Microsoft Antitrust Case

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The Trial Begins Contd...

However, CheckFree, Atlanta, had been offering such a service for almost a year before Microsoft made its claim. Microsoft, however, argued that CheckFree also issued some paper checks and so it was not totally electronic. CheckFree CEO Peter Knight complained, "We're out ahead, but they try to get people to stop and wait for them."

Many industry observers felt that Microsoft's marketing strategies were unfair. According to consultants, Gartner Group, Microsoft 'hooked' customers with an initial low bid and made it up subsequently by an overall rise in costs in the name of 'policy shifts.' Gartner issued a warning to Microsoft customers to expect around 50% increase in payments through a period of four years due to 'changes in terms and conditions.' Microsoft's 'Enterprise licensing' enabled clients to get unlimited use of Windows NT, Office and BackOffice, as well as its upgrades for a single price. This tied down the customer to other Microsoft products. Microsoft strongly denied that it had used 'malicious pricing.' The company maintained that price changes were a consequence of the simplification of licensing agreements and were finalised after negotiation with customers. As for 'Enterprise licensing,' Microsoft explained that the "one-price-for-all" enterprise agreements were common in the software industry. Even Microsoft-bashers admitted that many of the company's acts could not be termed strictly illegal.

Both the DOJ and Microsoft produced professors of economics to argue their case in the debate over whether the software giant should be viewed as a monopoly or not. DOJ's witness was Franklin M. Fisher, a 64-year old economics professor from MIT. Fisher strongly argued that monopoly in the OS market might seem to make life easy for the consumers, "but this case is not about being easy. If Henry Ford had a monopoly, we'd all be driving black cars.

That's not what competition is about. That's not what helping consumers is about. We're going to live in a Microsoft world. It may be a nice world. But it is not a competitive world," he commented. Microsoft's witness was Richard Schmalensee, another MIT professor, who was considered by many as one of the leading authorities on industrial economics (Schmalensee did his doctoral thesis under Fisher). He argued that Microsoft was not a monopoly, that it had not taken advantage of its dominance of the OS market, and that it had no power to do so.

Schmalensee held that Microsoft's competition included its own existing products. An OS did not wear out like any other commodity and the installed OS was an obvious competitor to a newly launched OS. As a result, Microsoft had no alternative but to price upgrades very reasonably. Microsoft countered the allegation of 'polluting' Java by stating that its licence agreement with Sun allowed it to modify Java.

Microsoft explained that the modification was necessary to improve upon the technology. As for the war-like language used in the internal e-mails, James E. Allchin, Microsoft's Senior VP of Windows division, offered a spirited defense: "Yes, we're a competitive company. We don't apologize for that." Gates argued that his rivals should spend less time being obsessed with Microsoft and more time on their own businesses.

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