Exclusivity and Tying

1
Exclusivity and Tying

• Microsofts aim to exclude rivals and potential
  rivals.
• Practice of MS
• Tying.
• Exclusive contracts

2
Contractual Tying

• Microsoft initially tied Internet Explorer to
  Windows contractually, by requiring that computer
  manufacturers who licensed Windows 95 for
  installation on new computers also install
  Internet Explorer, and by selling the two
  products bundled together at retail.

3
Contractual Tying

• Starting in 1996, Microsoft imposed additional
  requirements on computer manufacturers who
  licensed Windows
• they could not remove the Internet Explorer icon
  from the Windows desktop
• they could not place any icons on the desktop
  that were larger than the Microsoft icons
• they could not modify the boot sequence or have
  programs that automatically launch at its
  conclusion,

4
Physical Integration

• August 1996 integrated some IE code into a
  version of Windows 95
• but IE could be removed with Windows Software
  Uninstall function
• August 1998 physical integration of IE into
  Windows 98
• Consumers could not remove IE from Windows

5
Exclusive Contracts

• MS signed contracts with various parties
• with 14 of the largest Internet service providers
  (ISPs) to tie access to Windows
• with Internet content providers to tie placement
  in the Windows Channel Bar
• with software vendors, containing exclusivity
  provisions

6
Contracts with ISPs

• ISPs will be placed in the Windows Internet
  Connection Wizard which made it easy for
  consumers to subscribe to and download access
  software from ISPs, if and only if they agreed
• not to offer other browsers to customers
• not to offer web links to other browsers
• to ship another browser only upon customer
  requests, but required typically that 75 - 85
  percent of all browser shipments be IE
• April 1998 some restrictions relaxed, but still
  required IE to be the ISPs default browser and
  to be promoted as prominently as any other browser

7
Contracts withInternet Content Providers

• MS offers content providers to be tied in the
  Windows Channel Bar, which allowed consumers who
  enabled the Windows Active Desktop to connect
  more easily to their websites, if they agreed
• to promote for IE and links for it
• not to include the same items for other browsers
• not to pay other browser companies for promotion
  on the other browser companys website
• to develop their website using certain Microsoft
  technologies
• to create differentiated content that would be
  viewed better with IE than with Navigator under
  some contracts
• Later, contracts abandoned because Active Desktop
  was proved unpopular and due to pressure prior to
  the trial

8
Contracts with Software Vendors

• First Wave contracts with software vendors that
  in their early access to beta releases and other
  technical information, they have to
• use IE as their default browser for any software
  with a hypertext-based user interface
• use Microsofts HTML Help which is accessible
  only with IE, to implement its softwares help
  system
• Example June 1997 Intuit (maker of Quicken)
  promised not to distribute any other browser with
  its software

9
Reward

• Rewarded particular computer manufacturers for
  promoting Internet Explorer over Navigator more
  explicitly through reduced Windows licensing
  fees, co-marketing funds, and other payments
• Examples
• Compaq agreed in to promote Internet Explorer
  exclusively for its personal computer products.
• Microsoft pressured Apple to make Explorer its
  default browser and to put icons for no other
  browsers on the desktops of its Macintosh
  computers, using in part the threat that it might
  discontinue its Office product for Macintosh
  computers