Vai al sommario della sentenza.
era "abuso di posizione dominante"
Danno ai consumatori e violazione delle leggi antimonopolio. E' finita con un verdetto anti-Microsoft la lunga controversia che ha opposto Bill Gates a 19 stati americani e al dipartimento di Giustizia Usa. Lo stesso giudice che il 5 novembre scorso sancì, nella sentenza preliminare, la violazione della legge da parte di Microsoft, giudice Thomas Jackson, ha condannato, con una sentenza destinata a diventare storica, il gigante elettronico di Silicon Valley.
Ha prevalso il centenario "Sherman antitrust act", con le sue rigide norme a tutela dei consumatori. Per il giudice Microsoft avrebbe realizzato una serie di "atti predatori" per assicurarsi, sul mercato mondiale dell'informatica, una posizione di assoluto monopolio. La più eclatante di queste mosse sarebbe stata la chiusura, dal sistema operativo Windows, a browser per navigare su Internet, diversi da Explorer. Una "mossa" che avrebbe di fatto escluso dal 95 per cento dei computer navigatori diversi.
La sentenza ha avuto un primo impatto negativo sull'andamento dei titoli tecnologici. Ora si attende la pronuncia della pena contro l'azienda informatica, che la corte dovrà fissare entro tre mesi: vincoli rigidi al modo di operare di Microsoft sono già immaginabili, ma non risulta improbabile, a questo punto, anche l'ipotesi di smembrare il colosso dell'high-tech. (La Repubblica del 4 aprile 2000)
(Fonte: The New York Times Company)
CONCLUSIONS OF LAW
United States, nineteen individual states, and the District of Columbia
("the plaintiffs") bring these consolidated civil enforcement
actions against defendant Microsoft Corporation ("Microsoft")
under the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2. The plaintiffs
charge, in essence, that Microsoft has waged an unlawful campaign in
defense of its monopoly position in the market for operating systems
designed to run on Intel-compatible personal computers ("PCs").
Specifically, the plaintiffs contend that Microsoft violated §2 of the
Sherman Act by engaging in a series of exclusionary, anticompetitive,
and predatory acts to maintain its monopoly power. They also assert that
Microsoft attempted, albeit unsuccessfully to date, to monopolize the
Web browser market, likewise in violation of §2. Finally, they contend
that certain steps taken by Microsoft as part of its campaign to protect
its monopoly power, namely tying its browser to its operating system and
entering into exclusive dealing arrangements, violated § 1 of the Act.
consideration of the Court's Findings of Fact ("Findings"),
filed herein on
November 5, 1999 ,
as amended on December 21, 1999, the proposed conclusions of law
submitted by the parties, the briefs of amici curiae, and the argument
of counsel thereon, the Court concludes that Microsoft maintained its
monopoly power by anticompetitive means and attempted to monopolize the
Web browser market, both in violation of § 2. Microsoft also violated
§ 1 of the Sherman Act by unlawfully tying its Web browser to its
operating system. The facts found do not support the conclusion, however,
that the effect of Microsoft's marketing arrangements with other
companies constituted unlawful exclusive dealing under criteria
established by leading decisions under § 1.
nineteen states and the District of Columbia ("the plaintiff states")
seek to ground liability additionally under their respective antitrust
laws. The Court is persuaded that the evidence in the record proving
violations of the Sherman Act also satisfies the elements of analogous
causes of action arising under the laws of each plaintiff state. For
this reason, and for others stated below, the Court holds Microsoft
liable under those particular state laws as well.
SECTION TWO OF THE SHERMAN ACT
2 of the Sherman
declares that it is unlawful for a person or firm to "monopolize .
. . any part of the trade or commerce among the several States, or with
foreign nations . . . ." 15 U.S.C. § 2. This language operates to
limit the means by which a firm may lawfully either acquire or
perpetuate monopoly power. Specifically, a firm violates § 2 if it
attains or preserves monopoly power through anticompetitive acts. See
United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)
("The offense of monopoly power under § 2 of the Sherman Act has
two elements: (1) the possession of monopoly power in the relevant
market and (2) the willful acquisition or maintenance of that power as
distinguished from growth or development as a consequence of a superior
product, business acumen, or historic accident."); Eastman Kodak
Co. v. Image Technical Services, Inc., 504 U.S. 451, 488 (1992) (Scalia,
J., dissenting) ("Our § 2 monopolization doctrines are . . .
directed to discrete situations in which a defendant's possession of
substantial market power, combined with his exclusionary or
anticompetitive behavior, threatens to defeat or forestall the
corrective forces of competition and thereby sustain or extend the
defendant's agglomeration of power.").
threshold element of a § 2 monopolization offense being "the
possession of monopoly power in the relevant market," Grinnell, 384
U.S. at 570, the Court must first ascertain the boundaries of the
commercial activity that can be termed the "relevant market."
See Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382
U.S. 172, 177 (1965) ("Without a definition of [the relevant]
market there is no way to measure [defendant's] ability to lessen or
destroy competition."). Next, the Court must assess the defendant's
actual power to control prices in - or to exclude competition from -
that market. See United States v. E. I. du Pont de Nemours & Co.,
351 U.S. 377, 391 (1956) ("Monopoly power is the power to control
prices or exclude competition.").
this case, the plaintiffs postulated the relevant market as being the
worldwide licensing of Intel-compatible PC operating systems. Whether
this zone of commercial activity actually qualifies as a market, "monopolization
of which may be illegal," depends on whether it includes all
products "reasonably interchangeable by consumers for the same
purposes." du Pont, 351 U.S. at 395. SeeRothery Storage & Van
Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 218 (D.C. Cir. 1986)
("Because the ability of consumers to turn to other suppliers
restrains a firm from raising prices above the competitive level, the
definition of the 'relevant market' rests on a determination of
Court has already found, based on the evidence in this record, that
there are currently no products - and that there are not likely to be
any in the near future - that a significant percentage of computer users
worldwide could substitute for Intel-compatible PC operating systems
without incurring substantial costs. Findings 18-29. The Court has
further found that no firm not currently marketing Intel-compatible PC
operating systems could start doing so in a way that would, within a
reasonably short period of time, present a significant percentage of
such consumers with a viable alternative to existing Intel-compatible PC
operating systems. Id. 18, 30-32. From these facts, the Court has
inferred that if a single firm or cartel controlled the licensing of all
Intel-compatible PC operating systems worldwide, it could set the price
of a license substantially above that which would be charged in a
competitive market - and leave the price there for a significant period
of time - without losing so many customers as to make the action
unprofitable. Id. 18. This inference, in turn, has led the Court to find
that the licensing of all Intel-compatible PC operating systems
worldwide does in fact constitute the relevant market in the context of
the plaintiffs' monopoly maintenance claim. Id.
plaintiffs proved at trial that Microsoft possesses a dominant,
persistent, and increasing share of the relevant market. Microsoft's
share of the worldwide market for Intel-compatible PC operating systems
currently exceeds ninety-five percent, and the firm's share would stand
well above eighty percent even if the Mac OS were included in the
market. Id. 35. The plaintiffs also proved that the applications barrier
to entry protects Microsoft's dominant market share. Id. 36-52. This
barrier ensures that no Intel-compatible PC operating system other than
Windows can attract significant consumer demand, and the barrier would
operate to the same effect even if Microsoft held its prices
substantially above the competitive level for a protracted period of
time. Id. Together, the proof of dominant market share and the existence
of a substantial barrier to effective entry create the presumption that
Microsoft enjoys monopoly power. See United States v. AT&T
Co., 524 F. Supp. 1336, 1347-48 (D.D.C. 1981) ("a persuasive
showing . . . that defendants have monopoly power . . . through various
barriers to entry, . . . in combination with the evidence of market
shares, suffice[s] at least to meet the government's initial burden, and
the burden is then appropriately placed upon defendants to rebut the
existence and significance of barriers to entry"), quoted with
approval inSouthern Pac. Communications Co. v. AT&T Co., 740
F.2d 980, 1001-02 (D.C. Cir. 1984).
trial, Microsoft attempted to rebut the presumption of monopoly power
with evidence of both putative constraints on its ability to exercise
such power and behavior of its own that is supposedly inconsistent with
the possession of monopoly power. None of the purported constraints,
however, actually deprive Microsoft of "the ability (1) to price
substantially above the competitive level and (2) to persist in doing so
for a significant period without erosion by new entry or expansion."
IIA Phillip E. Areeda, Herbert Hovenkamp & John L. Solow, Antitrust
Law 501, at 86 (1995) (emphasis in original); see Findings 57-60.
Furthermore, neither Microsoft's efforts at technical innovation nor its
pricing behavior is inconsistent with the possession of monopoly power.
if Microsoft's rebuttal had attenuated the presumption created by the
prima facie showing of monopoly power, corroborative evidence of
monopoly power abounds in this record: Neither Microsoft nor its OEM
customers believe that the latter have - or will have anytime soon -
even a single, commercially viable alternative to licensing Windows for
pre-installation on their PCs. Id. 53-55; cf. Rothery, 792 F.2d at 219
n.4 ("we assume that economic actors usually have accurate
perceptions of economic realities"). Moreover, over the past
several years, Microsoft has comported itself in a way that could only
be consistent with rational behavior for a profit-maximizing firm if the
firm knew that it possessed monopoly power, and if it was motivated by a
desire to preserve the barrier to entry protecting that power. Findings
67, 99, 136, 141, 215-16, 241, 261-62, 286, 291, 330, 355, 393, 407.
short, the proof of Microsoft's dominant, persistent market share
protected by a substantial barrier to entry, together with Microsoft's
failure to rebut that prima facie showing effectively and the additional
indicia of monopoly power, have compelled the Court to find as fact that
Microsoft enjoys monopoly power in the relevant market. Id. 33.
a § 2 case, once it is proved that the defendant possesses monopoly
power in a relevant market, liability for monopolization depends on a
showing that the defendant used anticompetitive methods to achieve or
maintain its position. See United States v. Grinnell, 384 U.S. 563,
570-71 (1966); Eastman Kodak Co. v. Image Technical Services, Inc., 504
U.S. 451, 488 (1992) (Scalia, J., dissenting); Intergraph Corp. v. Intel
Corp., 195 F.3d 1346, 1353 (Fed. Cir. 1999). Prior cases have
established an analytical approach to determining whether challenged
conduct should be deemed anticompetitive in the context of a monopoly
maintenance claim. The threshold question in this analysis is whether
the defendant's conduct is "exclusionary" - that is, whether
it has restricted significantly, or threatens to restrict significantly,
the ability of other firms to compete in the relevant market on the
merits of what they offer customers. See Eastman Kodak, 504 U.S. at 488
(Scalia, J., dissenting) (§ 2 is "directed to discrete situations"
in which the behavior of firms with monopoly power "threatens to
defeat or forestall the corrective forces of competition").
the evidence reveals a significant exclusionary impact in the relevant
market, the defendant's conduct will be labeled
"anticompetitive" - and liability will attach - unless the
defendant comes forward with specific, procompetitive business
motivations that explain the full extent of its exclusionary conduct.
See Eastman Kodak, 504 U.S. at 483 (declining to grant defendant's
motion for summary judgment because factual questions remained as to
whether defendant's asserted justifications were sufficient to explain
the exclusionary conduct or were instead merely pretextual); see also
Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585,
605 n.32 (1985) (holding that the second element of a monopoly
maintenance claim is satisfied by proof of "'behavior that not only
(1) tends to impair the opportunities of rivals, but also (2) either
does not further competition on the merits or does so in an
unnecessarily restrictive way'") (quoting III Phillip E. Areeda
& Donald F. Turner, Antitrust Law 626b, at 78 (1978)).
the defendant with monopoly power consciously antagonized its customers
by making its products less attractive to them - or if it incurred other
costs, such as large outlays of development capital and forfeited
opportunities to derive revenue from it - with no prospect of
compensation other than the erection or preservation of barriers against
competition by equally efficient firms, the Court may deem the
defendant's conduct "predatory." As the D.C. Circuit stated in
Neumann v. Reinforced Earth Co.,
involves aggression against business rivals through the use of business
practices that would not be considered profit maximizing except for the
expectation that (1) actual rivals will be driven from the market, or
the entry of potential rivals blocked or delayed, so that the predator
will gain or retain a market share sufficient to command monopoly
profits, or (2) rivals will be chastened sufficiently to abandon
competitive behavior the predator finds threatening to its realization
of monopoly profits.
F.2d 424, 427 (D.C. Cir. 1986).
that a profit-maximizing firm took predatory action should suffice to
demonstrate the threat of substantial exclusionary effect; to hold
otherwise would be to ascribe irrational behavior to the defendant.
Moreover, predatory conduct, by definition as well as by nature, lacks
procompetitive business motivation. See Aspen Skiing, 472 U.S. at
610-11 (evidence indicating that defendant's conduct was "motivated
entirely by a decision to avoid providing any benefits" to a rival
supported the inference that defendant's conduct "was not motivated
by efficiency concerns"). In other words, predatory behavior is
patently anticompetitive. Proof that a firm with monopoly power engaged
in such behavior thus necessitates a finding of liability under § 2.
this case, Microsoft early on recognized middleware as the Trojan horse
that, once having, in effect, infiltrated the applications barrier,
could enable rival operating systems to enter the market for
Intel-compatible PC operating systems unimpeded. Simply put, middleware
threatened to demolish Microsoft's coveted monopoly power. Alerted to
the threat, Microsoft strove over a period of approximately four years
to prevent middleware technologies from fostering the development of
enough full-featured, cross-platform applications to erode the
applications barrier. In pursuit of this goal, Microsoft sought to
convince developers to concentrate on Windows-specific APIs and ignore
interfaces exposed by the two incarnations of middleware that posed the
greatest threat, namely, Netscape's Navigator Web browser and Sun's
implementation of the Java technology. Microsoft's campaign succeeded in
preventing - for several years, and perhaps permanently - Navigator and
Java from fulfilling their potential to open the market for
Intel-compatible PC operating systems to competition on the merits.
Findings 133, 378. Because Microsoft achieved this result through
exclusionary acts that lacked procompetitive justification, the Court
deems Microsoft's conduct the maintenance of monopoly power by
same ambition that inspired Microsoft's efforts to induce Intel, Apple,
RealNetworks and IBM to desist from certain technological innovations
and business initiatives - namely, the desire to preserve the
applications barrier - motivated the firm's June 1995 proposal that
Netscape abstain from releasing platform-level browsing software for
32-bit versions of Windows. See id. 79-80, 93-132. This proposal,
together with the punitive measures that Microsoft inflicted on Netscape
when it rebuffed the overture, illuminates the context in which
Microsoft's subsequent behavior toward PC manufacturers ("OEMs"),
Internet access providers ("IAPs"), and other firms must be
Netscape refused to abandon its efforts to develop Navigator into a
substantial platform for applications development, Microsoft focused its
efforts on minimizing the extent to which developers would avail
themselves of interfaces exposed by that nascent platform. Microsoft
realized that the extent of developers' reliance on Netscape's browser
platform would depend largely on the size and trajectory of Navigator's
share of browser usage. Microsoft thus set out to maximize Internet
Explorer's share of browser usage at Navigator's expense. Id.
133, 359-61. The core of this strategy was ensuring that the firms
comprising the most effective channels for the generation of browser
usage would devote their distributional and promotional efforts to
Internet Explorer rather than Navigator. Recognizing that
pre-installation by OEMs and bundling with the proprietary software of
IAPs led more directly and efficiently to browser usage than any other
practices in the industry, Microsoft devoted major efforts to usurping
those two channels. Id. ¶ 143.
respect to OEMs, Microsoft's campaign proceeded on three fronts. First,
Internet Explorer  to
Windows with contractual and, later, technological shackles in order to
ensure the prominent (and ultimately permanent) presence of Internet
Explorer on every Windows user's PC system, and to increase the costs
attendant to installing and using Navigator on any PCs running Windows.
Id. 155-74. Second, Microsoft imposed stringent limits on the freedom of
OEMs to reconfigure or modify Windows 95 and Windows 98 in ways that
might enable OEMs to generate usage for Navigator in spite of the
contractual and technological devices that Microsoft had employed to
bind Internet Explorer to Windows. Id. 202-29. Finally, Microsoft used
incentives and threats to induce especially important OEMs to design
their distributional, promotional and technical efforts to favor
Internet Explorer to the exclusion of Navigator. Id. 230-38.
actions increased the likelihood that pre-installation of Navigator onto
Windows would cause user confusion and system degradation, and therefore
lead to higher support costs and reduced sales for the OEMs. Id. 159,
172. Not willing to take actions that would jeopardize their already
slender profit margins, OEMs felt compelled by Microsoft's actions to
reduce drastically their distribution and promotion of Navigator. Id.
239, 241. The substantial inducements that Microsoft held out to the
largest OEMs only further reduced the distribution and promotion of
Navigator in the OEM channel. Id. 230, 233. The response of OEMs to
Microsoft's efforts had a dramatic, negative impact on Navigator's usage
share. Id. 376. The drop in usage share, in turn, has prevented
Navigator from being the vehicle to open the relevant market to
competition on the merits. Id. 377-78, 383.
fails to advance any legitimate business objectives that actually
explain the full extent of this significant exclusionary impact. The
Court has already found that no quality-related or technical
justifications fully explain Microsoft's refusal to license Windows 95
to OEMs without version 1.0 through 4.0 of Internet Explorer, or its
refusal to permit them to uninstall versions 3.0 and 4.0. Id. 175-76.
The same lack of justification applies to Microsoft's decision not to
offer a browserless version of Windows 98 to consumers and OEMs, id.
177, as well as to its claim that it could offer "best of breed"
implementations of functionalities in Web browsers. With respect to the
latter assertion, Internet Explorer is not demonstrably the current
"best of breed" Web browser, nor is it likely to be so at any
time in the immediate future. The fact that Microsoft itself was aware
of this reality only further strengthens the conclusion that Microsoft's
decision to tie Internet Explorer to Windows cannot truly be explained
as an attempt to benefit consumers and improve the efficiency of the
software market generally, but rather as part of a larger campaign to
quash innovation that threatened its monopoly position. Id. 195, 198.
the extent that Microsoft still asserts a copyright defense, relying
upon federal copyright law as a justification for its various
restrictions on OEMs, that defense neither explains nor operates to
immunize Microsoft's conduct under the Sherman Act. As a general
proposition, Microsoft argues that the federal Copyright Act, 17 U.S.C.
§101 et seq., endows the holder of a valid copyright in software
with an absolute right to prevent licensees, in this case the OEMs, from
shipping modified versions of its product without its express permission.
In truth, Windows 95 and Windows 98 are covered by copyright
registrations, Findings 228, that "constitute prima facie
evidence of the validity of the copyright." 17 U.S.C. §410(c). But
the validity of Microsoft's copyrights has never been in doubt; the
issue is what, precisely, they protect.
has presented no evidence that the contractual (or the technological)
restrictions it placed on OEMs' ability to alter Windows derive from any
of the enumerated rights explicitly granted to a copyright holder under
the Copyright Act. Instead, Microsoft argues that the restrictions
"simply restate" an expansive right to preserve the "integrity"of
its copyrighted software against any "distortion," "truncation,"
or "alteration," a right nowhere mentioned among the Copyright
Act's list of exclusive rights, 17 U.S.C. §106, thus raising some doubt
as to its existence. See Twentieth Century Music Corp. v. Aiken, 422
U.S. 151, 155 (1973) (not all uses of a work are within copyright
holder's control; rights limited to specifically granted "exclusive
rights"); cf. 17 U.S.C. § 501(a) (infringement means violating
specifically enumerated rights).
is also well settled that a copyright holder is not by reason thereof
entitled to employ the perquisites in ways that directly threaten
competition. See, e.g., Eastman Kodak, 504 U.S. at 479 n.29 ("The
Court has held many times that power gained through some natural and
legal advantage such as a . . . copyright, . . . can give rise to
liability if 'a seller exploits his dominant position in one market to
expand his empire into the next.'") (quoting Times-Picayune Pub.
Co. v. United States, 345 U.S. 594, 611 (1953)); Square D Co. v.
Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 421
(1986); Data General Corp. v. Grumman Systems Support Corp., 36
F.3d 1147, 1186 n.63 (1st Cir. 1994) (a copyright does not
exempt its holder from antitrust inquiry where the copyright is used as
part of a scheme to monopolize); see also Image Technical Services,
Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1219 (9th Cir. 1997),
cert. denied, 523 U.S. 1094 (1998) ("Neither the aims of
intellectual property law, nor the antitrust laws justify allowing a
monopolist to rely upon a pretextual business justification to mask
anticompetitive conduct."). Even constitutional privileges confer
no immunity when they are abused for anticompetitive purposes. See
Lorain Journal Co. v. United States, 342 U.S. 143, 155-56 (1951). The
Court has already found that the true impetus behind Microsoft's
restrictions on OEMs was not its desire to maintain a somewhat amorphous
quality it refers to as the "integrity" of the Windows
platform, nor even to ensure that Windows afforded a uniform and stable
platform for applications development. Microsoft itself engendered, or
at least countenanced, instability and inconsistency by permitting
Microsoft-friendly modifications to the desktop and boot sequence, and
by releasing updates to Internet Explorer more frequently than it
released new versions of Windows. Findings 226. Add to this the fact
that the modifications OEMs desired to make would not have removed or
altered any Windows APIs, and thus would not have disrupted any of
Windows' functionalities, and it is apparent that Microsoft's conduct is
effectively explained by its foreboding that OEMs would pre-install and
give prominent placement to middleware like Navigator that could attract
enough developer attention to weaken the applications barrier to entry.
Id. 227. In short, if Microsoft was truly inspired by a genuine concern
for maximizing consumer satisfaction, as well as preserving its
substantial investment in a worthy product, then it would have relied
more on the power of the very competitive PC market, and less on its own
market power, to prevent OEMs from making modifications that consumers
did not want. Id. 225, 228-29.
The IAP Channel
adopted similarly aggressive measures to ensure that the IAP channel
would generate browser usage share for Internet Explorer rather than
Navigator. To begin with, Microsoft licensed Internet Explorer and the
Internet Explorer Access Kit to hundreds of IAPs for no charge. Id.
250-51. Then, Microsoft extended valuable promotional treatment to the
ten most important IAPs in exchange for their commitment to promote and
distribute Internet Explorer and to exile Navigator from the desktop.
Id. 255-58, 261, 272, 288-90, 305-06. Finally, in exchange for efforts
to upgrade existing subscribers to client software that came bundled
with Internet Explorer instead of Navigator, Microsoft granted rebates -
and in some cases made outright payments - to those same IAPs. Id.
259-60, 295. Given the importance of the IAP channel to browser usage
share, it is fair to conclude that these inducements and restrictions
contributed significantly to the drastic changes that have in fact
occurred in Internet Explorer's and Navigator's respective usage shares.
Id. 144-47, 309-10. Microsoft's actions in the IAP channel thereby
contributed significantly to preserving the applications barrier to
are no valid reasons to justify the full extent of Microsoft's
exclusionary behavior in the IAP channel. A desire to limit free riding
on the firm's investment in consumer-oriented features, such as the
Referral Server and the Online Services Folder, can, in some
circumstances, qualify as a procompetitive business motivation; but that
motivation does not explain the full extent of the restrictions that
Microsoft actually imposed upon IAPs. Under the terms of the agreements,
an IAP's failure to keep Navigator shipments below the specified
percentage primed Microsoft's contractual right to dismiss the IAP from
its own favored position in the Referral Server or the Online Services
Folder. This was true even if the IAP had refrained from promoting
Navigator in its client software included with Windows, had purged all
mention of Navigator from any Web site directly connected to the
Referral Server, and had distributed no browser other than Internet
Explorer to the new subscribers it gleaned from the Windows desktop. Id.
258, 262, 289. Thus, Microsoft's restrictions closed off a substantial
amount of distribution that would not have constituted a free ride to
can an ostensibly procompetitive desire to "foster brand
association" explain the full extent of Microsoft's restrictions.
If Microsoft's only concern had been brand association, restrictions on
the ability of IAPs to promote Navigator likely would have sufficed. It
is doubtful that Microsoft would have paid IAPs to induce their existing
subscribers to drop Navigator in favor of Internet Explorer unless it
was motivated by a desire to extinguish Navigator as a threat. See id.
259, 295. More generally, it is crucial to an understanding of
Microsoft's intentions to recognize that Microsoft paid for the fealty
of IAPs with large investments in software development for their
benefit, conceded opportunities to take a profit, suffered competitive
disadvantage to Microsoft's own OLS, and gave outright bounties. Id.
259-60, 277, 284-86, 295. Considering that Microsoft never intended to
derive appreciable revenue from Internet Explorer directly, id. 136-37,
these sacrifices could only have represented rational business judgments
to the extent that they promised to diminish Navigator's share of
browser usage and thereby contribute significantly to eliminating a
threat to the applications barrier to entry. Id. 291. Because the full
extent of Microsoft's exclusionary initiatives in the IAP channel can
only be explained by the desire to hinder competition on the merits in
the relevant market, those initiatives must be labeled anticompetitive.
sum, the efforts Microsoft directed at OEMs and IAPs successfully
ostracized Navigator as a practical matter from the two channels that
lead most efficiently to browser usage. Even when viewed independently,
these two prongs of Microsoft's campaign threatened to "forestall
the corrective forces of competition" and thereby perpetuate
Microsoft's monopoly power in the relevant market. Eastman Kodak Co. v.
Image Technical Services, Inc., 504 U.S. 451, 488 (1992) (Scalia,
J., dissenting). Therefore, whether they are viewed separately or
together, the OEM and IAP components of Microsoft's anticompetitive
campaign merit a finding of liability under § 2.
ICPs, ISVs and Apple
other distribution channels for browsing software approach the
efficiency of OEM pre-installation and IAP bundling. Findings 144-47.
Nevertheless, protecting the applications barrier to entry was so
critical to Microsoft that the firm was willing to invest substantial
resources to enlist ICPs, ISVs, and Apple in its campaign against the
browser threat. By extracting from Apple terms that significantly
diminished the usage of Navigator on the Mac OS, Microsoft helped to
ensure that developers would not view Navigator as truly cross-platform
middleware. Id. 356. By granting ICPs and ISVs free licenses to bundle
Internet Explorer with their offerings, and by exchanging other valuable
inducements for their agreement to distribute, promote and rely on
Internet Explorer rather than Navigator, Microsoft directly induced
developers to focus on its own APIs rather than ones exposed by
Navigator. Id. 334-35, 340. These measures supplemented Microsoft's
efforts in the OEM and IAP channels.
as they fail to account for the measures that Microsoft took in the IAP
channel, the goals of preventing free riding and preserving brand
association fail to explain the full extent of Microsoft's actions in
the ICP channel. Id. 329-30. With respect to the ISV agreements,
Microsoft has put forward no procompetitive business ends whatsoever to
justify their exclusionary terms. See id 339-40. Finally, Microsoft's
willingness to make the sacrifices involved in cancelling Mac Office,
and the concessions relating to browsing software that it demanded from
Apple, can only be explained by Microsoft's desire to protect the
applications barrier to entry from the threat posed by Navigator. Id.
355. Thus, once again, Microsoft is unable to justify the full extent of
its restrictive behavior.
part of its grand strategy to protect the applications barrier,
Microsoft employed an array of tactics designed to maximize the
difficulty with which applications written in Java could be ported from
Windows to other platforms, and vice versa. The first of these measures
was the creation of a Java implementation for Windows that undermined
portability and was incompatible with other implementations. Id. 387-93.
Microsoft then induced developers to use its implementation of Java
rather than Sun-compliant ones. It pursued this tactic directly, by
means of subterfuge and barter, and indirectly, through its campaign to
minimize Navigator's usage share. Id. 394, 396-97, 399-400, 401-03. In a
separate effort to prevent the development of easily portable Java
applications, Microsoft used its monopoly power to prevent firms such as
Intel from aiding in the creation of cross-platform interfaces. Id.
tactics induced many Java developers to write their applications using
Microsoft's developer tools and to refrain from distributing
Sun-compliant JVMs to Windows users. This stratagem has effectively
resulted in fewer applications that are easily portable. Id. 398. What
is more, Microsoft's actions interfered with the development of new
cross-platform Java interfaces. Id. 406. It is not clear whether, absent
Microsoft's machinations, Sun's Java efforts would by now have
facilitated porting between Windows and other platforms to a degree
sufficient to render the applications barrier to entry vulnerable. It is
clear, however, that Microsoft's actions markedly impeded Java's
progress to that end. Id. 407. The evidence thus compels the conclusion
that Microsoft's actions with respect to Java have restricted
significantly the ability of other firms to compete on the merits in the
market for Intel-compatible PC operating systems.
actions to counter the Java threat went far beyond the development of an
attractive alternative to Sun's implementation of the technology.
Specifically, Microsoft successfully pressured Intel, which was
dependent in many ways on Microsoft's good graces, to abstain from
aiding in Sun's and Netscape's Java development work. Id. 396, 406.
Microsoft also deliberately designed its Java development tools so that
developers who were opting for portability over performance would
nevertheless unwittingly write Java applications that would run only on
Windows. Id. 394. Moreover, Microsoft's means of luring developers to
its Java implementation included maximizing Internet Explorer's share of
browser usage at Navigator's expense in ways the Court has already held
to be anticompetitive. See supra, § I.A.2.a. Finally, Microsoft
impelled ISVs, which are dependent upon Microsoft for technical
information and certifications relating to Windows, to use and
distribute Microsoft's version of the Windows JVM rather than any
Sun-compliant version. Id. 401-03.
actions cannot be described as competition on the merits, and they did
not benefit consumers. In fact, Microsoft's actions did not even benefit
Microsoft in the short run, for the firm's efforts to create
incompatibility between its JVM for Windows and others' JVMs for Windows
resulted in fewer total applications being able to run on Windows than
otherwise would have been written. Microsoft was willing nevertheless to
obstruct the development of Windows-compatible applications if they
would be easy to port to other platforms and would thus diminish the
applications barrier to entry. Id. 407.
the foregoing discussion illustrates, Microsoft's campaign to protect
the applications barrier from erosion by network-centric middleware can
be broken down into discrete categories of activity, several of which on
their own independently satisfy the second element of a § 2 monopoly
maintenance claim. But only when the separate categories of conduct are
viewed, as they should be, as a single, well-coordinated course of
action does the full extent of the violence that Microsoft has done to
the competitive process reveal itself. See Continental Ore Co. v. Union
Carbide & Carbon Corp., 370 U.S. 690, 699 (1962) (counseling that in
Sherman Act cases "plaintiffs should be given the full benefit of
their proof without tightly compartmentalizing the various factual
components and wiping the slate clean after scrutiny of each"). In
essence, Microsoft mounted a deliberate assault upon entrepreneurial
efforts that, left to rise or fall on their own merits, could well have
enabled the introduction of competition into the market for
Intel-compatible PC operating systems. Id. ¶ 411. While the evidence
does not prove that they would have succeeded absent Microsoft's actions,
it does reveal that Microsoft placed an oppressive thumb on the scale of
competitive fortune, thereby effectively guaranteeing its continued
dominance in the relevant market. More broadly, Microsoft's
anticompetitive actions trammeled the competitive process through which
the computer software industry generally stimulates innovation and
conduces to the optimum benefit of consumers. Id. 412.
Microsoft's conduct as a whole also reinforces the conviction that it
was predacious. Microsoft paid vast sums of money, and renounced many
millions more in lost revenue every year, in order to induce firms to
take actions that would help enhance Internet Explorer's share of
browser usage at Navigator's expense. Id. 139. These outlays cannot be
explained as subventions to maximize return from Internet Explorer.
Microsoft has no intention of ever charging for licenses to use or
distribute its browser. Id. 137-38. Moreover, neither the desire
to bolster demand for Windows nor the prospect of ancillary revenues
from Internet Explorer can explain the lengths to which Microsoft has
gone. In fact, Microsoft has expended wealth and foresworn opportunities
to realize more in a manner and to an extent that can only represent a
rational investment if its purpose was to perpetuate the applications
barrier to entry. Id. 136, 139-42. Because Microsoft's business
practices "would not be considered profit maximizing except for the
expectation that . . . the entry of potential rivals" into the
market for Intel-compatible PC operating systems will be "blocked
or delayed," Neumann v. Reinforced Earth Co., 786 F.2d 424,
427 (D.C. Cir. 1986), Microsoft's campaign must be termed predatory.
Since the Court has already found that Microsoft possesses monopoly
power, see supra, § I.A.1, the predatory nature of the firm's conduct
compels the Court to hold Microsoft liable under § 2 of the Sherman Act.
addition to condemning actual monopolization, § 2 of the Sherman Act
declares that it is unlawful for a person or firm to "attempt to
monopolize . . . any part of the trade or commerce among the several
States, or with foreign nations . . . ." 15 U.S.C. § 2. Relying on
this language, the plaintiffs assert that Microsoft's anticompetitive
efforts to maintain its monopoly power in the market for
Intel-compatible PC operating systems warrant additional liability as an
illegal attempt to amass monopoly power in "the browser
market." The Court agrees.
order for liability to attach for attempted monopolization, a plaintiff
generally must prove "(1) that the defendant has engaged in
predatory or anticompetitive conduct with (2) a specific intent to
monopolize," and (3) that there is a "dangerous probability"
that the defendant will succeed in achieving monopoly power. Spectrum
Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993). Microsoft's June
1995 proposal that Netscape abandon the field to Microsoft in the market
for browsing technology for Windows, and its subsequent, well-documented
efforts to overwhelm Navigator's browser usage share with a
proliferation of Internet Explorer browsers inextricably attached to
Windows, clearly meet the first element of the offense.
evidence in this record also satisfies the requirement of specific
intent. Microsoft's effort to convince Netscape to stop developing
platform-level browsing software for the 32-bit versions of Windows was
made with full knowledge that Netscape's acquiescence in this market
allocation scheme would, without more, have left Internet Explorer with
such a large share of browser usage as to endow Microsoft with de facto
monopoly power in the browser market. Findings 79-89.
Netscape refused to abandon the development of browsing software for
32-bit versions of Windows, Microsoft's strategy for protecting the
applications barrier became one of expanding Internet Explorer's share
of browser usage - and simultaneously depressing Navigator's share - to
an extent sufficient to demonstrate to developers that Navigator would
never emerge as the standard software employed to browse the Web. Id.
133. While Microsoft's top executives never expressly declared
acquisition of monopoly power in the browser market to be the objective,
they knew, or should have known, that the tactics they actually employed
were likely to push Internet Explorer's share to those extreme heights.
Navigator's slow demise would leave a competitive vacuum for only
Internet Explorer to fill. Yet, there is no evidence that Microsoft
tried - or even considered trying - to prevent its anticompetitive
campaign from achieving overkill. Under these circumstances, it is fair
to presume that the wrongdoer intended "the probable consequences
of its acts." IIIA Phillip E. Areeda & Herbert Hovenkamp,
Antitrust Law 805b, at 324 (1996); see also Spectrum Sports, 506 U.S. at
459 (proof of "'predatory' tactics . . . may be sufficient to prove
the necessary intent to monopolize, which is something more than an
intent to compete vigorously"). Therefore, the facts of this case
suffice to prove the element of specific intent.
if the first two elements of the offense are met, however, a defendant
may not be held liable for attempted monopolization absent proof that
its anticompetitive conduct created a dangerous probability of achieving
the objective of monopoly power in a relevant market. Id. The evidence
supports the conclusion that Microsoft's actions did pose such a danger.
the time Microsoft presented its market allocation proposal to Netscape,
Navigator's share of browser usage stood well above seventy percent, and
no other browser enjoyed more than a fraction of the remainder. Findings
89, 372. Had Netscape accepted Microsoft's offer, nearly all of its
share would have devolved upon Microsoft, because at that point, no
potential third-party competitor could either claim to rival Netscape's
stature as a browser company or match Microsoft's ability to leverage
monopoly power in the market for Intel-compatible PC operating systems.
In the time it would have taken an aspiring entrant to launch a serious
effort to compete against Internet Explorer, Microsoft could have
erected the same type of barrier that protects its existing monopoly
power by adding proprietary extensions to the browsing software under
its control and by extracting commitments from OEMs, IAPs and others
similar to the ones discussed in § I.A.2, supra. In short, Netscape's
assent to Microsoft's market division proposal would have, instanter,
resulted in Microsoft's attainment of monopoly power in a second market.
It follows that the proposal itself created a dangerous probability of
that result. See United States v. American Airlines, Inc.,
743 F.2d 1114, 1118-19 (5th Cir. 1984) (fact that two executives "arguably"
could have implemented market-allocation scheme that would have
engendered monopoly power was sufficient for finding of dangerous
probability). Although the dangerous probability was no longer imminent
with Netscape's rejection of Microsoft's proposal, "the probability
of success at the time the acts occur" is the measure by which
liability is determined. Id. at 1118.
conclusion alone is sufficient to support a finding of liability for
attempted monopolization. The Court is nonetheless compelled to express
its further conclusion that the predatory course of conduct Microsoft
has pursued since June of 1995 has revived the dangerous probability
that Microsoft will attain monopoly power in a second market. Internet
Explorer's share of browser usage has already risen above fifty percent,
will exceed sixty percent by January 2001, and the trend continues
unabated. Findings 372-73; see M&M Medical Supplies & Serv.,
Inc. v. Pleasant Valley Hosp., Inc., 981 F.2d 160, 168
(4th Cir. 1992) (en banc) ("A rising share may show more
probability of success than a falling share. . . . [C]laims involving
greater than 50% share should be treated as attempts at monopolization
when the other elements for attempted monopolization are also satisfied.")
(citations omitted); see also IIIA Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law 807d, at 354-55 (1996) (acknowledging the
significance of a large, rising market share to the dangerous
1 of the Sherman Act prohibits "every contract, combination . . . ,
or conspiracy, in restraint of trade or commerce . . . ." 15 U.S.C.
§ 1. Pursuant to this statute, courts have condemned commercial
stratagems that constitute unreasonable restraints on competition. See
Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977);
Chicago Board of Trade v. United States, 246 U.S. 231, 238-39
(1918), among them "tying arrangements" and "exclusive
dealing" contracts. Tying arrangements have been found unlawful
where sellers exploit their market power over one product to force
unwilling buyers into acquiring another. See Jefferson Parish
Hospital District No. 2 v. Hyde, 466 U.S. 2, 12 (1984); Northern
Pac. Ry. Co. v. United States, 356 U.S. 1, 6 (1958);
Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 605 (1953).
Where agreements have been challenged as unlawful exclusive dealing, the
courts have condemned only those contractual arrangements that
substantially foreclose competition in a relevant market by
significantly reducing the number of outlets available to a competitor
to reach prospective consumers of the competitor's product. See Tampa
Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961);
Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 393 (7th
for tying under § 1 exists where (1) two separate "products"
are involved; (2) the defendant affords its customers no choice but to
take the tied product in order to obtain the tying product; (3) the
arrangement affects a substantial volume of interstate commerce; and (4)
the defendant has "market power" in the tying product market.
Jefferson Parish, 466 U.S. at 12-18. The Supreme Court has since
reaffirmed this test in Eastman Kodak Co. v. Image Technical Services,
Inc., 504 U.S. 451, 461-62 (1992). All four elements are required,
whether the arrangement is subjected to a per se or Rule of Reason
plaintiffs allege that Microsoft's combination of Windows and Internet
Explorer by contractual and technological artifices constitute unlawful
tying to the extent that those actions forced Microsoft's customers and
consumers to take Internet Explorer as a condition of obtaining Windows.
While the Court agrees with plaintiffs, and thus holds that Microsoft is
liable for illegal tying under § 1, this conclusion is arguably at
variance with a decision of the U.S. Court of Appeals for the D.C.
Circuit in a closely related case, and must therefore be explained in
some detail. Whether the decisions are indeed inconsistent is not for
this Court to say.
decision of the D.C. Circuit in question is United
States v. Microsoft Corp., 147 F.3d 935 (D.C. Cir. 1998) ("Microsoft II")
which is itself related to an earlier decision of the same Circuit,
United States v. Microsoft Corp., 56 F.3d 1448 (D.C. Cir. 1995)
("Microsoft I"). The history of the controversy is
sufficiently set forth in the appellate opinions and need not be
recapitulated here, except to state that those decisions anticipated the
instant case, and that Microsoft II sought to guide this Court, insofar
as practicable, in the further proceedings it fully expected to ensue on
the tying issue. Nevertheless, upon reflection this Court does not
believe the D.C. Circuit intended Microsoft II to state a controlling
rule of law for purposes of this case. As the Microsoft II court itself
acknowledged, the issue before it was the construction to be placed upon
a single provision of a consent decree that, although animated by
antitrust considerations, was nevertheless still primarily a matter of
determining contractual intent. The court of appeals' observations on
the extent to which software product design decisions may be subject to
judicial scrutiny in the course of § 1 tying cases are in the strictest
sense obiter dicta, and are thus not formally binding. Nevertheless,
both prudence and the deference this Court owes to pronouncements of its
own Circuit oblige that it follow in the direction it is pointed until
the trail falters.
majority opinion in Microsoft II evinces both an extraordinary degree of
respect for changes (including "integration") instigated by
designers of technological products, such as software, in the name of
product "improvement," and a corresponding lack of confidence
in the ability of the courts to distinguish between improvements in fact
and improvements in name only, made for anticompetitive purposes. Read
literally, the D.C. Circuit's opinion appears to immunize any product
design (or, at least, software product design) from antitrust scrutiny,
irrespective of its effect upon competition, if the software developer
can postulate any "plausible claim" of advantage to its
arrangement of code. 147 F.3d at 950.
undemanding test appears to this Court to be inconsistent with the
pertinent Supreme Court precedents in at least three respects. First, it
views the market from the defendant's perspective, or, more precisely,
as the defendant would like to have the market viewed. Second, it
ignores reality: The claim of advantage need only be plausible; it need
not be proved. Third, it dispenses with any balancing of the
hypothetical advantages against any anticompetitive effects.
two most recent Supreme Court cases to have addressed the issue of
product and market definition in the context of Sherman Act tying claims
are Jefferson Parish, supra, and Eastman Kodak, supra. In Jefferson
Parish, the Supreme Court held that a hospital offering hospital
services and anesthesiology services as a package could not be found to
have violated the anti-tying rules unless the evidence established that
patients, i.e. consumers, perceived the services as separate
products for which they desired a choice, and that the package had the
effect of forcing the patients to purchase an unwanted product. 466 U.S.
at 21-24, 28-29. In Eastman Kodak the Supreme Court held that a
manufacturer of photocopying and micrographic equipment, in agreeing to
sell replacement parts for its machines only to those customers who also
agreed to purchase repair services from it as well, would be guilty of
tying if the evidence at trial established the existence of consumer
demand for parts and services separately. 504 U.S. at 463.
defendants asserted, as Microsoft does here, that the tied and tying
products were in reality only a single product, or that every item was
traded in a single market. In Jefferson Parish, the defendant contended
that it offered a "functionally integrated package of services"
- a single product - but the Supreme Court concluded that the "character
of the demand" for the constituent components, not their functional
relationship, determined whether separate "products" were
actually involved. 466 U.S. at 19. In Eastman Kodak, the defendant
postulated that effective competition in the equipment market precluded
the possibility of the use of market power anticompetitively in any
after-markets for parts or services: Sales of machines, parts, and
services were all responsive to the discipline of the larger equipment
market. The Supreme Court declined to accept this premise in the absence
of evidence of "actual market realities," 504 U.S. at 466-67,
ultimately holding that "the proper market definition in this case
can be determined only after a factual inquiry into the 'commercial
realities' faced by consumers." Id. at 482 (quoting United States
v. Grinnell Corp., 384 U.S. 563, 572 (1966)).
both Jefferson Parish and Eastman Kodak, the Supreme Court also gave
consideration to certain theoretical "valid business reasons"
proffered by the defendants as to why the arrangements should be deemed
benign. In Jefferson Parish, the hospital asserted that the combination
of hospital and anesthesia services eliminated multiple problems of
scheduling, supply, performance standards, and equipment maintenance.
466 U.S. at 43-44. The manufacturer in Eastman Kodak contended that
quality control, inventory management, and the prevention of free riding
justified its decision to sell parts only in conjunction with service.
504 U.S. at 483. In neither case did the Supreme Court find those
justifications sufficient if anticompetitive effects were proved. Id.
at 483-86; Jefferson Parish, 466 U.S. at 25 n.42. Thus, at a minimum,
the admonition of the D.C. Circuit in Microsoft II to refrain from any
product design assessment as to whether the "integration" of
Windows and Internet Explorer is a "net plus," deferring to
Microsoft's "plausible claim" that it is of "some
advantage" to consumers, is at odds with the Supreme Court's own
significance of those cases, for this Court's purposes, is to teach that
resolution of product and market definitional problems must depend upon
proof of commercial reality, as opposed to what might appear to be
reasonable. In both cases the Supreme Court instructed that product and
market definitions were to be ascertained by reference to evidence of
consumers' perception of the nature of the products and the markets for
them, rather than to abstract or metaphysical assumptions as to the
configuration of the "product" and the "market."
Jefferson Parish, 466 U.S. at 18; Eastman Kodak, 504 U.S. at 481-82. In
the instant case, the commercial reality is that consumers today
perceive operating systems and browsers as separate "products,"
for which there is separate demand. Findings 149-54. This is true
notwithstanding the fact that the software code supplying their discrete
functionalities can be commingled in virtually infinite combinations,
rendering each indistinguishable from the whole in terms of files of
code or any other taxonomy. Id. 149-50, 162-63, 187-91.
in line with the Supreme Court cases, which are indisputably controlling,
this Court first concludes that Microsoft possessed "appreciable
economic power in the tying market," Eastman Kodak, 504 U.S. at
464, which in this case is the market for Intel-compatible PC operating
systems. See Jefferson Parish, 466 U.S. at 14 (defining market power as
ability to force purchaser to do something that he would not do in
competitive market); see also Fortner Enterprises, Inc. v. United
States Steel Corp., 394 U.S. 495, 504 (1969) (ability to raise prices or
to impose tie-ins on any appreciable number of buyers within the tying
product market is sufficient). While courts typically have not specified
a percentage of the market that creates the presumption of "market
power," no court has ever found that the requisite degree of power
exceeds the amount necessary for a finding of monopoly power. See
Eastman Kodak, 504 U.S. at 481. Because this Court has already found
that Microsoft possesses monopoly power in the worldwide market for
Intel-compatible PC operating systems (i.e., the tying product
market), Findings 18-67, the threshold element of "appreciable
economic power" is a fortiori met.
the Court's Findings strongly support a conclusion that a "not
insubstantial" amount of commerce was foreclosed to competitors as
a result of Microsoft's decision to bundle Internet Explorer with
Windows. The controlling consideration under this element is "simply
whether a total amount of business" that is "substantial
enough in terms of dollar-volume so as not to be merely de minimis"
is foreclosed. Fortner, 394 U.S. at 501; cf. International Salt Co. v.
United States, 332 U.S. 392, 396 (1947) (unreasonable per se to
foreclose competitors from any substantial market by a tying arrangement).
the Court's Findings do not specify a dollar amount of business that has
been foreclosed to any particular present or potential competitor of
Microsoft in the relevant market, including Netscape, the Court did find
that Microsoft's bundling practices caused Navigator's usage share to
drop substantially from 1995 to 1998, and that as a direct result
Netscape suffered a severe drop in revenues from lost advertisers, Web
traffic and purchases of server products. It is thus obvious that the
foreclosure achieved by Microsoft's refusal to offer Internet Explorer
separately from Windows exceeds the Supreme Court's de minimis threshold.
See Digidyne Corp. v. Data General Corp., 734 F.2d 1336, 1341
(9th Cir. 1984) (citing Fortner).
various contractual agreements with some OLSs, ICPs, ISVs, Compaq and
Apple are also called into question by plaintiffs as exclusive dealing
arrangements under the language in § 1 prohibiting "contract[s] .
. . in restraint of trade or commerce . . . ." 15 U.S.C. § 1. As
detailed in §I.A.2, supra, each of these agreements with Microsoft
required the other party to promote and distribute Internet Explorer to
the partial or complete exclusion of Navigator. In exchange, Microsoft
offered, to some or all of these parties, promotional patronage,
substantial financial subsidies, technical support, and other valuable
consideration. Under the clear standards established by the Supreme
Court, these types of "vertical restrictions" are subject to a
Rule of Reason analysis. See Continental T.V., Inc. v. GTE Sylvania Inc.,
433 U.S. 36, 49 (1977); Jefferson Parish, 466 U.S. at 44-45 (O'Connor,
J., concurring); cf. Business Elecs. Corp. v. Sharp Elecs. Corp.,
485 U.S. 717, 724-26 (1988) (holding that Rule of Reason analysis
presumptively applies to cases brought under § 1 of the Sherman Act).
that some exclusive dealing arrangements may have benign objectives and
may create significant economic benefits, see Tampa Electric Co. v.
Nashville Coal Co., 365 U.S. 320, 333-35 (1961), courts have
tended to condemn under the § 1 Rule of Reason test only those
agreements that have the effect of foreclosing a competing manufacturer's
brands from the relevant market. More specifically, courts are concerned
with those exclusive dealing arrangements that work to place so much of
a market's available distribution outlets in the hands of a single firm
as to make it difficult for other firms to continue to compete
effectively, or even to exist, in the relevant market. See U.S.
Healthcare Inc. v. Healthsource, Inc., 986 F.2d 589, 595 (1st Cir.
1993); Interface Group, Inc. v. Massachusetts Port Authority, 816 F.2d
9, 11 (1st Cir. 1987) (relying upon III Phillip E. Areeda & Donald
F. Turner, Antitrust Law 732 (1978), Tampa Electric, 365 U.S. at 327-29,
and Standard Oil Co. v. United States, 337 U.S. 293 (1949)).
evaluate an agreement's likely anticompetitive effects, courts have
consistently looked at a variety of factors, including: (1) the degree
of exclusivity and the relevant line of commerce implicated by the
agreements' terms; (2) whether the percentage of the market foreclosed
by the contracts is substantial enough to import that rivals will be
largely excluded from competition; (3) the agreements' actual
anticompetitive effect in the relevant line of commerce; (4) the
existence of any legitimate, procompetitive business justifications
offered by the defendant; (5) the length and irrevocability of the
agreements; and (6) the availability of any less restrictive means for
achieving the same benefits. See, e.g., Tampa Electric, 365 U.S. at
326-35; Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380,
392-95 (7th Cir. 1984); see also XI Herbert Hovenkamp, Antitrust
Law 1820 (1998).
courts have found that the agreements in question failed to foreclose
absolutely outlets that together accounted for a substantial percentage
of the total distribution of the relevant products, they have
consistently declined to assign liability. See, e.g., id. 1821; U.S.
Healthcare, 986 F.2d at 596-97; Roland Mach. Co., 749 F.2d at 394
(failure of plaintiff to meet threshold burden of proving that exclusive
dealing arrangement is likely to keep at least one significant
competitor from doing business in relevant market dictates no liability
under § 1). This Court has previously observed that the case law
suggests that, unless the evidence demonstrates that Microsoft's
agreements excluded Netscape altogether from access to roughly forty
percent of the browser market, the Court should decline to find such
agreements in violation of § 1. See United States v. Microsoft Corp.,
Nos. CIV. A. 98-1232, 98-1233, 1998 WL 614485, at *19 (D.D.C. Sept. 14,
1998) (citing cases that tended to converge upon forty percent
foreclosure rate for finding of § 1 liability).
only agreements revealed by the evidence which could be termed so "exclusive"
as to merit scrutiny under the § 1 Rule of Reason test are the
agreements Microsoft signed with Compaq, AOL and several other OLSs, the
top ICPs, the leading ISVs, and Apple. The Findings of Fact also
establish that, among the OEMs discussed supra, Compaq was the only one
to fully commit itself to Microsoft's terms for distributing and
promoting Internet Explorer to the exclusion of Navigator. Beginning
with its decisions in 1996 and 1997 to promote Internet Explorer
exclusively for its PC products, Compaq essentially ceased to distribute
or pre-install Navigator at all in exchange for significant financial
remuneration from Microsoft. Findings 230-34. AOL's March 12 and October
28, 1996 agreements with Microsoft also guaranteed that, for all
practical purposes, Internet Explorer would be AOL's browser of choice,
to be distributed and promoted through AOL's dominant, flagship online
service, thus leaving Navigator to fend for itself. Id. 287-90, 293-97.
In light of the severe shipment quotas and promotional restrictions for
third-party browsers imposed by the agreements, the fact that Microsoft
still permitted AOL to offer Navigator through a few subsidiary channels
does not negate this conclusion. The same conclusion as to exclusionary
effect can be drawn with respect to Microsoft's agreements with AT&T
WorldNet, Prodigy and CompuServe, since those contract terms were almost
identical to the ones contained in AOL's March 1996 agreement. Id.
also successfully induced some of the most popular ICPs and ISVs to
commit to promote, distribute and utilize Internet Explorer technologies
exclusively in their Web content in exchange for valuable placement on
the Windows desktop and technical support. Specifically, the "Top
Tier" and "Platinum" agreements that Microsoft formed
with thirty-four of the most popular ICPs on the Web ensured that
Navigator was effectively shut out of these distribution outlets for a
significant period of time. Id. 317-22, 325-26, 332. In the same way,
Microsoft's "First Wave" contracts provided crucial technical
information to dozens of leading ISVs that agreed to make their
Web-centric applications completely reliant on technology specific to
Internet Explorer. Id. 337, 339-40. Finally, Apple's 1997 Technology
Agreement with Microsoft prohibited Apple from actively promoting any
non-Microsoft browsing software in any way or from pre-installing a
browser other than Internet Explorer. Id. 350-52. This arrangement
eliminated all meaningful avenues of distribution of Navigator through
the extent to which these "exclusive" distribution agreements
preempted the most efficient channels for Navigator to achieve browser
usage share, however, the Court concludes that Microsoft's multiple
agreements with distributors did not ultimately deprive Netscape of the
ability to have access to every PC user worldwide to offer an
opportunity to install Navigator. Navigator can be downloaded from the
Internet. It is available through myriad retail channels. It can (and
has been) mailed directly to an unlimited number of households. How
precisely it managed to do so is not shown by the evidence, but in 1998
alone, for example, Netscape was able to distribute 160 million copies
of Navigator, contributing to an increase in its installed base from 15
million in 1996 to 33 million in December 1998. Id. 378. As such, the
evidence does not support a finding that these agreements completely
excluded Netscape from any constituent portion of the worldwide browser
market, the relevant line of commerce.
fact that Microsoft's arrangements with various firms did not foreclose
enough of the relevant market to constitute a § 1 violation in no way
detracts from the Court's assignment of liability for the same
arrangements under § 2. As noted above, all of Microsoft's agreements,
including the non-exclusive ones, severely restricted Netscape's access
to those distribution channels leading most efficiently to the
acquisition of browser usage share. They thus rendered Netscape harmless
as a platform threat and preserved Microsoft's operating system monopoly,
in violation of § 2. But virtually all the leading case authority
dictates that liability under § 1 must hinge upon whether Netscape was
actually shut out of the Web browser market, or at least whether it was
forced to reduce output below a subsistence level. The fact that
Netscape was not allowed access to the most direct, efficient ways to
cause the greatest number of consumers to use Navigator is legally
irrelevant to a final determination of plaintiffs' § 1 claims.
courts in similar contexts have declined to find liability where
alternative channels of distribution are available to the competitor,
even if those channels are not as efficient or reliable as the channels
foreclosed by the defendant. In Omega Environmental, Inc. v. Gilbarco,
Inc., 127 F.3d 1157 (9th Cir. 1997), for example, the
Ninth Circuit found that a manufacturer of petroleum dispensing
equipment "foreclosed roughly 38% of the relevant market for sales."
127 F.3d at 1162. Nonetheless, the Court refused to find the defendant
liable for exclusive dealing because "potential alternative sources
of distribution" existed for its competitors. Id. at 1163.
Rejecting plaintiff's argument (similar to the one made in this case)
that these alternatives were "inadequate substitutes for the
existing distributors," the Court stated that "competitors are
free to sell directly, to develop alternative distributors, or to
compete for the services of existing distributors. Antitrust laws
require no more." Id.; accord Seagood Trading Corp. v. Jerrico,
Inc., 924 F.2d 1555, 1572-73 (11th Cir. 1991).
their amended complaint, the plaintiff states assert that the same facts
establishing liability under §§ 1 and 2 of the Sherman Act mandate a
finding of liability under analogous provisions in their own laws. The
Court agrees. The facts proving that Microsoft unlawfully maintained its
monopoly power in violation of § 2 of the Sherman Act are sufficient to
meet analogous elements of causes of action arising under the laws of
each plaintiff state. The Court reaches the same conclusion with respect
to the facts establishing that Microsoft attempted to monopolize the
browser market in violation of § 2, and with respect to those facts
establishing that Microsoft instituted an improper tying arrangement in
violation of § 1.
plaintiff states concede that their laws do not condemn any act proved
in this case that fails to warrant liability under the Sherman Act.
States' Reply in Support of their Proposed Conclusions of Law at 1.
Accordingly, the Court concludes that, for reasons identical to those
stated in § II.B, supra, the evidence in this record does not warrant
finding Microsoft liable for exclusive dealing under the laws of any of
the plaintiff states.
contends that a plaintiff cannot succeed in an antitrust claim under the
laws of California, Louisiana, Maryland, New York, Ohio, or Wisconsin
without proving an element that is not required under the Sherman Act,
namely, intrastate impact. Assuming that each of those states has,
indeed, expressly limited the application of its antitrust laws to
activity that has a significant, adverse effect on competition within
the state or is otherwise contrary to state interests, that element is
manifestly proven by the facts presented here. The Court has found that
Microsoft is the leading supplier of operating systems for PCs and that
it transacts business in all fifty of the United States. Findings 9. It
is common and universal knowledge that millions of citizens of, and
hundreds, if not thousands, of enterprises in each of the United States
and the District of Columbia utilize PCs running on Microsoft software.
It is equally clear that certain companies that have been adversely
affected by Microsoft's anticompetitive campaign - a list that includes
IBM, Hewlett-Packard, Intel, Netscape, Sun, and many others - transact
business in, and employ citizens of, each of the plaintiff states. These
facts compel the conclusion that, in each of the plaintiff states,
Microsoft's anticompetitive conduct has significantly hampered
once again invokes the federal Copyright Act in defending against state
claims seeking to vindicate the rights of OEMs and others to make
certain modifications to Windows 95 and Windows 98. The Court concludes
that these claims do not encroach on Microsoft's federally protected
copyrights and, thus, that they are not pre-empted under the Supremacy
Clause. The Court already concluded in § I.A.2.a.i, supra, that
Microsoft's decision to bundle its browser and impose first-boot and
start-up screen restrictions constitute independent violations of § 2
of the Sherman Act. It follows as a matter of course that the same
actions merit liability under the plaintiff states' antitrust and unfair
competition laws. Indeed, the parties agree that the standards for
liability under the several plaintiff states' antitrust and unfair
competition laws are, for the purposes of this case, identical to those
expressed in the federal statute. States' Reply in Support of their
Proposed Conclusions of Law at 1; Microsoft's Sur-Reply in Response to
the States' Reply at 2 n.1. Thus, these state laws cannot "stand
as an obstacle to" the goals of the federal copyright law to any
greater extent than do the federal antitrust laws, for they target
exactly the same type of anticompetitive behavior. Hines v. Davidowitz,
312 U.S. 52, 67 (1941). The Copyright Act's own preemption clause
provides that "[n]othing in this title annuls or limits any rights
or remedies under the common law or statutes of any State with respect
to . . . activities violating legal or equitable rights that are not
equivalent to any of the exclusive rights within the general scope of
copyright as specified by section 106 . . . ." 17 U.S.C. §
301(b)(3). Moreover, the Supreme Court has recognized that there is
"nothing either in the language of the copyright laws or in the
history of their enactment to indicate any congressional purpose to
deprive the states, either in whole or in part, of their long-recognized
power to regulate combinations in restraint of trade." Watson v.
Buck, 313 U.S. 387, 404 (1941). See also Allied Artists Pictures Corp.
v. Rhodes, 496 F. Supp. 408, 445 (S.D. Ohio 1980), aff'd in relevant
part, 679 F.2d 656 (6th Cir. 1982) (drawing upon similarities between
federal and state antitrust laws in support of notion that authority of
states to regulate market practices dealing with copyrighted subject
matter is well-established); cf. Hines, 312 U.S. at 67 (holding state
laws preempted when they "stand as an obstacle to the
accomplishment and execution of the full purposes and objectives of
Court turns finally to the counterclaim that Microsoft brings against
the attorneys general of the plaintiff states under 42 U.S.C. § 1983.
In support of its claim, Microsoft argues that the attorneys general are
seeking relief on the basis of state laws, repeats its assertion that
the imposition of this relief would deprive it of rights granted to it
by the Copyright Act, and concludes with the contention that the
attorneys general are, "under color of" state law, seeking to
deprive Microsoft of rights secured by federal law - a classic violation
of 42 U.S.C. § 1983.
already addressed the issue of whether granting the relief sought by the
attorneys general would entail conflict with the Copyright Act, the
Court rejects Microsoft's counterclaim on yet more fundamental grounds
as well: It is inconceivable that their resort to this Court could
represent an effort on the part of the attorneys general to deprive
Microsoft of rights guaranteed it under federal law, because this Court
does not possess the power to act in contravention of federal law.
Therefore, since the conduct it complains of is the pursuit of relief in
federal court, Microsoft fails to state a claim under 42 U.S.C. § 1983.
Consequently, Microsoft's request for a declaratory judgment against the
states under 28 U.S.C. §§ 2201 and 2202 is denied, and the
counterclaim is dismissed.
accordance with the Conclusions of Law filed herein this date, it is,
this (…) day of April, 2000,
ADJUDGED, and DECLARED, that Microsoft has violated §§ 1 and 2 of the
Sherman Act, 15 U.S.C. §§ 1, 2, as well as the following state law
provisions: Cal Bus. &
Prof. Code §§ 16720, 16726, 17200; Conn. Gen. Stat. §§ 35-26, 35-27,
35-29; D.C. Code §§ 28-4502, 28-4503; Fla. Stat. chs. 501.204(1),
542.18, 542.19; 740 Ill. Comp. Stat.
ch. 10/3; Iowa Code §§ 553.4, 553.5; Kan. Stat. §§ 50-101 et seq.; Ky. Rev. Stat.
§§ 367.170, 367.175; La. Rev. Stat. §§ 51:122, 51:123, 51:1405; Md. Com. Law
II Code Ann. § 11-204; Mass. Gen. Laws ch. 93A, § 2; Mich. Comp. Laws
§§ 445.772, 445.773; Minn. Stat. § 325D.52; N.M. Stat. §§ 57-1-1,
57-1-2; N.Y. Gen. Bus. Law § 340; N.C. Gen. Stat. §§ 75-1.1, 75-2.1;
Ohio Rev. Code §§ 1331.01, 1331.02; Utah Code § 76-10-914; W.Va. Code
§§ 47-18-3, 47-18-4; Wis. Stat. § 133.03(1)-(2); and it is
ORDERED, that judgment is entered for the United States on its second,
third, and fourth claims for relief in Civil Action No. 98-1232; and it
ORDERED, that the first claim for relief in Civil Action No. 98-1232 is
dismissed with prejudice; and it is
ORDERED, that judgment is entered for the plaintiff states on their
first, second, fourth, sixth, seventh, eighth, ninth, tenth, eleventh,
twelfth, thirteenth, fourteenth, fifteenth, sixteenth, seventeenth,
eighteenth, nineteenth, twentieth, twenty-first, twenty-second,
twenty-fourth, twenty-fifth, and twenty-sixth claims for relief in Civil
Action No. 98-1233; and it is
ORDERED, that the fifth claim for relief in Civil Action No. 98-1233 is
dismissed with prejudice; and it is
ORDERED, that Microsoft's first and second claims for relief in Civil
Action No. 98-1233 are dismissed with prejudice; and it is
ORDERED, that the Court shall, in accordance with the Conclusions of Law
filed herein, enter an Order with respect to appropriate relief,
including an award of costs and fees, following proceedings to be
established by further Order of the Court.
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