The US federal government and 19 US states allege that Microsoft engaged in illegal “monopoly maintenance” to protect and extend its market dominant Windows PC operating system and then tried to monopolise the Internet browser market, according to court papers filed late yesterday.
The US Department of Justice (DOJ) along with attorneys general from the US states and the District of Columbia allege that Microsoft violated the Sherman Act, the cornerstone of the nation’s antitrust laws, in at least four different ways. Among the other allegations made in the court papers are that Microsoft engaged in a variety of illegal business practices, including tying its Web browser to Windows, entered into exclusionary agreements with computer makers, Internet access providers and content providers, and impaired competitors' access to consumers.
The filings come as the historic antitrust case enters its final phase. US District Court Judge Thomas Penfield Jackson had asked the parties to file proposed findings of law after he ruled last month on the facts in the case. In those findings of fact, Jackson indicated that Microsoft has a monopoly on Intel-based PC operating system software and that the company has used that power to hurt consumers, stifle innovation and thwart competition.
Microsoft has until Jan. 17 to file its own proposed interpretation of how the law should be applied to the set of facts Jackson issues. After that, the two sides each can submit rebuttals. Oral arguments are scheduled for Feb. 22.
Today's court filings allege that Microsoft violated Section 2 of the Sherman Act “through a host of actions that illegally maintained the critical barrier to entry into, and hence its monopoly in, the market for operating systems for Intel-compatible personal computers," according to the document.
Secondly, the document also alleges that Microsoft violated Section 1 of the act by illegally tying its Internet Explorer Web browser to its Windows operating system. A third allegation states that Microsoft also violated Section 1 of the act by entering into “exclusionary” agreements with personal computer manufacturers and with ISPs (Internet service providers), online service providers and Internet content providers. Lastly, “Microsoft’s anticompetitive campaign to impair (Netscape Communication Corp.’s rival Web browser) Navigator's competitive access to consumers constituted an unlawful attempt to monopolize the browser market,” a Section 2 violation of the Sherman Act.
The DOJ filing is available at http://www.usdoj.gov/atr/.
The US states filed a separate 42-page document listing the laws in each state allegedly violated by Microsoft. While acknowledging that state antitrust laws “are based upon and largely emulate the federal scheme,” the states point out in the filing “the extent to which the standard of liability under that State’s antitrust or unfair competition law runs parallel to its federal counterparts.”
In California, for example, the state’s antitrust law, the Cartwright Act, states that it's illegal to restrict commerce, prevent competition or enter agreements to lessen competition. The court filings allege that Microsoft violated the state’s antitrust law by illegally tying its Internet browser to its Windows operating system.
In addition, the state alleges that Microsoft violated California’s Unfair Competition Law by illegally maintaining a monopoly over the PC operating system software, attempting to monopolise the 'Net browser market and entering into exclusive arrangements with ISPs, online service providers and Internet content providers. Furthermore, the complaint states that Microsoft unreasonably restrained computer makers from changing the first-boot or startup sequence on its software.
The state brief lists the laws that Microsoft allegedly violated on a state-by-state basis and is available at the National Association for Attorneys General Web site at http://www.naag.org/.
Antitrust experts said that observers shouldn’t read anything into the separate filings by the federal and state governments. Both filed joint proposed findings of fact in September. There have been reports that the states are eager to demand tougher remedies in relation to Microsoft than the federal government, such as a breakup or restructuring of the software company. Judge Jackson cited the reports when he appointed Federal Appellate Judge Richard Posner as a mediator in the case last month.
“There is enough variation in state law that they had to separately give the judge a state-by-state road map,” said William Kovacic, law professor at George Washington University. “Even if the state laws have the exact same text as the Sherman Act, their courts may interpret things differently.”
(Elizabeth Wasserman and Keith Perine write for the Industry Standard.)