FACTS The DOJ accused Microsoft of monopolizing the market of Intel compatible PC operating systems and using the monopoly to maintain a monopoly on internet browsers (i.e. Internet Explorer).
HOLDING The Court ruled that there are essentially two feasible methods to get a browser to a customer: either to install it through an OEM or to get an ISP to provide the browser.
Microsoft suggests both that it
has not actual monopoly and that Netscape is not actually excluded
from the market.
Microsoft didn’t challenge
The Court excluded Macs, non-PC
competitors (Palm, etc..), and so-called “middleware”
(Navigator, Java, etc…) that provided certain APIs for software
The Court found that the
persistently high market share and barriers to entry constituted
circumstantial evidence of market power in the short term.
Moreover, direct evidence of market power included the fact
that Microsoft set the price of Windows without considering its
rivals’ prices and that its pattern of exclusionary conduct
was rational only if the firm knew it possessed market
power—behavior that indicates it considered itself to have
market power is evidence of market power.
A price lower than a short-term
profit maximizing price is not inconsistent with a long-term
The requisite bad act must have
“anticompetitive effect” that harms the competitive process, not
merely one or more competitors.
The Court’s discussion of the
market does not really take into account consumers; it doesn’t
explore whether they are businesses or personal users and talks
about OEMs more than might be necessary.
The Court’s discussion of
“applications barrier to entry” is a discussion of the network
effects that affect software applications and OS platforms. Direct
network effects occur when networks do not interconnect and access
to a large network creates an upward spiral that makes it harder to
new networks to break in(e.g. Facebook). Indirect
network effects occur when a significant amount of many people using
the same system results in a lower cost of complementary goods (e.g.
toner is cheaper for widely used printers).
Π makes prima facie case
demonstrating anticompetitive effect
Δ makes “precompetitive
justification”—a nonpretextual claim that its conduct is
indeed a form of competition on the merits (e.g. it involves
greater efficiencies or greater customer appeal).
Π may rebut Δ’s
Π may demonstrate
that the anticompetitive harm outweighs the precompetitive benefit
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