Statement From The Software & Information Industry Association On The Decision By Judge Thomas Penfield Jackson; Re: U.S. v. Microsoft Corp.

WASHINGTON--(BUSINESS WIRE)--Nov. 5, 1999--

"U.S. District Court Judge Thomas Penfield Jackson today handed down a thoughtful and clear decision in what has been a highly complex case. Judge Jackson is to be congratulated for a decision that directly addresses the critical factual issues that will form the basis for restoring competition in the software industry. Today's finding lays to rest many of the arguments Microsoft presented in its defense. Most importantly, Judge Jackson affirmed that the antitrust laws do apply to the information technology industry, and that anti-competitive behavior in our industry is no different than anti-competitive behavior in any other industry," said Ken Wasch, SIIA president.

Specifically:

Microsoft argued that Windows 95 is a single product that integrated browsing with the operating system. Judge Jackson, however, has found "there is no technical justification for Microsoft's refusal to meet consumer demand for a browserless version of Windows 98." Paragraph 177. "No consumer benefit can be ascribed...to Microsoft's refusal to offer a version of Windows 95 or Windows 98 without Internet Explorer, or to Microsoft's refusal to provide a method for uninstalling Internet Explorer from Windows 98." (Paragraph 186)

Microsoft has argued that they do not have a monopoly in operating systems. Judge Jackson says they clearly do: "Microsoft possess a dominant, persistent, and increasing share of the world-wide market for Intel-compatible PC operating systems." Paragraph 35. "Viewed together, three main facts indicate that Microsoft enjoys monopoly power. First, Microsoft's share of the market for Intel-compatible PC operating systems is extremely large and stable. Second, Microsoft's dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft's customers lack a commercially viable alternative to Windows." (Paragraph 34)

Judge Jackson also found that "the fact that Microsoft invests heavily in research and development does not evidence a lack of monopoly power." (Paragraph 61)

Microsoft has argued that it is not a monopoly and therefore has not engaged in any monopoly leveraging. Judge Jackson found the opposite. "....Microsoft's monopoly power even extends beyond the Windows Operating System, to Microsoft Office." In its dealings with Apple Computer, the Judge found that "Microsoft threatened to refuse to sell a profitable product to Apple" if Apple did not agree to distribute the Microsoft Internet Explorer browser. (Paragraph 355)

Microsoft argued that it did not foreclose the ability of Netscape to deliver its Internet browser to consumers. Judge Jackson determined that "Microsoft relegated Netscape to more costly and less effective methods of distributing and promoting its browsing software." (Paragraph 379)

Microsoft argued that it has no ability to charge monopoly prices because of its many competitors and potential competitors. Judge Jackson found that "Microsoft raised the price that it charged to OEMs for Windows 95...to the same level as the price it charged for Windows 98. In a competitive market, one would expect the price of an older operating system to stay the same or decrease upon the release of a newer, more attractive version." (Paragraph 62)

Microsoft argued that the industry has moved beyond the case and that it is irrelevant in view of new technologies and new business alliances.

Clearly the information technology industry does not stand still and is, indeed, moving very quickly--all the more reason that it needs protection from a monopoly power seeking to extend its dominance into fast-emerging technology markets.

Judge Jackson has rejected Microsoft's view that anti-competitive behavior was justified to fuel innovation. In fact, Judge Jackson summarized his entire findings in his last sentence: "the ultimate result is that some innovation that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self-interest." (Paragraph 412)

Compliance with antitrust law is the responsibility of every company, even in the digital age.

SIIA looks forward to the remedies phase of this trial. In January 1998, as the Software Publishers Association (SPA), we released a set of Competition Principles (http://www.siia.net/ga/comp/principles.htm) that reflected the overriding economic and political value of antitrust law as applied to the software industry.

As the leading trade association for the code and content industry, we believe these principles provide the basis for restoring competitiveness to the industry.

With today's decision by the Court, SIIA believes these Competition Principles can form the parameters for an effective and equitable remedy in this case. We urge the Department of Justice to consider a broad range of remedies that will effectively address Judge Jackson's findings. Specifically, we recommend the following:

-- Antitrust relief should be tailored to eliminate the business

conduct adjudged by the Court to violate the antitrust laws and

to prevent similar practices in related markets in the future; -- The remedy should not be punitive (i.e., punishment for past

conduct), but should be prospective in nature to ensure that the

behavior found objectionable by the Court is prevented from

continuing; -- Any remedy ordered by the Court should be largely self-executing,

with a minimal amount of oversight by the Department of Justice

and/or the Court; -- The remedy must clearly preclude future abuses to protect against

the Court's findings that Microsoft has unlawfully extended its

OS monopoly into other software markets.; -- Antitrust relief should be adopted through a transparent process

that minimizes dislocations to the equity markets and to

Microsoft's employees or shareholders; -- Remedies should not require any changes to fundamental

intellectual property protections.

We believe the single most effective approach is for the Court to adopt a remedy that creates a new relationship between the dominant OS provider and the rest of the industry, while eliminating the need for the government to remain as a watchdog of software business practices. Today's decision by Judge Jackson is a significant step in ensuring the right of every company to engage in free trade and free commerce.

The Software & Information Industry Association (SIIA) is the principal trade association of the software code and information content industry. SIIA represents more than 1,400 leading high tech companies that develop and market software and electronic content for business, education, consumers and the Internet.

SIIA was formed on January 1, 1999, as a result of the merger between the Software Publishers Association (SPA) and the Information Industry Association (IIA). Additional information on SIIA and its wide-range of activities can be found at www.siia.net.