For Microsoft the good news in the Appeals Court decision on the US
vs Microsoft case is that it will not be broken up for now, and
that it will never have to face Judge Thomas Penfield Jackson in
court again. The bad news is that the court confirmed Microsoft has
a monopoly with Windows, and it repeatedly violated the Sherman Act
to maintain that monopoly.
Or to put it another way, the execution is off and a new judge will
pass sentence, but the defendant is still guilty.
Relief in Redmond? Yes, and there should be. But there should be
concern, too. Microsoft has been branded a monopoly, which changes
the rules.
From now on, Microsoft will have to tread more carefully.
Monopolies don't have the same flexibility as other companies.
Monopolies have to justify their actions in terms of competition.
The Appeals Court decision is riddled with the phrase "Microsoft
offers no pro-competitive justification" for its actions. From here
on in, "pro-competitive justification" is exactly what Microsoft
will need - every step of the way.
That may not be easy. The appeals court ruled that Microsoft broke
the law with some of its Windows reseller licence restrictions,
exclusive contracts with Internet service providers and agreements
with other software vendors to use Microsoft's version of Java.
These deals were standard business practices for Microsoft. They'll
have to change.
The Appeals Court also said Microsoft's exclusive browser deal with
Apple broke the law, and so did the way Microsoft pressured Intel
to stop supporting Java. Microsoft has been playing that kind of
game for 25 years. From now on, it will not be able to.
But the thing that should concern Bill Gates, Steve Ballmer and
Microsoft's rank and file the most is that the Appeals Court
decision finally answers the question of whether the courts can
tell Microsoft how to design products.
Short answer: Yes.
More accurately, the courts can tell Microsoft how it cannot design
products.
Mixing the code for Internet Explorer and Windows is illegal, the
court said.
So is excluding Internet Explorer from the Windows Add/Remove
Programs utility, according to the court.
And failing to disclose that its version of Java would create
Windows-only Java applications was illegal too, the court said.
The appeals court is not just specifying what Microsoft can and
cannot do in software design, but in its documentation, too.
All this because Microsoft is a monopoly.
Which means that Microsoft's competitors will now be able to do
things Microsoft cannot. They will be able to cut certain contracts
and offer certain deals that, if Microsoft did the same, would be
illegal.
Microsoft's competitors will now have more flexibility in designing
their products than Microsoft, and will be able to compete in ways
Microsoft cannot.
And if Microsoft's competitors sue for illegal anti-competitive
behaviour, they'll have an easier time now because, as a monopoly,
Microsoft has to meet much more stringent standards of behaviour.
Will Microsoft make the necessary changes? The months to come will
begin to answer that question. We have all seen Microsoft on its
best behaviour, in the days immediately following the original
trial. There is no real doubt that Microsoft can play according to
the new rules it faces and meet the new monopolist's standards for
its products and its behaviour.
Whether Microsoft will meet those standards, or will fight them
every step of the way, will impact the lives of users, competitors
and whole IT business for years.