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Saturday, 6 November, 1999, 15:19 GMT
Analysis: Microsoft taken to task
By independent computer industry analyst Graham Lea

It had been widely expected that Judge Jackson's Findings of Fact would lean heavily towards the case presented by the Department of Justice, but it was a great surprise that there were almost no crumbs of comfort for Microsoft.

The key finding in the 412 paragraphs 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."

Being a monopolist is not in itself illegal, but we shall have to wait until next spring to find out what Judge Jackson decides in his findings of law, after he has had a series of briefs from the parties.

'Just one step'

At a news conference after the release of the document, Bill Gates said that the filing was "just one step in an ongoing legal process that has many steps remaining ... We respectfully disagree with a number of the court's findings and believe the American legal system will affirm that Microsoft's actions and innovations were fair and legal."

Bob Herbold, Microsoft's chief operating officer, said that there was "no evidence of consumers being hurt".

However, section VII of the document includes a number of references to consumer harm: "To the detriment of consumers ... Microsoft also engaged in a concerted series of actions designed to protect the applications barrier to entry, and hence its monopoly power, from a variety of middleware threats, including Netscape's Web browser and Sun's implementation of Java.

"Many of these actions have harmed consumers in ways that are immediate and easily discernible. They have also caused less direct, but nevertheless serious and far-reaching, consumer harm by distorting competition."

Extreme measures

A recurring theme in the judge's findings was that Microsoft took extreme measures to stop the development of any potentially competitive product.

The company had reacted strongly against Netscape's Navigator browser, Intel's software developments, Apple's QuickTime multimedia product, RealNetworks streaming audio and video, as well as IBM's OS/2 and SmartSuite.

Judge Jackson was firmly of the view that "Microsoft decided to bind Internet Explorer to Windows" to make it difficult for Netscape Navigator, "rather than for any pro-competitive purpose".

He thought Microsoft could produce a version of Windows without IE, and software to remove IE optionally.

It may well transpire that this is one of the remedies he requires in due course.

Illegal or not?

The judge was very critical of Microsoft's pricing policies for PC makers, so that he may require Microsoft to use a fixed price list, rather than conduct secret negotiations with discounts for those who toed the Microsoft line.

The fundamental question is now whether Microsoft has illegally exploited its Windows monopoly. If this is found to be the case, then there will be a third phase in the Washington DC District Court when the judge will listen to proposals about possible remedies.

The biggest issue is perhaps what will happen during the inevitable appeals processes.

Later this year, the judge will probably order some remedies to restore fair competition, but Microsoft has said it would ask for any such remedies to be held in abeyance pending the outcome of any appeal, including possibly to the Supreme Court.

Since this process could take several years, there will be much disquiet in the industry unless Microsoft' freedom to act is curtailed in the event that Judge Jackson imposes some measures to bring relief and restore fair competition.

It is premature to speculate about the possible break up of Microsoft into "Baby Softs", especially as there may be more practical remedies such as stopping Microsoft from making any further acquisitions for a period of years, and declaring Windows to be an essential facility, with the source code being in the public domain.

Graham Lea is a leading computer industry analyst specialising in Microsoft, who is following the case for News Online - his views do not represent those of the BBC.

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