Transcript Document 7912494

Exclusivity and Tying
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Microsoft’s aim: to exclude rivals and
potential rivals.
Practice of MS:
Tying.
Exclusive contracts
Contractual Tying
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Microsoft initially tied Internet Explorer to Windows
contractually, by requiring that computer manufacturers
who licensed Windows 95 for installation on new
computers also install Internet Explorer, and by selling the
two products bundled together at retail.
Contractual Tying
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Starting in 1996, Microsoft imposed additional
requirements on computer manufacturers who
licensed Windows:
 they could not remove the Internet Explorer
icon from the Windows desktop;
 they could not place any icons on the desktop
that were larger than the Microsoft icons;
 they could not modify the boot sequence or
have programs that automatically launch at its
conclusion,
Physical Integration
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August 1996: integrated some IE code into a version of
Windows 95
 but IE could be removed with Window’s Software
Uninstall function
August 1998: physical integration of IE into Windows 98
 Consumers could not remove IE from Windows
Exclusive Contracts
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MS signed contracts with various parties:
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with 14 of the largest Internet service
providers (ISPs) to tie access to Windows
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with Internet content providers to tie
placement in the Windows Channel Bar
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with software vendors, containing exclusivity
provisions
Contracts with ISPs
 ISPs will be placed in the Windows Internet Connection
Wizard which made it easy for consumers to subscribe to
and download access software from ISPs, if and only if
they agreed:
 not to offer other browsers to customers
 not to offer web links to other browsers
 to ship another browser only upon customer requests,
but required typically that 75 - 85 percent of all
browser shipments be IE
 April 1998: some restrictions relaxed, but still required IE
to be the ISP’s default browser and to be promoted as
prominently as any other browser
Contracts with
Internet Content Providers
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MS offers content providers to be tied in the Windows
Channel Bar, which allowed consumers who enabled the
Windows Active Desktop to connect more easily to their
websites, if they agreed:
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to promote for IE and links for it
not to include the same items for other browsers
not to pay other browser companies for promotion on the other
browser company’s website
to develop their website using certain Microsoft technologies
to create “differentiated” content that would be viewed better with
IE than with Navigator under some contracts
Later, contracts abandoned because Active Desktop was
proved unpopular and due to pressure prior to the trial
Contracts with Software Vendors
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“First Wave” contracts with software vendors that in their
early access to beta releases and other technical
information, they have to:
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use IE as their default browser for any software with a hypertextbased user interface
use Microsoft’s “HTML Help” which is accessible only with IE,
to implement its software’s help system
Example: June 1997: Intuit (maker of Quicken) promised
not to distribute any other browser with its software
Reward
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Rewarded particular computer manufacturers for
promoting Internet Explorer over Navigator more
explicitly through reduced Windows licensing fees, comarketing funds, and other payments
Examples:
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Compaq agreed in to “promote Internet Explorer exclusively” for
its personal computer products.
Microsoft pressured Apple to make Explorer its default browser
and to put icons for no other browsers on the desktops of its
Macintosh computers, using in part the threat that it might
discontinue its Office product for Macintosh computers