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Microsoft marks 10 years of antitrust action

Tags:
Netscape,
Litigation,
Rivals,
Defeat

John Borland CNET News

Published: 14 Apr 2004 12:30 BST

Microsoft has argued consistently in court that it must add new features to its products simply by virtue of being in the fast-paced software business. If the company doesn't consistently innovate, it will be out of business itself, its executives say publicly and in the internal emails that have come to light in the course of various trials.

In response, several respected economists have argued in articles and books that Microsoft's dominance in succeeding markets has come because it creates high-quality products that consumers choose in the marketplace.

Indeed, many close observers say the company's developers do not have antitrust on their minds when they're trying to improve their products.

"I can tell you with 100 percent certainty that when managers are deciding what features to put inside products, they are not considering antitrust issues unless it is in a very narrow area covered by the DOJ settlement," said Matt Rosoff, an analyst with Directions on Microsoft, a research firm that closely covers the company.

Has the EU really changed anything?
Some believe that the European Union decision last month, if upheld, will be the first one to put serious constraints on Microsoft's actions in these new areas.

In contrast to the US Appeals Court, which set rules for analysing Microsoft's bundling but did not issue a final opinion on its legality, the Europeans said they thought Microsoft's addition of Media Player to the operating system had clearly crossed a line. They ordered a version of Windows to be produced without it. This doesn't directly affect future products, but some believe it will serve as enough of a precedent that Microsoft will be more careful.

Some believe the European antitrust ruling will make Microsoft more careful. "This will make them have to think harder about when and how they bundle," said Bob Kimball, general counsel for multimedia software company RealNetworks, which is suing Microsoft for $1bn on its own antitrust charge. "It will make regulators quicker to go after them for future bundling activity."

Others aren't so sure. According to statements from Ballmer and European Competition Commissioner Mario Monti, settlement talks failed over issues dealing with future products. Had that settlement been struck, a process might have been put in place to deal quickly with future complaints about bundled products.

"They wanted to go beyond the specific issues in this case to try to create a precedent that would govern our ability to include new features into future versions of Windows," Ballmer wrote in an 18 March email to employees. "While this is not the outcome we wanted, it is an outcome that I am confident will ultimately work out for the best."

Ballmer's "best" could mean that future issues will also have to be independently investigated and litigated, a process that often has taken a half-decade or more. That has typically given Microsoft enough time to solidly establish itself in the new markets, often with lethal effect on competitors, some observers say.

"In the case of Standard Oil or the rail industry, those markets developed over decades," Berkeley's Shapiro said. "But what can happen in two or three years in the software industry is much more significant in terms of market structure and irreversibility than was the case with oil in 1895."

"Government is really not equipped to regulate in such a fast-moving industry as technology," Rosoff added. "That's why the most aggressive antitrust commentators originally pressed for the breakup of the company."

CNET News.com's Ina Fried and Scott Ard contributed to this report.