Anti-trust Proceedings

Anti-trust Proceedings

At present, Microsoft are being hassled by the US Justice Department over the tight integration of their Internet Explorer browser into the Windows operating system. The argument here is that Microsoft are forcing PC buyers to use their browser by including it as an integral part of the operating system and making it difficult for the competition, ie. Netscape. Whilst a market monopoly is not technically illegal, the way in which it is managed can be.

In addition to integrating Internet Explorer into Windows 98, Microsoft have also come under scrutiny for their licensing policies with OEMs. Some large PC manufacturers have been supplied with Windows on the understanding that they install Internet Explorer and no other browser. I doubt that anyone (except Microsoft themselves of course) would argue that this is not a slightly underhand practice and against the interests of the buying public. Without competition, there is no choice for customers and no incentive for the company to produce quality merchandise or price their product reasonably.

The anti-trust law being used to tackle Microsoft is the same one used to break up Rockefeller’s monopoly of the American oil business in 1911. The Sherman anti-trust law, as it is called, was designed essentially to allow innovation and protect the best interests of the economy in the long run. If Microsoft lose the initial injunction, they will be forced to remove Internet Explorer from Windows 98 or have PC manufacturers install Netscape as well, thus providing a choice for the user. Microsoft claim that the former option is not possible, which leaves customers with even larger volumes of pre-installed bloatware.

Next in the firing line are Intel, the company who made the IBM PC and compatibles possible. Intel produce some 85 percent of the processors used in PCs and are being accused of abusing their dominant position to stifle rivals.

In November 1997, workstation manufacturer Intergraph filed a case against Intel accusing them of patent infringement and withholding technical information. Intergraph were granted a preliminary injunction against Intel to provide them with the same technical information as other manufacturers. Additionally, Intel became involved in a dispute with Digital Equipment in which they were accused of threatening to cut off chip supplies. These cases prompted the Federal Trade Commission to consider a broad-based cased to investigate Intel’s pricing and technology strategies.

Reading this, one might think that big brother was justified in pursuing these companies, but I think not. Whilst there are clear arguments for preventing what can only be described as corporate malpractice, I question what is achieved by forcing a company to withdraw, or limit the functionality of, a product. If the competition are unable to compete in the marketplace, there is usually a reason for this: one product is better than the other. In the case of Microsoft Internet Explorer vs. Netscape Navigator, I certainly consider this to be the case - Internet Explorer is a clear winner here. Netscape’s support for DHTML is virtually non-existant, and its stability leaves a lot to be desired. The only saving grace of Netscape is its interface; I think the buttons look better.

There was talk of more competitive pricing in the UK for Windows 98. Currently the recommended retail price is around the £85 mark, but this translates to around £69.99 inc. VAT in even the more expensive sources such as Dixons. A price of around £30 was suggested, but clearly Microsoft has had to change its mind on this issue. The reason for this is unclear, but could possibly be due to the prospect of large fines from the DOJ and the need to recoup IE4 development costs. If Windows 98 is likely to be "banned", then obviously it is in Microsoft’s best interest to take as much revenue from sales as possible, whilst it can. So the threat of legal action may have contributed to the high price of Windows 98, one key anti-trust issue.

Intel has resolved the issue with Digital Equipment, mainly by purchasing their chip production facilities and agreeing to continue development and licensing of Digital’s chip technology. On balance, there is no question of lack of competition for Intel. Both Cyrix/IBM and AMD offer serious alternatives to Intel’s Pentium II and Celeron lines, but are much less expensive. Intel’s Celeron is nothing but a huge mistake, a desperate attempt on Intel’s part to reclaim some of the sub-$1000 PC market. The lack of on-chip cache means that the Celeron is much slower than an equivalent Pentium II. In fact, an average Celeron 266MHz can be outpaced in some applications by a standard Pentium 200MMX. Cyrix/IBM claim that their 6x86MX chips are up to 25% faster than equivalent Celerons and are even match for similarly specified Pentium IIs. AMD offer similar products and have recently introduced the K6-2, which includes their 3DNow! Technology, which increases throughput of floating point instructions in much the same way as MMX speeds up integer performance. Microsoft are to include support for 3DNow! in DirectX 6.0, which should secure the future of 3DNow! and make it a greater success than MMX.

My conclusion is simple. If a company such as Netscape are unable to compete, then why should the successful market leader be forced to make concessions to give the competition a chance? This is mainly what the situation boils down to. As for pursuing Intel, this now seems completely unnecessary especially as the main issues are now resolved. Intel have dug their own grave in the budget PC market, with their pricing strategies and the launch of the unfortunate Celeron. The question then arises about where to draw the line, with Microsoft also facing the prospect of similar legal action over other products such as Office. As Microsoft themselves argue, a judgement against them would stifle innovation and be against the interests of the economy in the long run. This is the very thing that the Sherman anti-trust law was designed to protect.