Restraints on technology advances

The US Antitrust Division’s new case against Microsoft and the Federal Trade Commission’s new case against Intel focus on restraints on technology advances. In both cases, the government’s attorneys allege that the company charged with anticompetitive conduct has abused its dominant market position to extend its monopoly power from a first market to a second market. They also allege that part of the anticompetitive market-extension conduct involves hindering or suppressing other companies’ technological innovation. In the Microsoft case, the Antitrust Division contends that Microsoft is abusing its economic monopoly power over the Windows PC operating system to acquire a further monopoly or monopolies in related markets. The first monopoly is based largely on copyright, which prevents other companies from simply appropriating the Windows operating system or using it in a way contrary to Microsoft’s license agreements. The license agreements themselves limit computer manufacturers (OEMs) from differentiating their computer systems from each other and cutting their own deals with electronic commerce vendors. If Microsoft would let them, the OEMs would provide their respective customers with a choice among different OEMs’ different “front doors” (opening screens and interfaces). The OEMs would also like to cut their own deals with vendors in markets where Microsoft has contracts with “partners” to build direct access to them into the Win 98 front door. Like Henry Ford who told customers they could have their cars any color they wanted as long as it was black, Microsoft tells computer OEMs to give customers any front door they like as long as it’s the Microsoft standard format. A further issue in this antitrust case is Microsoft’s effort to supplant Netscape in the browser market (discussed in the Nov.-Dec. 1997 and Jan.-Feb. 1998 Micro Law columns). In the Intel case, the FTC contends that Intel is abusing its economic monopoly power over X86 microprocessor chips or a high-performance subset of them. The FTC says that Intel is exploiting this power to maintain the first monopoly and/or to acquire a further monopoly in related hardware markets. Intel’s first monopoly is based largely on two things. The first is Intel’s patents, which prevent other companies from simply cloning X86 microprocessors. The second is technical information about X86 “interrupts” and other microprocessor features that companies need to know about to make their products compatible with the all-pervasive X86 chips. The related hardware market appears to be a workstation (high-performance PC) market or boards (such as graphics boards) for use in workstations. The FTC’s later-filed Intel case is in many ways more interesting than the Antitrust Division’s current Microsoft case. The FTC’s case raises more unusual questions. It specifically addresses a practice that Microsoft also uses, that the current Antitrust Division case fails to challenge. The practice is depriving other parties of needed technical information unless they comply with restrictive demands. In Microsoft’s case, this has involved API manipulation and denial of information about APIs (see Micro Law, Jan.-Feb. 1998, pp. 83-84) to stymie applications software competitors. (The Antitrust Division does not seem to be pressing a challenge to this.) The FTC’s complaint against Intel zeroes in on several incidents in which Intel sought to blackjack other companies into turning over to Intel their intellectual property rights in their technology. Intel threatened to deny needed technical information about X86 chips to coerce the other companies.