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ATPM 5.03
March 1999

How many undergraduate students does it take to screw in a light bulb?
Three. One to screw in the light bulb, and two to throw the football.

How many College Athletes does it take to screw in a light bulb?
One, but he gets three credits for doing it.

How many graduate students does it take to screw in a light bulb?
One, but it takes her seven years to do it.

How many blunders can a company which holds close to a 90% market share in an industry and has more money than many third world nations commit during a federal anti-trust trial?
You gotta be kidding me. Zero, right?

Yeah, that’s exactly what I thought when I heard that the Federal Government was going to pursue the anti-trust trial of Microsoft. You see, when it comes to domination of the software market, Microsoft rules the roost. However, when it comes to preparing witnesses for anti-trust trials, the company could use a little help.

To understand what the government’s beef is all about, you have to understand just what the heck constitutes a monopoly. I know this sounds like Economics 101, but bear with me.

You see, here in the United States, free enterprise is the king. There is what is known as a free marketplace where anyone is allowed to peddle their products to the masses. This should allow for a whole slew of people to bring their products to the marketplace and sell ‘em to the public..

Over time, though, someone may be able to get ahead in the market. Maybe it just starts as an innocent lead in market share, or perhaps inventing a new product or innovating on an idea already in existence.

Suddenly, this company finds itself in a unique position. They have a very large share of the market. While this could be bad for competition, the mere fact that it exists isn’t bad. Hey, let’s face it, if you offer a better or new and innovative product, more people are gonna want to get their mitts on it.

Where the bad part comes in is when the company with the advantage starts to flex its muscles. It bullies other companies into setting their prices differently, or seeks to corner the market and squeeze out competition.

To create a Monopoly.

In fact, the United States Supreme Court defines monopoly power as the “Power to control prices and exclude competition.”

The legal test to see if a company or business entity is unlawfully using monopoly power was set up in the Supreme Court case of United States vs. Grinnel Corporation. The test is simple: If the monopolist is indeed in the possession of a monopoly of power in an industry, and it is willfully using its market share to influence the industry then, according to the courts, the company would be exerting illegal monopolistic power. In effect, it’s OK to be a monopoly, but if you start to act like one, you are in violation of the law.

Y’all with me so far?

The reason this law was put into effect was to prevent one company from getting a strangle hold on one industry and driving out the competition. The government has actively sought to prevent monopolies from driving their competition out of business. Standard Oil was broken up into daughter companies to open up the oil industry. So was AT&T to open the communications industry. These are just two of many companies which have been disbanded due to their strangle holds on their particular industries.

So, now we find Microsoft in federal court. The Department of Justice is seeking to prove that Microsoft has illegally exerted its monopolistic power to dominate the computer industry.

And, surprisingly enough, Microsoft’s executives have been their own worst enemies.

The Department of Justice’s case is centering on a few key points. First, they have established that Microsoft’s Windows operating system is on over 90% of the home computers in America. Before Windows, another Microsoft product, DOS, ruled the roost as well. Based on the Grinnel test, yes, Microsoft does and has had a substantial domination of the home computing operating system market. So, part one has been satisfied.

Now, here’s where the fun begins. The Department of Justice has to prove the second part of the Grinnel test, which is that Microsoft has sought to exert control over the pricing and to exclude competitors. And, it would seem that Microsoft’s top brass is doing everything they can to sink their own case.

You see, from the evidence presented in court, Microsoft’s executives seem to have acted like bullies and thugs. And, they have proven to be witnesses which haven’t really deserved any sympathy.

For example, Avie Tevanian recounted a story about his contact with Microsoft exec Eric Engstrom regarding the Apple-developed QuickTime technology. Apple had hit on a winner with QuickTime. The only problem was that Microsoft had been working on a multimedia technology of their own called ActiveX. Now, Microsoft has been working for a long time to wrest control of many aspects of the computer market, and a company which was having success with something not compatible with their product ruffled a few feathers.

So, Eric Engstrom allegedly fired off a few e-mails to Dr. Tevanian strongly suggesting that Apple get QuickTime into line, or else...

Or else what?

Well, as much as we Mac fans love to poke fun a Bill Gates and the Redmond crowd, Microsoft is the largest manufacturer of software for the Macintosh. The implied threat was simple: keep doing what you are doing, and we’ll pull the plug on our Mac software.

This pattern of intimidation has played out more than once, and to other companies besides Apple. Microsoft has bullied Netscape. Microsoft has bullied RealNetworks. Microsoft has bullied the hardware manufacturers to load only Windows on their computers. Microsoft has bullied these companies around because they have a monopoly, and they are using that monopoly to their advantage. The evidence seems to suggest that the second part of the Grinnel test is proven as well.

The amazing thing about this case is that every Microsoft witness, from the Vice Presidents in charge of specific areas of development, all the way up to Bill Gates himself, have been surly, combative, and have made it possible for the Department of Justice to solidify its case. You would figure that Microsoft, with all of its billions of dollars, would hire a slew of attorneys to better prepare their executives for the government’s cross examination.

Instead, U.S. District Judge Thomas Penfield Jackson, the judge hearing the case, has physically demonstrated his disgust and frustration with the antics of the Microsoft executives. Judge Jackson has thrown his head back and stared at the ceiling during witness testimony. He has interrupted attorney questioning to get in a few jabs at the witnesses as well. And, you just have to know, when you are on trial, you don’t want to make the judge angry. Heck, I had to appear before a traffic judge when I was 17 years old and knew this basic rule of the courtroom.

So, where do we go from here? The Department of Justice may be able to do what no other software company, Apple included, has been able to do. I have a sneaking suspicion that Microsoft is going to be found guilty in this case—which would mean that you could add Microsoft to the list of companies broken into pieces after becoming and acting like monopolies.

And, then, I ask you, who’s gonna be doing the laughing then?

“Apple Cider” is Copyright © 1999 by Tom Iovino, tiovino@atpm.com.

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