Microsoft Case Research Articles

Political Perspective on Technology Alliances – the Case of Microsoft and Google

The article presents technological alliances as political activities, helping establish coalitions, co-opt supporters and eliminate rivals. Using the example of Microsoft’s and Google’s partner ecosystems, it discusses specific partnership techniques and their relevance for technology companies. The article offers a rich picture of developments of Microsoft Windows and Google Android platforms, combined with the steps taken by both companies to ensure support from partner firms. The effectiveness of financial, marketing and technological incentives as well as of deterrents depends on expected outcomes (such as: decreasing transaction costs, creating lock-ins, stimulating innovativeness or restricting development of competitive products) and technology life cycle stages. The article helps shape partnership strategies and optimize investments, needed to motivate and control partners.

Excessive Pricing: The Flaws of 'Tea Party' Competition Policy

Since the adoption of the Guidance Communication in 2009, the Commission has kept exploitative abuses— and in particular excessive pricing cases—in a state of artificial hibernation, and focused on exclusionary cases as a matter of enforcement priority. The Commission’s small antitrust policy against exploitative abuses is predicated on ‘Tea Party’ competition economics: in the long term, high prices are presumed to deliver efficient outcomes, and competition enforcers risk doing more harm than good in trying to improve market outcomes. Tea Party competition gurus are, however, wrong on three counts. First, they are wrong on the theory. Contrary to the ominous suspicion that competition agencies fiddle with excessive pricing laws to tax dominant firms’ profits and achieve distributional transfers, there is a sound conceptual basis to justify the control of dominant firms’ excessive prices. Take a monopolist charging excessive prices in market A. With this, the monopolist dries up demand in neighbouring markets (B, C, D, etc.). But the monopolist also dries up a range of unrelated markets (W, X, Y, Z) which include all the markets where customers purchase goods/ services. For instance, a customer faced with surging oil prices will purchase lower quantities of milk, cereals, fruits, etc. (assuming finite resources). As a consequence, the monopolist’s pricing policy on market A thus forecloses—possibly unwillingly—sales opportunities for other producers on a range of markets. In turn, this may force out a number of firms from those markets, increase concentration, decrease entry opportunities and eventually harm consumer welfare. Competition authorities should thus pay attention to the foreclosure effects that arise on ir-relevant markets. Second, Tea Party competition enthusiasts are wrong on the practice. In particular, the assertion that excessive prices cannot be objectively determined is not persuasive. Most of us have, for instance, noticed that the price of competition law conferences, books, or subscriptions has reached insanely high levels. And beyond such personal experiences, policy makers at all levels routinely consider that some prices are excessive, and craft policy decisions on this basis. This occurs, for instance, in all markets where States facilitate the purchase of high price products with subsidies (for instance, pharmaceutical products) or discourage the purchase of low priced products with taxation (for instance, cigarettes). Last but not least, firms themselves often recognize that their prices are excessive. This is aptly illustrated in markets where firms engage in price discrimination (and thus slash some of their prices), in order to serve additional categories of customers with low reservation prices. Of course, the remaining issue is of a methodological nature. It boils down to devising a standard of price excessiveness that ensures economic efficiency. But as in other legal disciplines (e.g. risk regulation), the absence of a ‘silver bullet’ evidentiary method—or the existence of several methods with intrinsic limitations—should not hinder the enforcement of the law. Rather, the sole admissible limitation is that in such areas where legal standards are blurred, competition agencies should not inflict sanctions on non-compliant firms. This issue is at the heart of the Microsoft case currently pending before the EU courts. Third, Tea Party scholars and practitioners are wrong from an institutional perspective. Often, opponents of Article 102 (a) TFEU resort to scaremongering, suggesting that the application of excessive pricing doctrines would open the floodgates to litigation, with angry customers clogging up courts and competition agencies with requests to change the price

Tying Law in Microsoft I and II: The Secret Art of Magic?

This paper seeks to uncover an inconvenient truth. The Microsoft decisions are not tying cases. Rather, the two decisions taken by the EU Commission against Microsoft – i.e. the Windows Media Player (“WMP”) case of 2004 and the Internet Explorer (“IE”) case of 2009 – mark departures from conventional tying analysis (I). First, they deviate from standard tying law in that in the Microsoft cases, a key component of abusive tying, namely coercion, is missing (II). Second, the Microsoft decisions share many analogies with “essential facility” cases. One may thus question to what extent the Commission has not pursued disguised refusal to supply cases (III).

모바일 플랫폼 중립성의 개념 정립

FCC announced Network neutrality guideline last year. There were a big debate between the Democrats nominated commissioners were on the same side with the chairman who is supportive on the rule making on favor of Network neutrality. Network neutrality, in other words Internet neutrality is a principle which advocates no restrictions by Internet service providers or governments on consumers’ access to networks that participate in the internet. Specifically, network neutrality would prevent restrictions on content, sites, platforms, the kinds of equipment that may be attached, or the modes of communication.BR Verizon wireless becomes the first case. A media reform group named Free Press complained to the Federal Communication Commission June 2011 that the wireless service provide is violating FCC guidelines by preventing users from using third party tethering Apps.BR The Wireless internet network becomes the center of neutrality turmoil after the Comcast case by Court. This case has close relationship with the platform operator like Google. Google was the strongest lobbying group to take the net neutrality. Now the platform matters.BR In this article, I try to define the concept of platform neutrality by analysing the features of platform related ecosystem and how the innovation in that context is to be developed has to be awarded by the regulator. Considering the two-sided market feature of the internet based services, cross leverage effect newly coined word by myself has to be studied thinking of the Microsoft case early 2000.

Article 82, Sector-Specific Regulation, Microsoft and Telefonica: Really a New Economic Understanding of Abusive Practices Under EC Law?

Article 82 of EC Treaty prohibits any abuse by one or more undertakings of a dominant position; the examples contained of “abuse” reflect a variety of public policies that have led European antitrust authorities in several directions simultaneously, indicating also a highly regulatory policy of control of the adverse effects of market power in the EU. The lack of guidance in this field both for undertakings and enforcers led the European Commission to issue in 2005 the well known Discussion Paper on exclusionary abuses; although also announced, a further notice on the so-called exploitative abuses is still waited. Besides, a more economic approach to abusive practices is preached from virtually all the communitarian instances. However, two recent decisions - the fine imposed in July 2007 to Telefonica for practicing excessive prices in the form of margin squeeze in the broad band market in Spain, and the confirmation in September 2007 by the Court of First Instance of the fine imposed to Microsoft in 2004 for two allegedly anticompetitive practices (tying and refusal to supply) - suggest that this new economic understanding is either still forthcoming or not yet understood as such by everybody.In this paper we take all this considerations into account when analyzing two features of the current understanding of abusive practices under EC law. First, the evolution from early decisions finding excessive prices and refusals to deal - which were mostly vertical in nature - to the latest pronouncements show a shift to horizontal effects. In addition to it, the ex ante regulation of certain industries - e.g. telecommunications - has certainly altered the way in which antitrust ex post intervention is conducted. Both phenomena are illustrated respectively by the Telefonica and Microsoft cases, and need to be assessed under the new economic approach to Article 82 practices.

“High-Tech” Antitrust: Incoherent, Misguided, Obsolete, or None of the Above? Comments on Crandall-Jackson and Wright

That prominent antitrust cases have been in the “high-tech” arena is not surprising, since high-tech industries are often susceptible to the scale economies that lead to highly concentrated or monopoly markets. Crandall and Jackson’s observations on the IBM case are on point. Regarding AT&T, the salient observation is that recent changes in legal doctrine may make it impossible to bring antitrust cases in regulated industries. The problem with the Microsoft case was not that it was right or wrong, but that it was fundamentally incoherent. Wright’s critique of the Federal Trade Commission’s case against Intel is problematic because buyers in exclusion cases tend to be better off, not victims as they would be under collusion or anticompetitive mergers. As these observations apply more generally to cases in sectors that are not associated with high-tech, I offer a few thoughts on some antitrust issues that are particular to high-tech sectors, specifically how the prospect of innovation could affect market definition in merger cases and, more broadly, whether dynamic efficiencies reduce the need for antitrust enforcement.

Abuse of dominance by high technology enterprises: a comparison of u.s. and e.c. approaches

This paper compares how the United States and the European Community dealt with competition policy challenges by two firms operating at the frontiers of technology: Microsoft and Intel. The U.S. Microsoft case was broadly targeted but largely unsuccessful in implementing remedies once violation was found. The European case was more narrowly focused, failing in its media player unbundling remedy but fighting hard to implement its interoperability information remedy. The European case on Intel was also tightly focused, leading to the highest fine in E.C. competition policy history and a mandate to avoid quantity-linked rebates. The newest U.S. settlement regarding Intel poses difficult monitoring problems with respect to its ambitious claim for remedies. The paper ends with critical comments on E.C. adjudication procedures.

EU Competition Law Policy versus Intellectual Property Rights: A Study of the Microsoft Case

The constant tension between intellectual property rights and competition policy has recently culminated in the Microsoft case. This article examines the tests applied by the European Commission and CFI in finding Microsoft’s behaviour tantamount to the abuse of dominant position – are those tests precise and easily applicable, do they result in legal certainty, and do they only result in more competition in the short term, while having far-reaching consequences on the exercise of IPRs? In particular, this article examines the requirements of indispensability and new product in the part of the case concerning the interoperability issue, but also analyses the Commission’s assessment of the two separate products element of the test applied in the part of the judgement concerning tying. Finally, the article stresses the need to establish new or redefine the present tests in judging whether the behaviour of a dominant undertaking amounts to the abuse of dominant position.

APPLICATIONS BARRIER TO ENTRY AND EXCLUSIVE VERTICAL CONTRACTS IN PLATFORM MARKETS

I. INTRODUCTION Exclusive contracts in vertical relationships feature prominently in antitrust cases in network industries. At issue are contracts a firm with market power signs with its suppliers or buyers that may limit access to the market by its rivals. We focus on the case in which the firm signs exclusive contracts with upstream suppliers. For example, in the 1980s developers of games for Nintendo's video game console agreed not to provide any titles for other platforms (Atari v. Nintendo). (1) In U.S. v. Microsoft, the dominant software provider was charged with abusing its monopoly power in its contracts with Internet content providers and independent software developers, with the goal of excluding competitors to Microsoft's Internet Explorer browser. (2) Exclusive contracts such as these are an example of vertical restraints, an area in law and economics that has generated as much controversy as any. We examine the impacts of exclusionary contracts between hardware manufacturers and software providers in the home video game market. An important feature of the market for video game consoles is indirect network effects (Katz and Shapiro 1985), whereby the consumer valuation of the primary product (the console, or platform) increases with the number of complementary goods available (gaming software). If platform providers enjoy indirect network effects, then each may want to prevent suppliers of its complementary good from also supplying competing platforms (Evans 2003; Regibeau 2004). When a dominant platform provider and the producers of the complementary goods sign such exclusionary contracts, they burden competing platforms and potential challengers with producing the complementary goods themselves or finding alternative suppliers, which may raise rivals' costs and can diminish competition (Brennan 2007). This is the applications barrier to entry at issue in the Microsoft case. Foreclosure of competitors can result (Armstrong and Wright 2007). Whether survival of a single dominant platform is inefficient or to the detriment of consumers depends on the size of duplicated costs among platforms, the heterogeneity of consumers' preferences among platforms and among the complementary goods, and other factors. We focus on estimating, determining the causes of, and exploring the implications of indirect network effects for exclusively and nonexclusively provided games. Exclusive titles are those games that can only be played on one system, because the console producer either created the game itself or negotiated an exclusive contract with a video game maker. We examine the sixth-generation videogame console market, which comprises Nintendo's GameCube, Sony's PlayStation2, and Microsoft's Xbox, and uncover an interesting finding: although we find strong indirect network effects, and a large impact of exclusivity on rivals' console demand when most games are nonexclusive, the marginal exclusive game contributes virtually nothing to console demand. Exclusivity helps a firm establish market share at first, but beyond a certain point additional locking up of software supply no longer hurts rivals. Consequently, there is no ability to capture ever more console consumers through locking in an increasing supply of exclusive games. Such capture of the whole market is often assumed in discussion or derived in theoretical models of the video game industry in specific or platform markets in general. By itself, a finding that exclusivity does not affect console demand on the margin does not necessarily imply that there is no consumer harm, for with heterogeneous game quality it may be that a console maker need only lock in the best games to harm the rivals' ability to compete. However, our investigation suggests that exclusionary contracts did not hurt consumers, because of two important features of the videogame market. The bargaining power enjoyed by the best software providers, coupled with the existence of blockbuster games that enable competitors to establish market share, prevents the foreclosure of rivals through exclusive contracting suggested by some models (Armstrong and Wright 2007). …

A Critical Appraisal of Remedies in the EU Microsoft Cases

We discuss and compare the remedies in the two cases antitrust cases of the European Union (EU) against Microsoft. The first EU case alleged (i) that Microsoft illegally bundled the Windows Media Player (WMP) with Windows; and (ii) that Microsoft did not provide adequate documentation that would allow full interoperability between Windows servers and non-Microsoft servers as well as between Windows clients and non-Microsoft servers. After finding Microsoft liable and imposing a large fine, the EU imposed as remedies the requirements on Microsoft (i) to sell a version of Windows without WMP (Windows-N); and (ii) to publish and license interoperability information. Windows-N was a commercial failure, and there has been only limited cross-platform server entry. In its second investigation of Microsoft, the EU alleged illegal tying of Internet Explorer (IE) with Windows. The EU settled with Microsoft with Microsoft undertaking the obligation to ask (through compulsory Windows updates) consumers whose computers have Internet Explorer pre-installed to choose a browser from a menu of competing browsers. Thus, the EU imposed quite different remedies in the two cases: an unbundling remedy for the WMP but a close to a must-carry requirement for IE. We analyze and compare the different approaches.

MICROSOFT AND THE LIMITS OF ANTITRUST

Frank Easterbrook's 1984 article, The Limits of Antitrust, did not focus on public antitrust enforcement. Nevertheless, it expressed the kind of antitrust thinking that led the Antitrust Division of the U.S. Department of Justice, around the same time, to shift its resources to cartel prosecutions and away from big monopolization cases. The Microsoft case, filed in 1998, broke this pattern. I argue that the Division made this exception, and ultimately achieved a partial victory in the courts, because the relatively new economic theory of network effects seemed to make the filters Easterbrook proposed in 1984 less applicable in high technology markets like the ones in which Microsoft competed. In this article, I return to Easterbrook's filters and consider whether they offer a different perspective on the Division's decision to sue and the courts' eventual resolution of the case.

The Microsoft Case as a Political Trial

The Microsoft Case as a Political Trial

The Quest for Appropriate Remedies in the Microsoft Antitrust EU Cases: A Comparative Appraisal

The Microsoft cases in the United States and in Europe have been influential in determining the contours of the substantive liability standards for dominant firms in US antitrust law and in EC Competition law. The competition law remedies that were adopted, following the finding of liability, seem, however, to constitute the main measure for the “success” of the case(s). An important disagreement exists between those arguing that the remedies put in place failed to address the roots of the competition law violation identified in the liability decision and others who advance the view that the remedies were far-reaching and that their alleged failure demonstrates the weakness of the liability claim. This study evaluates these claims by examining the variety of remedies that were finally imposed in the European Microsoft cases, from a comparative perspective. The study begins with a discussion of the roots of the Microsoft issues in Europe and the consequent choice of a remedial approach by the Commission and the Court. It then explores the effectiveness of the remedies in achieving the aims that were set. The non-consideration of the structural remedy in the European case and the pros and cons of developing such a remedy in the future are briefly discussed before more emphasis is put on alternative remedies (competition and non-competition law ones) that have been suggested in the literature. The study concludes by discussing the fit between the remedy and the theory of consumer harm that led to the finding of liability and questions a total dissociation between the two. We believe that it is important to think seriously about potential remedies before litigation begins. However, we do not require an ex ante identification of an appropriate remedy by the plaintiffs, since this could lead to underenforcement or overenforcement.

EU의 지적재산권의 보장과 경쟁법상의 제문제 : EU 마이크로소프트 사건을 중심으로

EU의 지적재산권의 보장과 경쟁법상의 제문제 : EU 마이크로소프트 사건을 중심으로

Real Knowledge is to Know the Extent of One's Own Ignorance: On the Consumer Harm Approach in Innovation-Related Competition Cases

Modern economics advocates an assessment of competition law cases in light of the effects of firm conduct on the relevant market. In many instances, law enforcers and also firms that have to assess the legality of their business models in advance will often have to predict the “likely” effects in the future. This obviously creates a problem of uncertainty. This article reviews this problem for the assessment of competition law cases in innovation-related markets. Thereby, three specific sets of cases are discussed: (1.) the GlaxoSmithKline cases in Europe, where the question was whether R&D intensive pharmaceutical companies should be allowed to restrain parallel trade between Member States in order to enhance their ability to invest in innovation, (2.) the European Microsoft case, and (3.) “pay-for-delay” settlements of patent litigation proceedings that involve a so-called “reverse payment” by the patent holder to the generic drugs producer for delaying the market entry of the generic drug. Thereby, the article aims to identify the most appropriate standard of liability against the background of the problem of uncertainty. It rejects the consumer harm standard which is accepted by the courts in the U.S. and traditionally rejected by the EU courts in favor of a concept of protecting the process of dynamic competition which focuses on the elements of rivalry, openness of the market, and consumer choice.

Beyond 'Essential Facilities': Innovation, Intellectual Property and Competition Policy Across the Atlantic

Beyond 'Essential Facilities': Innovation, Intellectual Property and Competition Policy Across the Atlantic

Wintel Under the Antitrust Microscope: A Comparison of the European Intel Case with the U.S. Microsoft Cases, Updated as of May 12, 2009

European Union has issued a statement of objections, and a supplemental statement of objections, to Intel regarding the company’s conduct aimed at suppressing competition from Intel’s chief rival, AMD. Although the statements of objections remain confidential, the allegations in AMD’s private litigation are public and provide a useful basis for analysis. Intel dominates the PC chip market almost to the same degree that Microsoft dominates the PC operating system market. As in the Microsoft case, Intel’s aggressive marketing tactics prevented OEMs from offering rival products to consumers. And like Microsoft, Intel has engaged in this conduct to maintain its existing monopoly. These parallels between the Microsoft and Intel suggest that Intel’s anticompetitive practices harm consumers, including American consumers, by denying them the access to innovative products at lower prices from rivals. The United States established that Microsoft repeatedly and willfully violated the antitrust laws, but failed to achieve an effective remedy. The EU, however, should have an easier time achieving an effective remedy. First, unlike the OS market, a viable competitor still exists in the chip market, i.e., AMD. Second, Intel has relied primarily on exclusionary rebates, not commingling of intellectual property, to maintain its monopoly. Consequently, the EU should be able to fashion a remedy that does not require Intel to redesign its product.

Article 82 EC as Remedy to Patent System Imperfections: Fighting Fire with Fire?

It has been a well-established principle of EC competition law that there is no inherent conflict between competition laws and intellectual property laws. However, there are indications that this view is coming under pressure. The European Commission’s pharmaceutical sector inquiry has identified a toolbox of practices engaged in by originator firms, which allegedly aims at hindering or delaying generic entry or competition from other originators. A number of these practices involve the strategic use of patents. As sector inquiries aim at giving effect to Articles 81 and 82 EC, the Commission’s preliminary findings raise the question whether strategic patenting engaged in by dominant firms is caught by Article 82 EC and, if so, in what circumstances. This article discusses these questions in light of the existing case law on the application of Article 82 EC to refusals to license intellectual property rights, in particular the Microsoft case, which has extended this case law to patents. The article discusses in particular whether practices involving patent clustering, secondary patenting, and defensive patenting may be caught by Article 82 EC.

Ex ante identification of disruptive innovations in the software industry applied to web applications: The case of Microsoft's vs. Google's office applications

This paper analyzes the question whether web applications pose a disruptive threat to incumbents or a disruptive growth opportunity for entrants in the application software industry using a novel method for ex ante identification of disruptive innovations in the software industry. Building on the theory of disruptive innovations, network effects and existing frameworks for the ex ante identification of disruptive innovations a new method of analysis is deduced. The analysis is based on a list of criteria that indicate a disruptive innovation and trajectory maps of the technologies' performance attributes. This method is applied to study the potential disruption of Microsoft's desktop office applications by Google's web-based office applications. The chosen method of analysis indicates a small likelihood for web applications to pose a disruptive threat to Microsoft, and by extension, to incumbents in the software industry. While web applications show a potential to satisfy market demand in established performance attributes, strong network effects in existing software products should give incumbents enough time to co-opt the innovation. The case illustrates how our new method to analyze disruptive potential in the software industry ex ante can help to apply the theory of disruptive innovation better for forecasting purposes and to provide novel strategic insights for the players involved.

Dynamic Inefficiencies of Intellectual Property Rights from an Evolutionary/Problem-Solving Perspective: Some Insights on Computer Software and Reverse Engineering

This interdisciplinary paper focuses on an evolutionary and problem-solving approach to intellectual property rights in order to discuss some controversial issues in the European legislation on computer software and in some recent competition law case (e.g. the Microsoft case). Given such claims, we argue that a standard “Coasian” approach to property rights, designed to cope with the externalities of semi public goods may not be appropriate for computer software, as it may decrease both ex-ante incentives to innovation and ex-post efficiency of diffusion. On the other hand the institutional definition of property rights may strongly influence the patterns of technological evolution and division of labour in directions which are not necessarily optimal. Taking the European legislation on computer software and some recent competition law cases as an example, this paper intends to show that a more careful balancing of costs and benefits, both in static and dynamic terms should be suitable for a pro-innovation IP regime and competition policy.