent'] would have devolved upon Microsoft...
...You may oRler by toll-free phone, by marl, cr by fax and pay by check or "v~sa/MasteaCa...
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...That "remedy" would amount to expropriation of the Windows trademark...
...Everything will appear twenty-five tm~eslarg~d~anit ~xdd ~o d~e naked eye...
...In 1997, in a separate but related case, Jackson had ordered Microsoft to unbundle its Windows operating sysrein and its Internet Explorer Web browser...
...Jackson, you may recall, is the federal judge in Washington, D.C., who ruled against Microsoft, finding that the software giant had violated antitrust law, undercut rivals, and inhibited innovation...
...In the end, those assurances meant nothing, for Jackson proceeded to do what he said he would not...
...One of his "findings of fact" was this: "While some consumers may decide to make do with one or more information appliances, the number of these consumers will, for the foreseeable future, remain small in comparison to the number of consumers deciding that they will still need an Intel-compatible PC system...
...D o n ' t leave home without i t - - o r d e r it today...
...Microsoft was to be split into two companies designed by government lawyers, and its business practices were to be tightly regulated for at least three years, possibly ten...
...Today IDC says Linux runs more than 3o percent of all servers and 4 percent ofdesktops...
...But Apple has grown by z 5 percent a year...
...Thus Jackson relied on a prediction that very well may be wrong in concluding that Microsoft had a "reasonable probability"' of "monopolizing the browser market...
...He also commented on Mierosoft's legal strategy and the integrity of company witnesses to the Washington Post, Wall Street Journal, Newsweek, and CNN...
...Made findings of fact that were plainly erroneous...
...That publicity blitz ignored the clear mandate of Canon 3A(6) of the Code of Conduct for United States Judges to "avoid public comment on the merits of a pending or impending action...until completion of the appellate process...
...To illustrate, consider the following "remedy," from the judge's final ruling, that redefines who controls proper~" rights to Windows: Microsoft shall not restrict...[a computer manufacturer I from modi~'ing...[any] aspect of a Windows Operating System Product to...display icons or otherwise feature other products or services...
...You put is an astonishing 7.5 ampare stranded--some- hs., incomparably higher than times for hours or in any competing unit...
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...Let's hope they take it...
...watch te TV show without disturbing your partner...
...Drew unjustified legal conclusions...
...But Justice did not take that sound advice--nor did Jackson...
...Jackson found that "Microsoft had reason to believe that other operating system vendors would do the same...
...Catch the audio portion of t~OU~afaVorite TV show, wherever you are...
...and t by end users...
...s for the remedies Jackson imposed, they are draconian and wholly unrelated to Microsoft's purported misbehavior...
...Jackson failed to appreciate that a company holding a valid copyright can ask for delivery of its copyrighted products to customers in the form it specifies...
...It measures only inconspicuously 5 x 25 inches and weighs less than on your desk or six ounces...
...For once Jackson got it right when he wrote, "The inclusion of Intemet Explorer with Windows at no separate charge...contributed to improving the quality of Web browsing software, lowering its cost, and increasing its ability, thereby benefiting consumers...
...Fortunately, courts like his don't have the last word...
...ROBERT A. LEVF ALAN REYNOLDS ackson thus presided over a trial that denied Microsoft basic fairness --what the lawyers call due process...
...And rubber-stamped government remedies that were neither proportionate nor even related to Microsoft's alleged infractions...
...Within 48 hours of the meeting, the government was given detailed notes about it written by Netscape co-founder (and legendary Microsoft basher) Marc Andreessen and relayed by Netscape's outside attorney, Gary Rebaek...
...Microsoft appealed some~ hcrc iIR the \vc~rtd...
...When youextendthe four sections to full len~.h, the scope will be thirteen inches long and focused to infinity with needle sharpness...
...No poison and no mess...
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...There are courts of appeal, and of course Microsoft has appealed...
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...Moreover, IBM "announced in September 1994 its plan to include browsing capability in OS/z Warp [IBM's oper54 No v e m b e r 2 o o o _9 The American Spectator ating system, then the principal challenger to Windows] at no extra charge...
...95* ~ T he N i g h t P i e r c e r I F casts a focused beam that can be seen for many miles...
...But this was not the worst of it...
...Ultimately that political agenda will destroy what it sets out to protect...
...That would be hard to prove...
...Microsoft may not be the most appealing company around...
...Soon the United States Court of Appeals for the District of Columbia, which will likely be a friendlier venue, will have tire chance to reverse Jackson and rebuke the government...
...Finally, lurking among Jackson's more destructive remedies was this one: Microsoft shall not, in any Operating System Product...
...Yet Jackson himself conceded that it had not, Jackson also made much of a June 1995 meeting between executives of Microsoft and Netscape...
...Jackson made another dubious finding when he said that 70,000 games and other applications, old and new, created a formidable "applications barrier" to entry...
...70,000 cu...
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...The company could not have been acting anti-competitively if its actions responded to similar actions by other companies- and that was clearly the case...
...In realit?, few computer users want more software than is contained in the competent office suites that are available for all operating systems...
...The u n i t contains two sealed heavyd u t y l e a d - a c i d b a t t e r i e s and can be recharged either through your household c u r r e n t or through the cigarette l i g h t e r socket of your car, RV or boat...
...It comes with a plastic "tripod" for extended observations at 15x or 30x magnifications...
...Despite the amplified charges, Jackson never required the government to include them in an amended complaint...
...to] display any user interfaces, provided that any icon is also displayed that allows the user access to the Windows user interface, or [to]...launch automatically any non-Microsoft Middleware, Operating System, or application...
...Jackson heard no evidence on the efficacy of these remedies, and, despite a promise to do so, he offered Microsoft no opportunity to research their impact...
...In 1997, when IDC made the estimate, it thought Apple would slip into oblivion...
...The optics are superb: brilliant luminosity, needle-sharp focus, absolute planarity, total chromatic correction, and fully anastigmatic...
...The scope comes with a belt-looped vinyl carrying case...
...And in his legal conclusions, Jackson even lectured the D.C...
...Whatever the answer, the department fell far short of its burden under the antitrust laws, which was to show there had been an unambiguous invitation to engage in collusive acts...
...The Episcopal", magnificationof only 2" long, was devel- 30x, theEpiscope TM oped in Wetzlar (Ger- resolvesasdistinctly many), the home of as any laboratory world-famous Leica cam- microscope, yettiis eras...
...Here Jackson reached two contradictory conclusions...
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...Consumers, although not the manufacturers, can easily delete the Interact Explorer icon, even substitute a new shell for the first screen...
...That is, Microsoft's share includes every Intel-based desktop still in use percentage of users with a viable substitute for Windows...
...But the icons in question occupy only 15 percent of the screen, and that the agreements did not violate section 1 of the Sherman Act, which addresses conspiracies in restraint of trade, because Netscape was not wholly prevented from distributing its browser...
...Consider the matter of"first screen" restrictions...
...Every year for the last decade," he said, "Microsoft's share of the market for Intel-compatibte PC operating systems has stood above ninety percent...and analxsts project that the share will climb even higher over the next few years 7 Here Jackson simply accepted a forecast found in a government exhibit...
...And because Internet Explorer would be owned usefulness of\Vindows to consumers...
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...The appellate judges observed, "The [Justice l Department may well regard further pursuit of the case as unpromising...
...This forecast was based on an outdated estimate made by the International Data Corporation (IDC...
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...When [a manufacturer I removes End-User Access to a Middleware Product...
...Surely if Microsoft had attempted to exclude Netscape from the ISP and ICP channels, and if Microsoft enjoyed the enormous monopoly power that Jackson claimed, then Microsoft would have succeeded...
...In essence, the court concluded that Microsoft's packaged product, i::lch~4ng both Windows and Interact Explorer, was better for customers than buying the two components separately and t13,ing to put thcm together...
...After use, you can recharge the unit again right through that same cigarette lighter...
...Also, IDC did not even bother to make a separate estimate for Linux in 1997...
...Jackson's courtroom was tilted against Microsoft from start to finish...
...Insisting that the meeting was set up by Netscape to explore technological cooperation, Microsoft cited an e-mail from former Netscape chairman Jim Clark in which he said, "We'd like to work with you...you might even take an equity position in Netscape...
...The American Spectator • No v e m b e r ~ o o o 53 Or consider Jackson's finding about market share, which was widely echoed in the media as all the proof needed that Windows has a monopoly...
...This -Night powerful l i g h t i s PiercerlF M i n d i s p e n s a b l e f o r is constructed of heavytracking and explor- duty high-impact polypropylene...
...And a judge more sophisticated about economics than Jackson would have recognized that no measure of market share can be a viable gauge of monopoly for the simple reason that monopoly means no consumer choices, not most consumers choosing one product over others...
...Our "special deal": BUY ANY 2 ITEMS AND GET ANOTHER ONE FREE...
...Consider the remedy for the alleged operating-system monopoly, which is to split offa separate Windows company...
...And once the trial had been held and the time came for determining appropriate remedies, Jackson rubber-stamped what Justice proposed, making not a single material change...
...Moreover, the IDC percentages did not measure actual sales, which is what most people mean by shares of a market, but only the "installed base...
...It has six variable pitch and "loudness" settings...
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...Nevertheless, he held that Microsoft's license agreements with the companies violated the Sherman Act by requiring Microsoft's permission before deleting certain icons...
...blind any Middleware Product to a Windows Operating System b~ a separate applications company, which could not deal with the operating system company for many years, the browser currently built into Windows could be improved nearterm only, by leasing a browser from, say, Netscape...
...Why Netscape would even be most can be deleted by the manufacturers...
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...Economist Richard McKenzie has estimated that a credible challenge to Windows could be mounted with no more than a few hundred key applications...
...But the case brought by the Justice Department's Antitrust Division was a weak one and should have been rejected by Judge Jackson...
...For permanent mounting the scope comes with an extendfOle table-top tripod...
...During and after the trial Jackson granted "friendly, informal and unstructured" interviews to the New York Times...
...the royalty paid by the [manufacturer] for that copy of Windows is reduced...
...That restriction supposedly enabled Microsoft to dictate Internet access, even content...
Vol. 33 • November 2000 • No. 9
