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Microsoft stated that the merging of Microsoft Windows and Internet Explorer was the result of Innovation and Competition , and that the two were now the same product and were inextricably linked together and that consumers were now getting all the benefits of IE for free. Those who opposed Microsoft's position countered that the browser was still a distinct and separate product which didn't need to be tied to the operating system, since a separate version of Internet Explorer was available for Mac OS . They also asserted that IE was not really free, because its development and marketing costs may have kept the price of Windows higher than it might otherwise have been. The case was tried before U.S. District Court Judge Thomas Penfield Jackson . The DOJ was initially represented by David Boies . HISTORY Government interest in Microsoft's affairs had begun in 1991 with an inquiry by the Federal Trade Commission over whether Microsoft was abusing its monopoly on the PC operating system market. The FTC commissioners deadlocked with a 2-2 vote in 1993 and closed the investigation, but the DOJ opened its own investigation on August 21 of that year, resulting in a settlement on July 15 , 1994 in which Microsoft consented not to tie other Microsoft products to the sale of Windows but remained free to integrate additional features into the operating system. In the years that followed, Microsoft insisted that Internet Explorer (which first appeared in the Plus! Pack sold separately from Windows 95) was not a ''product'' but a ''feature'' which it was allowed to add to Windows, although the DOJ did not agree with this definition. TRIAL The trial started in May 1998 with the US Justice Department and the Attorneys General of twenty US states sueing Microsoft for illegally thwarting competition in order to protect and extend its software monopoly. Later, in October the US Justice Department also sued Microsoft for violating a 1994 consent decree by forcing computer makers to include its Internet browser as a part of the installation of Windows software. During the antitrust case it was revealed that Microsoft had threatened PC manufacturers with revoking their license to distribute Windows if they removed the Internet Explorer icon from the initial desktop, something that Netscape had requested of its licensees. Microsoft Chairman Vice-President Steven McGeady , called as a witness, quoted Paul Maritz , a senior Microsoft vice president as having stated an intention to "extinguish" and "smother" rival Netscape Communications Corporation and to "cut off Netscape's air supply" by giving away a clone of Netscape's flagship product for free. The Microsoft executive denied the allegations. {Link without Title} A number of videotapes were submitted as evidence by Microsoft during the trial, including one that demonstrated that removing Internet Explorer from Microsoft Windows caused slowdowns and malfunctions in Windows. In the videotaped demonstration of what Microsoft vice president , a Microsoft vice president, verified the government's tape and conceded that Microsoft's own tape was inaccurate. {Link without Title} When the judge ordered Microsoft to offer a version of Windows which did not include Internet Explorer, Microsoft responded that the company would offer manufacturers a choice: one version of Windows that was obsolete, or another that did not work properly. The judge asked, "It seemed absolutely clear to you that I entered an order that required that you distribute a product that would not work?" professor Edward Felten presented a modified version of Windows from which he claimed the Internet Explorer function had been removed. On cross-examination, he was guided through a sequence of steps that produced a fully functional Internet Explorer window. Microsoft vigorously defended itself in the public arena, claiming that its attempts to innovate were under attack by rival companies jealous at its success, and that government litigation was merely their pawn. A full-page ad run in The Washington Post and The New York Times on June 2, 1999 by The Independent Institute (which is funded by Microsoft) delivered "An Open Letter to President Clinton From 240 Economists On Antitrust Protectionism." It said, in part, ''"Consumers did not ask for these antitrust actions - rival business firms did. Consumers of high technology have enjoyed falling prices, expanding outputs, and a breathtaking array of new products and innovations. ... Increasingly, however, some firms have sought to handicap their rivals' races by turning to government for protection. ... Many of these cases are based on speculation about some vaguely specified consumer harm in some unspecified future, and many of the proposed interventions will weaken successful U.S. firms and impede their competitiveness abroad."'' {Link without Title} Judge Jackson issued his findings of fact on November 5, 1999, which stated that Microsoft's dominance of the personal computer operating systems market constituted a monopoly, and that Microsoft had taken actions to crush threats to the monopoly, including Apple, Java, Netscape, Lotus Notes, Real Networks, Linux, and others. Then on , and his ''remedy'' was that Microsoft must be broken into two separate units, one to produce the operating system, and one to produce other software components. Some argue that the outcome of the antitrust case has served to chill venture capital investment in technical startup companies, for fear that Microsoft will notice the startup's niche and starve off the new company to protect Microsoft's market. Others argue that the outcome of the case harms technological innovation due to fear of being challenged by an anti-trust lawsuit. The trial was also notable for the use by both the prosecution and the defense of professors of MIT to serve as expert witnesses to bolster their cases. Richard L. Schmalensee , a noted economist and the dean of the MIT Sloan School Of Management , testified as an expert witness in favor of Microsoft. Frank Fisher , another MIT economist and who ironically was Schmalensee's former doctoral thesis advisor, testified in favor of the Department Of Justice . APPEAL On September 26, 2000, after Judge Jackson issued his findings of fact , Microsoft appealed to the Supreme Court. However, the Supreme Court declined to hear the appeal and sent the case to a federal appeals court. The D.C. Circuit Court of Appeals unanimously overturned Judge Jackson's rulings against Microsoft on browser tying and attempted monopolization on grounds, that he gave off-the-record, but nevertheless disclosed, interviews to the . The DOJ, now under the administration of U.S. President George W. Bush , announced on September 6 , 2001 that it was no longer seeking to break up Microsoft and would instead seek a lesser antitrust penalty. SETTLEMENT On November 2 , 2001 , the DOJ reached an agreement with Microsoft to settle the case. The proposed settlement required Microsoft to share its Application Programming Interfaces with third-party companies and appoint a panel of three people who will have full access to Microsoft's systems, records, and source code for five years in order to ensure compliance. However, the DOJ did not require Microsoft to change any of its code nor prevent Microsoft from tying other software with Windows in the future. On August 5 , 2002 , Microsoft announced that it would make some concessions towards the proposed final settlement ahead of the judge's verdict. On November 1 , 2002 , Judge Kollar-Kotelly released a judgment accepting most of the proposed DOJ settlement. Nine States (California, Connecticut, Iowa, Florida, Kansas, Minnesota, Utah, Virginia and Massachusetts) and the District Of Columbia (which had been pursuing the case together with the DOJ) did not agree with the settlement, arguing that it did not go far enough to curb Microsoft's anti-competitive business practices. On June 30, 2004, the U.S. appeals court unanimously approved the settlement with Justice Department, rejecting objections from Massachusetts that the sanctions are inadequate. The dissenting States regarded the settlement as merely a slap on the wrist. Some people in the computer industry agreed with dissenting States, especially those who advocated who assisted Judge Jackson in drafting the findings of fact, wrote that the settlement gave Microsoft "a special antitrust immunity to license Windows and other 'platform software' under contractual terms that destroy freedom of competition." {Link without Title} Microsoft's obligations under the settlement expire on November 12, 2007. {Link without Title} CRITICISMS OF THE CASE Some critics of the antitrust proceedings against Microsoft assert that they were an unjustified assault on a business that held a large market share merely by outcompeting its rivals. Some hold that the case against Microsoft was the result of collusion between government and Microsoft's competitors in an attempt to gain an unfair advantage by thwarting the Free Market through government coercion. Nobel economist Milton Friedman believes that the antitrust case against Microsoft set a dangerous precedent that foreshadowed increasing government regulation of what was formerly an industry that was relatively free of "government intrusion" and that future technological progress in the industry will be impeded as a result. Moreover, Friedman says that antitrust laws do more harm than good and should not exist. Strict free market advocates believe that the only type of monopolies that should be dismantled are Coercive Monopolies and reject the claim that Microsoft falls in this category. Jean-Louis Gassée , CEO of Be, Inc , which at the time made a competing operating system which eventually folded in the face of Microsoft's dominance, provided a series of criticisms against the antitrust suit. These criticisms were levelled at the overemphasis on the "packaging problem". Microsoft wasn't really making any money off the "sales" of Internet Explorer, and its reason for incorporating it into the operating system was because the consumer expected to have a browser packaged with the operating system. Indeed, BeOS came packaged with its web browser, NetPositive. Instead, he argued, Microsoft's true anticompetitive clout was in the rebates it offered to OEMs preventing other operating systems from getting a foothold in the market. The lobby group Association For Competitive Technology (ACT) was founded in response to the case, though some claim that the organization is mainly a Front for Microsoft. EXTERNAL LINKS
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