What Facebook, Google and Others Can Learn From Microsoft’s Antitrust Case | WSJ
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What Facebook, Google and Others Can Learn From Microsoft’s Antitrust Case | WSJ

– [Narrator] In the summer of 2019, the United States put Silicon
Valley in its crosshairs. – Only a small number of
the nearly two billion apps in the app store are made by Apple. – We have rolled out many
innovations over the course of the history of our product. – For every $3 of
advertising spent online, a business would have to spend
an equivalent of $5 offline to get equal prominence. That is a tremendous savings
for the U.S. economy. – [Narrator] To some,
these hearings recall another major antitrust
case, a showdown between the Justice Department and Microsoft. The year was 1998. Microsoft controlled more than 90% of the PC operating systems market. At the heart of the
case was a new product, the Internet Explorer web browser. Prosecutors argued that
Microsoft used its market power to stifle the growth
of competing browsers. At the time, many computer networks relied on software from Microsoft. This gave the firm lots
of power and influence. Today, leaders from Facebook,
Amazon, Google, and Apple are studying big cases like Microsoft to prepare for their scrutiny. Here’s what they could learn
from watching Microsoft’s case. Lesson number one, how not to
counter an antitrust probe. Ahead of the trial the
Justice Department deposed Microsoft’s CEO, Bill Gates. – [Questioner] Mr.
Gates, when did you first become concerned about
the competitive threat that Netscape posed to Microsoft? – Bill Gates’ behavior, his
body language, is contemptuous. – The product that didn’t
include Internet Explorer was called the Windows 95 upgrade. – [Kovacic] Arrogant. – IS that the full
breadth of your question? – And evasive. The Department of Justice
played pieces of that video in its opening statement to the judge on the first day of the case,
and the judge later said, “Microsoft, you lost me on day one.” – [Narrator] Gates was deposed
well after the government sounded an alarm over
his company’s behavior. In 1995, Microsoft was
served a court order for its anti-competitive
activities and software licensing. Another case opened after
the Department of Justice argued that Microsoft
violated that court order. The repeat violations in Gates’ behavior did not play well with the
judge presiding over the case. After viewing the tape,
Judge Thomas Penfield Jackson expressed negative opinions
of Gates and Microsoft to journalists. In his decision, he called
for Microsoft to be broken up, but on appeal, a panel
faulted the judge’s conduct, as well as some of his conclusions. Throughout parts of the ruling, Microsoft narrowly escaped a breakup. In the aftermath, the two
sides agreed to settle with some changes to how the
software maker did business. According to Kovacic, the
legend of the Gates tape haunts today’s tech reps when they testify before Congress. – I think the approach that
especially the tech leaders have been urged to take is humility. What their inside and outside
lawyers will tell them, because this is deadly serious, and if you don’t take this very seriously, you expose yourself, your
company, everything you’ve done to real hazard, and if
you don’t believe us, watch this one. – [Narrator] Precedent number two, free doesn’t always mean
better for consumers. At the heart of any
antitrust investigation lies the standard of consumer harm. – [Kovacic] Three key elements,
price, quality, innovation, that improves business
performance over the long term for the benefit of consumers. – [Narrator] These three
factors have been interpreted by the courts for decades. In the modern era, courts
have spent the most time grappling with the
price dimension of harm. In Microsoft, Internet
Explorer was bundled with Windows 98 at no charge,
which meant that the case would require a different
kind of analysis. In the view of the courts, Microsoft made its browser free, but
still abused its market power by favoring its products
and shutting out rivals. – The government’s theory
was that those steps taken, the forestall, the
emergence of an alternative to the Windows operating
system was improper exclusion, and for the most part, the district court and the court of appeals agreed. – [Narrator] Which means that
companies can harm consumers, even if the products
they’re offering are free. That’s important because
in today’s digital economy, free is in. You don’t pay money to use Google search, Maps, or Translate, but you
do pay something of value, access to your personal data. – Certainly in the
modern tech environment, an important dimension of
quality is what they do with your data, and the
treatment of privacy is a variable of quality that the consumer is increasingly concerned about. – [Narrator] Precedent number three, the U.S. government isn’t the only test. An array of state attorneys general submitted comments to
the FTC on big tech antitrust violations. They recommend that the Department move its philosophy away
from under-enforcement. Many from that group
are expected to launch their own investigations. Across the pond, the European Union already has fined Google 8 billion euro. European regulators also
opened new investigations into Facebook and Amazon. In its day, Microsoft also had to defend against a variety of challengers. In 1998, 20 state attorneys general joined the Justice Department
in suing the tech giant, and in the 2000s, Europe’s
Antitrust Commission launched two investigations
into Microsoft. Those resulted in 1.6
billion euro in fines against the company. – I think one needs to
put it into context. Microsoft makes profits of
about $1.5 billion per month. It’s not all that large a fine. Neither competitors nor
consumers of Microsoft are out after fines. Fines don’t really do them any good. It’s competition that does them good, but we’d rather have compliance
and competition than fines. – [Narrator] According to Kovacic, the European Union has broader criteria on which to bring an antitrust case. – The EU’s position in dealing
with high tech companies, leading firms, has been
much stronger than the U.S. They arguably came out
with a stronger remedy than the U.S. did in their Microsoft case. If you ask which jurisdiction
plays the leading role in setting global standards
and influencing the way that other countries think
about competition law, it’s unmistakably the European Commission. – [Narrator] All told, Microsoft’s tangle with antitrust law
stretched from 1995 to 2011. In Silicon Valley, that’s a lifetime. According to Kovacic, you can expect the tech companies to argue
that a lot will change in their sector as the government
attempts to make a case. – One thing that the
companies will argue is, let’s take account for a
second of how we got here. Where was Google in 1998? Where was Facebook? It didn’t exist. That’s years later. Where was Amazon? Another nascent enterprise
with an interesting idea. – [Narrator] In the final
years of Microsoft’s case, the Windows operating
system that Microsoft fought so hard to protect lost ground to the pantheon of web-based applications that we enjoy right now. Today, the operating system commands only a 35% market share. Meanwhile, Internet Explorer
enjoyed a dominant share of the web browser market through 2012, but eventually a new
browser, Google Chrome, overtook Explorer. How the Justice Department presides over these investigations just might cause another shakeup for companies
on charts like this. (airy music)

62 thoughts on “What Facebook, Google and Others Can Learn From Microsoft’s Antitrust Case | WSJ

  1. This time it’s different than the 90’s

    National security and who is going to dominate future tech like Artificial Intelligence is more important

    Guarantee you none of the tech giants today will be broken up

  2. why americans so concerned about this nonsense and never about what really matters? like if the`d focus 11% of this energy on the pharma industry…

  3. Yeah.. Bill Gates is soft-spoken, humble and polite now.. But back in his day, he was ruthless like a warlord.. You don't get to the very top by being "nice". Nice is for you and me.

  4. Good. Break them up and let Alibaba, Baidu, Tencent take over the global internet then.

    What a bunch of narcissistic politicians and state AGs, trying to take down a big company to put themselves into fame. Also, EU’s anti-business environment can’t sustain any tech company, so EU economy will keep declining. All they can do is to beg for money from US companies and sell out to China.

  5. Google is much worse than Microsoft, if you use Android, you can't remove the apps it comes with, like Gmail or google magazine or all those useless apps no one ever uses and you need to have a gmail account for android to work and giver you access to google market.

  6. Unfortunately when it comes to internet services, the only efficient biz models are the ones with a handful companies.
    If we break them up, nobody's gonna break the chinese giants Alibaba and Tencent and they will start dominating.
    All these tech companies are poised to either go away or become monopolies in their domains.

  7. ….. so if I reveal my telepathic alien’s friend identity, from 31 light years away, without his consent am I violating any intra-galactic privacy laws? No one’s told me. I wonder if ignorance of the law works. Cuz the Deep State is on my back about fessing up who he is. I know what you’re thinking – don;t tell the Deep State anything!

  8. facebook, google and others have to make cheap easy to use operating systems with an inbuilt internet browser for computers and allow piracy?

  9. It was huge monopolies that made possible for hitler to rise in power and led the whole world into war !!!!! That's why Anti Trust law exists

  10. 35.12 % market share, that's so inaccurate. Windows is a computer based Operating system. Did you guys consider mobile OS's also? Fire your research team man.

  11. It’s alarming to see the rise of Chrome. I used it until a year ago until I came across Brave and I’ve not turned back. Using any of Google’a product means Google is watching everything you do. It’s the worst offender in terms of breaching privacy laws. Switch to Brave. If nothing else you’ll shave off the now 7 seconds before every YouTube video!

  12. If they break the tech companies they’ll doom the entire country, these law men just don’t understand what they’re dealing with

  13. Q: what do the tech titans do with your data?
    A: use your data to show you ads that are most relevant to you, aka, products you will most likely to buy.

    Conclusion: no harm done to consumers if data is used this way. It is not that the consumers are concerned about how their data is used, rather Government is concerned because the tech titans are getting too big to be controlled by governments.

  14. Is it really fair to compare Windows OSs to ALL OPERATING SYSTEMS!?

    No, it's still the majority for Desktops, not fair to compare it to the mobile platform.

  15. Android has 88% market share in smartphone OS. Event though it's open source, google shouldn't provide Play Store freely bundled with chrome and other apps

  16. The only thing they can learn from Microsoft is one word “bribery.”bribe every official in Washington set up your offices there and watch.Microsoft didn’t want to play the game of politics and your going to suffer in the end.

  17. "Ya'll haters whupped me in school. You can't handle my science now. I believe. I am. Thirstyenough. To buy whateveritis. I want. Todrink."

  18. Everybody wants free lunch…. let's make up a case and sue them so we can get more money. Big government sucks 👎. In Bill Gates case they wanted him to set up office and hire their Union workers (government officials)

  19. Microsoft still raises up to break the amazing record…… what government did is not enough …. modern age requires the raise of issue surround the principle…..
    this is not a technology world only ……

  20. I still don't understand why Microsoft was sued. What do you expect them to install on their system? It's not like you can't go out and install other options yourself.

  21. You make a plan
    You work immensely hard
    You dodge all the obstacles
    Then you become successful
    But govt. says competition is better, you need to step down!!!

  22. Basically US government requests these companies to work or tie with it. Otherwise, they will get a trouble. What an astounding freedom and democracy of this country!

  23. Gates, just made a mockery of the proceedings. And nothing happened. The Government is even dependent on the MS products. Apple, Google, Amazon, Facebook among others are all practicing Monopolistic methods. And what's the point of all these investigations if the corporations get away with nothing. And the politicians get significant campaign money, from these tech companies.

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