Judge's findings reject MS evidence, back DoJ

Analysis One of the most striking features of Judge Jackson's findings of fact is the near absence of direct comment from the good judge. After a while, the reason suddenly becomes clear: what he has written - a basic account of most aspects of the case - wholly accepts the DoJ case and hardly gives any credence to the Microsoft evidence. A considerable part of the evidence - especially from the economists - has been judged to be not relevant. But many of the juiciest morsels offered in evidence are included, and of course this makes them official facts of the case. We shall be offering more analyses of the significance of the result, but here are a few preliminary impressions. On the few occasions where the judge makes a personal statement, it is significant. First blood is when he defined the relevant market following the refusal of Microsoft witness Dean Schmalensee to do so. This wouldn't have helped Microsoft, but Schmalensee has defined the market in other cases where he has been a witness. The judge's decision was that in determining the level of Microsoft's market power, the relevant market consisted of Intel-compatible PC operating systems. He excluded server operating systems, information appliances, network computers, and middleware such as Netscape's browser and Java class libraries. He also decided that Microsoft's claims that it was always vulnerable to new entrants to the market was spurious, because of the applications barrier. The key finding here is that "Microsoft's actual pricing behaviour is consistent with the proposition that the firm enjoys monopoly power in the market for Intel-compatible PC operating systems". So monopoly power is a fact, despite Microsoft's denials, and the next step will be to consider whether Microsoft has used its monopoly illegally. Aside from concluding that the applications barrier blocks new entrants, the judge's findings also cover the actions Microsoft has taken in order to maintain this barrier. Talks with rivals are initiated ostensibly to do a deal, but the goal turns out to be to neutralise competition by getting the rival to slow down or abandon development. He notes: "Microsoft were willing to invest a large amount of cash and other resources into securing the agreement of other companies to halt software development that exhibited discernible potential to weaken the applications barrier." AOL, Apple, IBM, Intel, Intuit, Netscape, Novell, and Sun/Java come to mind as victims. Judge Jackson elaborated cases where Microsoft's actions have harmed consumers: "Microsoft's actions have inflicted collateral harm on consumers who have no interest in using a Web browser at all." He also thought that MS exec Jim Allchin's refusal to supply a technique to remove for IE, and Microsoft's refusal to cater for customers who might prefer Navigator, harmed consumers. The judge firmly came to the conclusion that there was no technical justification for Microsoft's refusal to meet consumer demand for a browserless version of Windows 98. Microsoft could easily supply a version of Windows 98 that does not provide the ability to browse the Web, and to which users could add the browser of their choice, he said. This suggests he may order Microsoft to produce an IE removal program, and to sell 'unbundled' versions of Windows: "Given Microsoft's special knowledge of its own products, the company is readily able to produce an improved implementation of the concept illustrated by Felten's prototype removal program. In particular, Microsoft can easily identify browsing-specific code that could be removed from shared files, thereby reducing the operating system's memory and hard disk requirements and obtaining performance improvements even beyond those achieved by Felten." Jackson clearly intends to impose serious and wide-ranging remedies on Microsoft, but unless Microsoft and the DoJ cut a deal in the interim, that will only be the beginning. His findings of fact are carefully crafted in order to make it very difficult for an appellate court to come to Microsoft's rescue, but the appeals process will be likely to delay, ultimately even block, any remedies he proposes Microsoft intends to appeal, and has indicated that it will go as far as the Supreme Court. So far the company has done better on appeal, and it's perfectly possible that the appellate court could put remedies on hold. Judge Jackson's own temporary injunction requiring Microsoft to offer a version of Windows without IE was thrown out on appeal, and way back in 1995 the appellate court overruled Judge Sporkin's refusal to sign the consent decree, which he thought was too feeble. The DoJ, which at that time was in cahoots with Microsoft to force the consent decree through, no doubt now agrees. ® Complete Register Trial coverage