Reversal of opinion: Microsoft and the DOJ

The Department of Justice won, Microsoft lost, and the consensus is that the ruling will have little effect on the computer industry because Microsoft’s lawyers can slog an appeal through various courtrooms for years.

So why did the DOJ bother, and why should you care? Here’s one justification for the whole circus: the case might encourage computer professionals to look at Microsoft’s role in the industry a little more carefully. It has had that effect around the ComputerWorld Canada offices, and thereby caused us to reverse some previously stated opinions.

It is an often-heard view that Microsoft is being unfairly penalized for its own success. The argument goes like this: work hard, pursue the American Dream, but don’t do it too well or the feds will come calling. It has also been said that the additions Microsoft made to Windows – notably the integration of Internet Explorer – are innovations that benefit customers.

Bill Gates has flogged both of these theories for years. The arguments appear to make sense, and similar sentiments have appeared at least twice in this space. The basic premise is that Microsoft should not be criticized for being the best.

On the other side of the fence is the DOJ, which has been investigating Microsoft since 1991, and U.S. District Court Judge Thomas Penfield Jackson, who decided the vendor contravened the Sherman Antitrust Act by illegally integrating IE and Windows, pressuring OEMs, service providers and developers in an effort to crush Netscape Navigator and Sun’s Java, and generally committing anticompetitive and predatory acts.

Judge Jackson went on to say that only by viewing the company’s various areas of misconduct as a “single, well-coordinated course of action, does the full extent of the violence that Microsoft has done to the competitive process reveal itself.”

The Big picture

Jackson makes a good point, because if you look at surface results only, Microsoft offers pretty good products at a decent price, and the company is responsible for many of the efficiencies and joys of the computer age.

But if, as Jackson said, one examines the company’s business history, a different picture emerges. This image is one of questionable dealings, pressure tactics and stretching of the truth.

One microscope through which to get this view is The Microsoft File, The Secret Case Against Bill Gates. Written by journalist Wendy Goldman Rohm, the 1998 book is a scathing depiction of Microsoft in general, and of Gates in particular. Among the many intriguing stories in the book are the following:

Microsoft committed to co-developing OS/2 with IBM in 1989, publicly stating it supported the OS as a business platform. At the same time, Microsoft was secretly moving ahead on a version of Windows designed to compete with OS/2. One result of this was that Lotus, among others, wasted a lot of money porting its products to OS/2.

In 1991, Germany’s largest PC company at the time, Vobis Microcomputer, sold half of its PCs with DR-DOS preinstalled on them. DR-DOS, the main rival to MS DOS, cost Vobis US$13 per copy. But in order to push out DR-DOS, Microsoft told Vobis chief Theo Lieven he would have to pay more for a stand-alone copy of Windows, than he would for a DOS/Windows 3.1 package. He could buy a DOS/Windows bundle for US$24 each, or pay US$35 for Windows alone. Continuing to sell DR-DOS with Windows on top, therefore, would put Vobis at a cost disadvantage, and Lieven caved to the Microsoft demand.

Also, in order to discourage users from running the beta release of the Windows 3.1 shell on top of DR-DOS, Microsoft inserted secret code that would pop-up fake error messages, implying that Windows 3.1 was incompatible with DR-DOS.

By 1994, DR-DOS was essentially out of the market, and the price for MS-DOS climbed.

Gates was extremely concerned that Novell’s 1994 acquisition of WordPerfect would allow Novell to use its NOS dominance to push its PC applications – exactly the same tactic Gates used with Windows and Microsoft Office.

Gates purposely poached senior staff at WordPerfect and Borland, in an effort to weaken their ability to compete.

Microsoft forced developers to sign agreements stating they would be denied access to Chicago code if they did not support OLE. This was aimed at killing off competing standards OpenDoc and WABI.

The browser wars: Netscape was the target, and Microsoft opted to make IE free – not to give consumers easy access to innovation but to harm Netscape. In deposition testimony, Joachim Kempin, then Microsoft senior vice-president of OEM sales, said: “…if the user gets used to a totally different (browser) metaphor, he might not buy a Windows machine anymore. He might just say, oh, now I can buy a Mac, I can buy a Unix machine, I can buy a Nintendo machine.”

Microsoft expressly mandated that PC manufacturers install IE on any computer running Windows 95. James Von Holle of Gateway 2000 testified to federal and states attorneys that in addition to IE, the Windows 95 licence agreement required that Microsoft preconfigured all on-screen icons, and that Gateway was not permitted to alter them.

Questions raised

These stories, and others, all paint a clear picture: Microsoft used leverage, and not just superior products, as its competitive ace.

To be fair to Microsoft, two points have to be acknowledged. One, Microsoft’s products are pretty good; if they were useless, no one would buy them despite the vendor’s industry weight. (Witness the failure of Microsoft Bob as proof of this.) Two, Rohm’s book is not necessarily 100 per cent reliable. Upon its publication, Microsoft publicly labeled it a work of “fiction.”

However, it is also important to note that Microsoft never sued Rohm for libel, as it surely would have done if the work were substantially untrue.

For the sake of fairness, however, let’s assume that 50 per cent of Rohm’s stories are exaggerations or even someone’s fabrications. Even then, there is enough evidence to cause computer professionals to question the sway Microsoft holds over the industry.

Has the software giant employed unfair and underhanded practices to lock-up control of this industry? Rohm argues it has, and she is by no means alone in her criticism. She can now, in fact, count a U.S. District Court on her side. And if that’s true, what would the industry look like if all of those smaller, innovative companies had thrived, funded R&D projects, and given you more choice?

No one can provide an absolute answer to that question, but it is an important one to raise, if only to keep our minds open to alternatives the next time we research a new software purchase.