Reading the fineprint
Thursday, June 28th, 2001Reading the fineprint.
This isn’t a big victory for Microsoft - it’s only the beginning of a long journey towards fairness and open competition in the software industry.
From the appeal:
Microsoft argues that the District Court incorrectly defined
the relevant market. It also claims that there is no barrier to
entry in that market. Alternatively, Microsoft argues that
because the software industry is uniquely dynamic, direct
proof, rather than circumstantial evidence, more appropriately indicates whether it possesses monopoly power.
Rejecting
each argument, we uphold the District Court’s finding of
monopoly power in its entirety.
In sum, we hold that with the exception of the one restriction prohibiting automatically launched alternative interfaces, all the OEM license restrictions at issue represent uses of Microsoft’s market power to protect its monopoly, unredeemed by any legitimate justification.
The restrictions therefore violate §2 of the Sherman Act.
Plaintiffs having demonstrated a harm to competition, the
burden falls upon Microsoft to defend its exclusive dealing
contracts with IAPs by providing a procompetitive justification for them. Significantly, Microsoft ’s only explanation for
its exclusive dealing is that it wants to keep developers
focused upon its APIs — which is to say, it wants to preserve
its power in the operating system market. 02/26/01 Ct.
Appeals Tr.at 45 –47. That is not an unlawful end, but
neither is it a procompetitive justification for the specific
means here in question, namely exclusive dealing contracts
with IAPs.
Accordingly, we affirm the District Court’s decision holding that Microsoft’s exclusive contracts with IAPs
are exclusionary devices, in violation of §2 of the Sherman
Act.
Microsoft offers no procompetitive justification for the exclusive dealing arrangement. It makes only the irrelevant
claim that the IE-for-Mac Office deal is part of a multifaceted
set of agreements between itself and Apple, see Appellant ’s
Opening Br.at 61 (‘‘Apple ’s ‘browsing software’obligation
was [not ]the quid pro quo for Microsoft’s Mac Office obligation [;] all of the various obligations were part of
one ‘overall agreement ’between the two companies.’’); that
does not mean it has any procompetitive justification.
Accordingly, we hold that the exclusive deal with Apple is
exclusionary, in violation of § 2 of the Sherman Act.
Because the cumulative effect of the deals is anticompetitive
and because Microsoft has no procompetitive justification for
them,
we hold that the provisions in the First Wave Agreements requiring use of Microsoft’s JVM as the default are
exclusionary, in violation of the Sherman Act.
Microsoft’s conduct related to its Java developer tools
served to protect its monopoly of the operating system in a
manner not attributable either to the superiority of the
operating system or to the acumen of its makers, and therefore was anticompetitive. Unsurprisingly, Microsoft offers no
procompetitive explanation for its campaign to deceive developers.
Accordingly, we conclude this conduct is exclusionary, in violation of §2 of the Sherman Act.
Microsoft does not deny the facts found by the District
Court, nor does it offer any procompetitive justification for
pressuring Intel not to support cross-platform Java. Microsoft lamely characterizes its threat to Intel as ‘‘advice.’’ The
District Court, however, found that Microsoft ’s ‘‘advice ’’to
Intel to stop aiding cross-platform Java was backed by the
threat of retaliation, and this conclusion is supported by the
evidence cited above.
Therefore we affirm the conclusion
that Microsoft’s threats to Intel were exclusionary, in violation of §2 of the Sherman Act.
Who would call this a win for Microsoft?