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Re: [News] Novel hypocritically sues Microsoft over "exclusionary" deals

____/ Handover Phist on Thursday 18 October 2007 06:42 : \____

> DFS :
>> [H]omer wrote:
>>> Exclusionary Agreement Grievance Gets Airing in Novell-Microsoft Suit
>>> .----
>>>>    One of the biggest gripes the FOSS community has with respect to
>>>> Microsoft's business tactics is that its longstanding exclusionary
>>>> agreements with hardware vendors has stifled genuine competition.
>>>> This is the very issue of one of two claims Novell will be allowed
>>>> to press against Microsoft in their anti-trust lawsuit.
>>> `----
>>> http://lxer.com/module/newswire/ext_link.php?rid=94179
>>> Is this anything like the "exclusionary" Patent Protection Racket that
>>> Novell so eagerly signed up to.
>>> I'm all for suing Microsoft, God knows they deserve all the flack they
>>> get, but this is gross hypocrisy at its worst.
>> From the link: "The second claim allowed to move forward is that 'Microsoft
>> engaged in exclusionary agreements with manufacturers that amounted to
>> unreasonable restraint of trade.'"
>> How was trade restrained when everyone was free to start a new OEM selling
>> non-Windows systems?
> That market was wrapped up by Apple. You know, that hugeass computer
> company that sucks up all the non-MS business?

The exclusionary deals have a lot to do with **pricing** and incentives (same
as Intel's abuses against its rivals.

Comes petition (Iowa):

"Microsoft's Predatory Response to GNU/Linux

142. GNU/Linux is an "open source" operating system that runs on Intel-
compatible PCs. Microsoft has targeted the competing operating system
by pressuring Intel, as well as various major OEMs such as Dell and
Compaq, to boycott Linux. In late 2000, for instance, Microsoft
executive Joachim Kempin described his plan of retaliation and
coercion to shut down competition from Linux: "I am thinking of
hitting the OEM harder than in the past with anti- Linux actions" and
will "further try to restrict source code deliveries where possible
and be less gracious when interpreting agreements - again without
being obvious about it," continuing "this will be a delicate dance."

143. LindowsOS (now known as Linspire), which is developed and
marketed by Lindows.com, Inc., is an Intel-compatible PC operating
system based on Linux and which competes directly with Microsoft on
the. PC desktop. On information and belief, Microsoft interfered with
Lindows.com, Inc.'s ability to distribute its product through the OEM
channel. Microsoft also initiated a lawsuit against Lindows.com, Inc.
that adversely affected Lindows.com, Inc.'s ability to exist, obtain;
funding and conduct business. Mierosoft's Antieompetltive Agreements
With OEMs To Foreclose Competition 144. Microsoft Chairman and former
CEO, Bill Gates, reportedly summarized the effects of the DOJ's 1995
consent decree--which banned "per processor" licenses, among other

47Page 48 exclusionary licensing termsmas "nothing." Microsoft was
able to devise other restrictive OEM agreements to foreclose
competition in th¢Õ 145. A "per system" license was the practical
equivalent of the "per processor" license. Under the "per system"
license, the OEM had to pay royalties to Microsoft for every computer
of a particular "model" or "system" that it shipped--again, as with
the "per processor" contracts, regardless of whether the PC contained
Microsoft's operating system. Microsoft defined "system" and "model"
so broadly in its contracts that virtually all of an OEM's production
was subject to Microsoft's "double tax" if the OEM wanted to give the
consumer a choice of operating systems. Microsoft did not agree to
give up its "per system" licenses in the 1995 consent decree, even
though the Department of Justice warned the federal district court
that "per system licenses, if not properly fencet in, could be used by
Microsoft to accomplish anticompetitive ends similar to 'per
processor' licenses"--and in fact were. 146. Another way that
Microsoft found to circumvent the federal court's 1995 injunction
forbidding its use of "minimum commitment/per processor" licenses was
what Microsoft calls its "Market Development Agreements" ("MDAs").
Microsoft contrived the MDA as a device to evade the Court's decree
prohibiting Microsoft from requiring OEMs to adhere to "minimum
commitments." As Steve Ballmer (Microsoft's current CEO) acknowledged:
"We have always given better prices to customers who work with us to
make the market. Those used to take the form of commits [i.e., minimum
commitments] which we do not do anymore as a result of the [federal
court's] decree but we still believe in rewarding people who help us
create demand. Hence the iMDA." Under the MDAs, Microsoft granted
large discriminatory price concessions to those OEMs that would agree
to market and promote Microsofl's Windows to the exclusion of any
rival operating system. These discounts were

48Page 49 calibrated so as to force the OEM to sell most of its
computers with a Microsoft operating system in order to obtain the
lowest price. 147. Because the OEM market is so competitive and profit
margins are so thin, every OEM had to get the lowest price it
could :from Microsoft in order to survive. In March 2002, a Gateway
marketing executive (Anthony Fama) testified before Judge Kollar-
Kotelly in State of New York et al. v. Microsoft, Case No. 98-1233
(CKK), about how Microsoft used its MDA program in order to force OEMs
to market Microsot's operating system exclusively: "Given the
substantial nature of these discounts, participation in the MDA, as a
practical matter, is not optional. In other words, not
receiving :these discounts would put Gateway at a substantial
competitive disadvantage, and Gateway has communicated that self-
evident proposition to Microsoft." Microsoft also used its MDAs to
lock OEMs in and competitors out by offering a discriminatory price to
the OEM in a later year provided (a) the OEM reached Microsoft's
imposed goal of Windows sales over competitive sales in the prior year
and (b) renewed its exclusionary contract with Microsoft for ,the
later year. This placed the OEM on a perpetual treadmill, eliminating
competition indefinitely. Microsoft continued these exclusionary terms
at least past April 2002. 148. One method for encouraging competition
in the operating systems market would have been the sale by OEMs of
"naked machines" (i.e., computers that are sold without a
predetermined suite of software forced upon the consumer). "Naked
machines" would allow consumers to choose their computer's software
configuration from an array of competitive software products, either
for preinstallation by the OEM or installation by the end user.
Microsoft sought and obtained the agreement of the OEMs to refrain
from selling "naked machines." Instead, OEMs universally agree to
"bundle" Microsoft applications and operating 49Page 50

systems with their computer hardware, effectively depriving consumers
of any competitive choices. These restrictive agreements exited before
2000 but, in 2000, Microsoft ratcheted the restriction up so that OEMs
are forced to forfeit all discounts otherwise earned if they ship any
"naked machines" to consumers. This heightened restriction, which (on
information and belief) continues to the present, prohibits PC users
and PC retailers from buying and installing lower priced or better
quality operating systems of their choice."

                ~~ Best of wishes

Roy S. Schestowitz      | "Ping this IP, see if it responds the second time"
http://Schestowitz.com  |  RHAT GNU/Linux   |     PGP-Key: 0x74572E8E
         run-level 2  2007-10-16 15:14                   last=
      http://iuron.com - help build a non-profit search engine

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