"Microsoft's true anticompetitive clout was in the rebates it offered to OEMs" - Cuomo Explores Same Problem With Intel

Submitted by Norm Roulet on Thu, 11/05/2009 - 00:18.

We have had discussions on REALNEO about the antitrust of Microsoft, and the harm that has caused the world, but few people remember back to 1999, when the antitrust case United States vs. Microsoft determined Microsoft's dominance of the Intel-based personal computer operating systems market constituted a monopoly, and that Microsoft had taken actions to crush threats to that monopoly, including Apple, Java, Netscape, Lotus Notes, Real Networks, Linux, and others. The court's conclusion was Microsoft must be broken into two separate units, one to produce the operating system, and one to produce other software components... a decision weakened on appeal (see below).

A decade later, we have the opportunity to explore related antitrust in the computer industry further, and put Microsoft antitrust in new perspective, as the November 4, 2009, New York Times reports "Cuomo Files Intel Antitrust Suit" - "Following the lead of foreign regulators, New York's attorney general, Andrew M. Cuomo, filed a federal antitrust lawsuit Wednesday against Intel, the world's largest chip maker."

The NYTimes reports:

According to Mr. Cuomo’s lawsuit, Intel, the world’s largest chip maker, has for years used large rebates and co-marketing arrangements to talk Dell and other manufacturers into sticking with its products rather than increasing their business with A.M.D., a much smaller chip maker.

As the supplier of about 80 percent of the central chips that power PCs and servers, Intel had monopoly power, which it abused, according to Mr. Cuomo. “Intel has used illegal threats, coercion, fines and bullying to preserve its stranglehold on the market,” he said at a news conference Wednesday. “We intend to stop them.”

The heart of the arguments follow:

Mr. Cuomo argues that Intel’s behavior curtailed innovation in the industry and forced consumers and businesses to pay higher prices for computers.

Under federal antitrust law, states have the power to bring charges independently of the federal government. The F.T.C. and other states may file similar cases, much as in the government’s antitrust case against Microsoft a decade ago.

The major complaints surrounding Intel concern its use of rebates and marketing dollars to keep customers. The New York suit argues that Intel executives threatened to take away such incentives from customers if they did more business with A.M.D.

In the Wikipedia entry on United States vs. Mircrosoft, a decade ago, Jean-Louis Gassée, CEO of Be Inc.,is quoted saying "Microsoft's true anticompetitive clout was in the rebates it offered to OEMs preventing other operating systems from getting a foothold in the market."

Same business model and outcome as for Intel, executed in concert with Microsoft, in many ways. That has been monopoly computing in our world, for most our computing lifetimes.

Perhaps Mr. Cuomo will help break that mold. He will need an astounding legal team, as Intel will be ferocious in its defense.

As a preview of what to expect from The United States vs. Intel, read some highlights from the Wikipedia entry describing the US vs. Microsoft trial:

The trial started on May 18, 1998 with the U.S. Justice Department and the Attorneys General of twenty U.S. states suing Microsoft for illegally thwarting competition in order to protect and extend its software monopoly. Later, in October the US Justice Department also sued Microsoft for violating a 1994 consent decree by forcing computer makers to include its Internet browser as a part of the installation of Windows software. During the antitrust case it was revealed that Microsoft had threatened PC manufacturers with revoking their license to distribute Windows if they removed the Internet Explorer icon from the initial desktop, something that Netscape had requested of its licensees.

Microsoft Chairman Bill Gates was called "evasive and nonresponsive" by a source present at a session in which Gates was questioned on his deposition.[2] He argued over the definitions of words such as "compete", "concerned", "ask", and "we".[3] BusinessWeek reported, "Early rounds of his deposition show him offering obfuscatory answers and saying 'I don't recall' so many times that even the presiding judge had to chuckle. Worse, many of the technology chief's denials and pleas of ignorance have been directly refuted by prosecutors with snippets of E-mail Gates both sent and received."

Judge Jackson issued his findings of fact[11] on November 5, 1999, which stated that Microsoft's dominance of the Intel-based personal computer operating systems market constituted a monopoly, and that Microsoft had taken actions to crush threats to that monopoly, including Apple, Java, Netscape, Lotus Notes, Real Networks, Linux, and others. Then on April 3, 2000, he issued a two-part ruling: his conclusions of law were that Microsoft had committed monopolization, attempted monopolization, and tying in violation of Sections 1 and 2 of the Sherman Act, and his remedy was that Microsoft must be broken into two separate units, one to produce the operating system, and one to produce other software components.

The D.C. Circuit Court of Appeals overturned Judge Jackson's rulings against Microsoft. This was partly because the Appellate court had adopted a "drastically altered scope of liability" under which the Remedies could be taken, and also partly due to the embargoed interviews Judge Jackson had given to the news media while he was still hearing the case, in violation of the Code of Conduct for US Judges.[13] Judge Jackson did not attend the D.C. Circuit Court of Appeals hearing, in which the appeals court judges accused him of unethical conduct and determined he should have recused himself from the case.[14]

Judge Jackson's response to this was that Microsoft's conduct itself was the cause of any "perceived bias"; Microsoft executives had "proved, time and time again, to be inaccurate, misleading, evasive, and transparently false. ... Microsoft is a company with an institutional disdain for both the truth and for rules of law that lesser entities must respect. It is also a company whose senior management is not averse to offering specious testimony to support spurious defenses to claims of its wrongdoing."[15]

However, the appeals court did not overturn the findings of fact. The D.C. Circuit remanded the case for consideration of a proper remedy under a more limited scope of liability. Judge Colleen Kollar-Kotelly was chosen to hear the case.

The DOJ announced on September 6, 2001 that it was no longer seeking to break up Microsoft and would instead seek a lesser antitrust penalty.

Damn shame Gates was able to change that ruling. Imagine a world with real competition in the computing industry.

Thank goodness for Linux and other open source software!

Thank goodness for AMD and other competitors against Intel.

Good luck, AG Cuomo!

if you win this case, you deserve to be Governor... perhaps President.

Global governments are slowly switching to Linux

Norm,

I don't know every single detail about the transistion of various international governments switching from Microsoft to Linux.  Some citing a variety of reasons like anti-trust and price-gouging, though I am aware that German--starting with the City of Munich, a major technology hub in europe-- has already made the switch.  Yet, even in the US, according to this USA Today article from 2002, sectors of our own government are kicking Microsoft to the curb.  And as you've mentioned before, a lot of people are not just fed up with Windows, but also with IE Explorer...myself included.  I use Firefox--for the last 5 years or so--with plans to switch my operating system to Linux the next time I do a major hardware upgrade.

Eternity

mono infection strikes big business

I've been toying with Linux for 10 years and made the switch 4 years ago. Governments will look to the major industry players and endure the economic pain because of one thing, lobbiest. When ever the notion to acquire and use open source software is entertained, the lobbiest come to enforce why they shouldn't. Lobbiest and lawyers sitting a tree.........

I believe mono-culture is thee simple way of life in America. One size fit all, farms planting one kind of crop (probably genetically modified), mega industries that saturate and dominate the market. Big, big, big, all encompassing, all inclusive and all consuming. And when the market changes, they are tooooooooooo big to change so fast. They fight for what ever contract they can keep, especially the government ones. Some knuckle thought since we have Microsoft operating system it might be efficient and cheaper to require all Microsoft products to do business. I remember when Word Perfect was kicked to the curb for MS Word, I had never seen dozens of women all cry at the same time, until that day.

It continues when every school that teaches word processing insist on teaching MS Word instead of word processing. Teaching the product instead of the skill because businesses seek the convenience of the mono-culture.

In the Open Source arena there is Open Office from Sun, IBM's Symphony, Kword, Abiword and a couple more. They all produce MS Windows doc formats and are free.

Once you throw in the green card worker thing and the copyright wrestling thing, you realize it's not about competing, but about beating and eliminating competition. Now who's stiffling innovation and creativity?

To tell you a secret, I think Mr. Gates just wants a company like his buddy Mr. Jobs where he controls both the hardware and the software. Intel is nothing without AMD and other chip makers. If Intel snuffs out everybody else complacency will set in and they will whimp along like Mircosoft. So, I too root for AMD and Linux and Open Source.

Well put, Mojo

I think Bill Gates just wants to be loved, like the rest of us. But something went wrong for Bill.

You need to love others, to be loved by others.

Disrupt IT