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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: E. T. who wrote (43721)	4/28/2000 12:40:00 PM
From: rudedog	Read Replies (2) \| Respond to of 74651

E.T. - re: What was the illegal part then? Hmmm... pretty big question... and the complexity of the answer is one of the reasons that the "remedies" cover such a broad range. But let's first cover what was "not" illegal, since it will serve to clear the air. MSFT's contract practices were not illegal. It is perfectly permissible to have different prices for different customers, as long as the rules make business sense and are applied in an unbiased way. For example, offering a discount based on volume, or offering discounts based on delivery commitments. To avoid having any appearance of bias in those discount arrangements, it is wise to publish a schedule, as Intel does. MSFT publishes such a schedule for Select, DSP and MOLP licenses but did not for OEMs. I assume they will publish OEM volume discount schedules now. But not publishing the schedule does not make the practice illegal, it just means a little more work to document what was done if questioned, as in this case. It is not illegal to offer bundles of products. If the bundles are designed as specifically anti-competitive attacks to leverage a monopoly position, then the practice is known as "tying" and is illegal for a monopoly, although not for any other company. MSFT was found to have NOT violated the tying provision. "Exclusionary or restrictive" contracts. A contract which directly works in restraint of trade for a competitive product is illegal in some circumstances. This was the primary focus of the 1995 consent decree. MSFT contracts since that time were found to be neither exclusionary nor restrictive. So the findings were based not on violations of contract law but rather on a "pattern of behavior", kind of like the RICO act... this is of course harder to prove, which is why the details are muddy, and why, if MSFT did engage in that "pattern of behavior", MSFT felt they could probably get away with it. My personal opinion is that MSFT did in fact go close to the line in almost every case and over the line in some cases as far as pressuring their customers to favor MSFT over real and potential competitors. But the reality of the market is that every successful company does this to some extent. It is partly a matter of degree - how often do the practices approach the edge of unacceptable behavior, and how "unacceptable" is the behavior. It is also OK for a company which has no monopoly position to go a lot farther than a company which is a monopoly, which is probably where MSFT screwed up. The culture and behaviors which made them the dominant desktop provider were necessary when they were the underdog, but needed to change as they became more dominant.