Findings of fact: Microsoft is a monopoly that hurts competition and consumers

As expected, Judge Thomas Penfield Jackson has found Microsoft to have monopoly power in the computer operating system market. But more damagingly, the judge also found that Microsoft has harmed competitors and consumers alike by its business practices. And Internet Explorer and Windows are "separate products...with no technical justification" for bundling. The findings of fact in the historic Microsoft antitrust trial were finally released Friday night at 6:30 p.m. and the news, shall we say, wasn't totally unexpected. Corporate monopolies are not illegal in America, but Microsoft violated the law by muscling rivals out of various markets and using a monopoly to gain entry into other markets.

"Microsoft enjoys so much power in the market for Intel-compatible PC operating systems that if it wished to exercise this power solely in terms of price, it could charge a price for Windows substantially above that which could be charged in a competitive market," the findings read. "Moreover, it could do so for a significant period of time without losing an unacceptable amount of business to competitors. In other words, Microsoft enjoys monopoly power in the relevant market."

The court uses lessons from the failure of OS/2 Warp and the Mac OS as examples of how Microsoft is able to keep competitors at bay. Windows, the findings say, has had over 90% marketshare for over a decade; for the past few years, it's been over 95%. And, most ominously, there's nothing coming down the pipe that will affect its domination of the market. And because of its dominance, Microsoft was able to fix prices.

"A Microsoft study from 1997 reveals that the company could have charged $49 for the upgrade to Windows 98, but the study identifies $89 as the revenue-maximizing price. Microsoft thus opted for the higher price," the findings read. "The firm [also] charges different [PC makers] different prices for Windows, depending on the degree to which the individual [PC makers] comply with Microsoft's wishes."

Microsoft's actions toward other companies, of course, came under fire as well.

"Over the years... Microsoft took actions that could only have been advantageous if they operated to reinforce monopoly power."

The findings discuss Microsoft's attempts to squash competition from Netscape and Sun's Java, for example, only when the market for these products became seen as a danger to Windows. Microsoft, the findings read, attempted to coerce Netscape into a "special (and illegal) relationship" that would have incorporated Navigator's features into Windows 95 while keep Netscape away from the lucrative Windows market. Netscape declined the offer. A variety of firms, including Netscape, Apple Computer, RealNetworks, IBM, and Intel, also testified that Microsoft withheld vital technical information that would have allowed their products to better take advantage of Windows.

The findings represent over 200 pages of documentation, a weighty volume that will take some time to get through. The conclusion, however, is obvious: Microsoft is guilty as charged. So the next phase, where the judge makes his findings of law, will pave the way to a final judgment that could well mean the breakup of Microsoft Corporation. Of course, several years of appeals will precede any planned breakup.

"Most harmful of all," the judge concludes, "is the message that Microsoft's actions have conveyed to every enterprise with the potential to innovate in the computer industry. Through its conduct toward Netscape, IBM, Compaq, Intel, and others, Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products. Microsoft's past success in hurting such companies and stifling innovation deters investment in technologies and businesses that exhibit the potential to threaten Microsoft. The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self-interest.

For the complete findings of fact, please visit the Web site for "Findings of Fact - United States of America v. Microsoft Corporation"