Justice Dept. Says Microsoft is Behaving, California Disagrees

By Scott M. Fulton, III, BetaNews

August 30, 2007, 5:00 PM

In its regular progress report for Microsoft's compliance with the terms of its antitrust settlement, the US Justice Dept. stated today that it believes that since the settlement, there's significant evidence of a more competitive market unhindered by the presence or conduct of Microsoft.

Though the entire DOJ filing had not been publicly released by this afternoon, excerpts cited from a press release show the Dept. wrote, "Since the entry of the Final Judgments, there have been a number of developments in the competitive landscape relating to middleware and to PC operating systems generally that suggest that the Final Judgments are accomplishing their stated goal of fostering competitive conditions among middleware products, unimpeded by anticompetitive exclusionary obstacles erected by Microsoft."

Among the examples the DOJ cited are the emergence of Apple as a dominant player in the digital music market, Adobe as a dominant player in multimedia delivery, and the recent decisions by Dell and Lenovo to make Linux available to their customers as an alternative operating system.

But the DOJ's was not the only filing to be made before the federal court now handling the Microsoft case. Writing on behalf of her own state as well as Connecticut, Iowa, Kansas, Massachusetts, Minnesota, and the District of Columbia, California Assistant Attorney General Kathleen Foote filed a report that states, if anything, market conditions have only gotten worse for anyone wanting to go against Microsoft head-to-head.

Citing an excerpt from a book that concluded that the Microsoft settlement would go down in history as an example of the federal government having snatched defeat from the jaws of victory, Atty. Gen. Foote writes, "Whether or not one agrees with these stark conclusions, the Final Judgment clearly has had little or no discernible impact in the marketplace as measured by the most commonly used metric - market shares. In the market at the heart of the case - Intel-compatible PC operating systems - Microsoft's share has remained persistently high at supra-monopoly levels."

As a basic example, Foote demonstrated that Microsoft's share of the operating system market in 1991, back when the whole antitrust process began, was 93% according to IDC's numbers. Today, it's receded all the way down to 92%. And in the field of Web browsers - which was one of the focus points of the original antitrust case, especially when it appeared Microsoft had lost it - Netscape no longer exists, though Mozilla Firefox has only been capable of knocking down Microsoft's usage share from a high of 95% to 85% last year.

"The purpose of the remedy in this case was not to favor any particular competitor or to pre-determine competitive outcomes," states Foote. Borrowing language from the settlement agreement, she continued, "A fundamental purpose of an antitrust decree, however, is 'to ensure competition.' It is noteworthy, then, that Microsoft's market dominance, which its anticompetitive conduct was intended to protect, has endured."

In a public statement this afternoon, California Attorney General (and former governor) Jerry Brown put in his two cents: "The decree has not lived up to its goal of increasing market competition."

But the DOJ, perhaps anticipating that argument from the states, said that its objective with the agreement was not to tip the scales in favor of Microsoft's competitors, but to enable competitors to have a shot at Microsoft...whether they took that shot or not.

"The filing also notes that, as Microsoft was never found to have acquired or increased its monopoly market share unlawfully, the final judgments were not designed to eliminate Microsoft's Windows monopoly or reduce Windows' market share by any particular amount," reads the DOJ's press release this afternoon. "Rather, the final judgments were designed to re-invigorate competitive conditions that Microsoft had suppressed so that the market could determine the success of these software products. The final judgments are succeeding in that goal."

For its own part, Microsoft had its own report to file with the court today. Its choice of language, after having read the DOJ's public statement, strikes a remarkably similar chord.

"Rather than recognizing the pro-competitive changes that have occurred since November 2002," Microsoft attorney Charles F. Rule writes, "the California Group suggests that the Final Judgments should have done more, ensuring that Microsoft's market share was diminished. That, however, was not the objective of the Final Judgments and should not be the standard by which the effectiveness of the Final Judgments is assessed. Microsoft did not achieve its position in the PC operating systems market unlawfully; rather, the Court found that Microsoft maintained that position by specific anticompetitive means. Having prohibited Microsoft from further employing those or similar means, and having created mechanisms to facilitate competition with Microsoft, the Final Judgments created an environment in which market forces can determine the relative success and thus the market shares of participants. Measured by that standard, the Final Judgments have been a success."

One week from Tuesday, Judge Kathleen Kollar-Kotelly will convene the next scheduled status conference on the antitrust settlement. It will not be the final status conference after all, the DOJ announced today, as it has exercised its option after all to continue monitoring Microsoft's compliance until 2009.

Microsoft reportedly agreed, and also agreed to an extension requested by the DOJ and states that are a party to the agreement, enabling them two years from now to extend their monitoring right for another three years to 2012. So the State of California's principal fear that, as Ass. Atty. Gen. Foote put it, "the principal constraint on Microsoft's ability to abuse its market power will be gone" will not come to pass after all.