Have the actions of Microsoft harmed the consumer

1

• Have the actions of Microsoft harmed the
  consumer?
• The case at a glance.
• By Min Lin
• Nicole Ritter
• Gerald DesRoches
• Terry Schmidt

2
Federal Trade Commission Investigation

• June 1990
• Federal Trade Commission secretly investigates
  possible collusion between Microsoft and IBM.
• February 5, 1993
• FTC takes no action against Microsoft after 2-2
  vote of its commissioners.

3
U.S. Department of Justice Investigation

• August 21, 1993
• U.S. Justice Department takes over Microsoft
  investigation.
• July 15, 1994
• Microsoft and U.S. DOJ sign consent decree.

4
Netscape Communications Corp.

• December 1994
• Netscape Communications Corp. introduces
  Navigator Internet Browser
• shortly after introduction have 80 of Internet
  browser market Microsoft less than 5
• three years later, Netscape slips to 50 and
  Microsoft up to 40

5
Consent Decree

• 1995
• February 14 - U.S. District Judge Stanley Sporkin
  throws out consent decree
• June 16 - Appellate court overturns ruling

6
Infamous Meeting

• June 1995
• infamous meeting between Microsoft and Netscape

7
Windows 95 and Internet Explorer

• July 1995
• Microsoft releases Windows 95 and integrated
  Internet Explorer

8
Consent Decree

• 1995
• August 21 - U.S. District Judge Thomas Penfield
  Jackson approves consent decree

9
Department of Justice Investigation

• September 1996
• DOJ investigates possible violation of consent
  decree by Microsoft

10
Violation of Consent Decree

• October 20, 1997
• DOJ asks Judge Jackson to fine Microsoft 1
  million/day for violating consent decree and
  bundling Windows 95 and Internet Explorer
• Microsoft claims the browser is an integrated
  part of the operating system

11
Microsoft Guilty

• December 11, 1997
• Judge Jackson issues preliminary injunction
  against Microsoft
• requires unbundling of Web browser from Windows
  95 operating system
• appoints special master to advise him

12
Microsoft Appeals and Appeals and Appeals and . .
.

• December 1997 to May 1998
• Microsoft appeals decision
• offers computer makers a version of Windows 95
  that does not work
• DOJ asks Microsoft to be held in contempt for not
  complying to order
• Microsoft appeals appointment of special master
• Microsoft allows computer makers to install
  Windows 95 without Internet Explorer icon
• Court of Appeals halts special master
  investigation
• Court of Appeals rules that injunction against
  Microsoft does not apply to Windows 98

13
Anti-trust Violation

• May 18, 1998
• DOJ and 20 states file major anti-trust cases
  alleging Microsoft abused its monopoly power to
  stifle competition
• June 1998
• Windows 98

14

• October 19, 1998
• trial begins in Washington D.C.
• Judge Jackson presiding

15
Sherman Act

• Came into force in 1890
• stop corporate giants from forming trusts to
  buy competitors, force others out of business and
  raise prices.
• IBM - 1969 to 1982
• ATT - 1974 to 1982
• Standard Oil - 1911
• Aluminum Co. of America - 1945
• American Tobacco - 1946

16
Sherman Act

• Section 1
• prohibits tying arrangements or exclusionary
  contracts
• Section 2
• prohibits a firm from maintaining monopoly
  through anti-competitive acts

17
Courtroom Showdown

• What must government prove?
• proof of monopoly
• 80 of computers worldwide use Microsoft
  operating systems
• abusing monopoly power
• predatory pricing
• exclusionary contracts
• market division
• hurting consumers

18
Courtroom Showdown

• trial begins October 19, 1998
• governments key witnesses include deposition
  videotape of Bill Gates, senior executives from
  IBM, Apple, Sun, Intel, AOL, Intuit, Netscape,
  economist from MIT, software experts and
  admittance of thousands of e-mail snippets
• Microsofts key witnesses are senior Microsoft
  executives, economist from MIT

19
AOL and Netscape Merger

• November 24, 1998
• AOL and Netscape complete 4 billion merger
• alliance with Sun Microsystem
• Microsoft claims evidence that competition is
  alive and well and their dominant market position
  could be overthrown in the blink of an eye
• South Carolina drops out of lawsuit

20
The Verdict

• June 24, 1999
• trial testimony ends
• September 21, 1999
• closing arguments
• November 5, 1999
• Jackson in preliminary findings, declares
  Microsoft a monopoly
• November 9, 1999 to April 1, 2000
• Microsoft and government in mediation talks - fail

21
The Verdict

• April 3, 2000
• Judge Jackson rules
• Microsoft guilty of violating Section 1 and 2 of
  Sherman Act
• invites coalition of states and DOJ to propose
  remedies
• June 9, 2000
• Judge Jackson files final decision
• actions harmed consumers
• orders company split in two

22
Aftermath

• June 10, 2000 to present
• Microsoft appeals to Court of Appeals
• government wants appeal expedited to Supreme
  Court
• Supreme Court assigns appeal to Court of Appeals
• decision expected by spring of 2001
• expected to be appealed to Supreme Court - could
  take another year