Experts in Famous Cases: US v. Microsoft
By Noah Bolmer
In this series of blogs, we explore the impact of expert witnesses in landmark cases. In United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001), Microsoft appealed a 2000 ruling ordering a breakup of the company into separate operating system and software enterprises.
Background–DC Circuit Court Case
In 1998, the Department of Justice along with the Attorneys General from twenty states brought allegations to the DC Circuit Court that Microsoft had engaged in monopolistic business practices. The plaintiffs argued that with Windows’ 95% share of the Intel-based PC operating system (OS) market, the barriers to entry were unreasonably high for competitors, violating Section 2 of the Sherman Antitrust Act.
The court was persuaded that exclusive dealing agreements with computer hardware manufacturers, predatory pricing against competitors, and tying the Internet Explorer browser with Windows were sufficient to hold for the plaintiffs, and ordered Microsoft split up.
The Operating System
The first issue at hand was whether Microsoft did, in fact, hold a monopoly on PC operating systems with Windows. Both sides presented a variety of expert witnesses at trial, whose testimony was crucial to the court’s decision.
Chief among them was Dr. Frederick Warren-Boulton, an economist for the plaintiff and antitrust veteran. Cited over 300 times in the Findings of Fact, his expert report was heavily relied on to set the foundation for the judgment.
His testimony linked OEMs (Original Equipment Manufacturers; consumer PC vendors such as Dell and Compaq) with Windows, noting that a PC without Windows is a commercially untenable endeavor. Even Microsoft’s own OEM witness (Compaq, the industry leader at the time) admitted that nearly all its PCs came pre-installed with Windows, echoing the testimony from Dell, Packard-Bell, Gateway, and others.
Dr. Warren-Boulton began by differentiating the manufacture of computers from the operating system: “The OEM stage of the PC industry is competitive, as indicated by the large number of computer makers, thin profit margins, and the absence of a dominant firm” [emphasis added]. This simultaneously addressed the structure of the PC market, while providing a counterexample to Microsoft’s business model.
Then, he moved on to an antitrust market analysis, relying on Horizontal Merger Guidelines (deprecated in 2023), the same publication used by the DOJ and FTC:
The basic idea underlying the Guidelines is to find the smallest group of products, and smallest geographic area, over which a monopolist in those products could exercise market power by profitably imposing “at least ‘a small but significant and nontransitory’ increase in price.” This test, known as the “hypothetical monopolist” test, reflects the underlying rationale for defining markets: to assess whether conduct has the potential to cause anticompetitive effects. If a “hypothetical monopolist” in the relevant product could not effectively exercise monopoly power, then we can be confident that attempts by firms operating in such a market to impose anticompetitive restraints could effectively be checked by other forces, such as competing firms, entry by new firms, or a shift by consumers to a substitute product. In contrast, if the “hypothetical monopolist” can exercise power over the product in question, then a dominant producer of that product might well be able to inflict harm on consumers through its conduct.
As an antitrust expert, Dr. Warren-Boulton was acutely aware that the Sherman Act makes not only overt monopolistic acts illegal but attempts as well. The implication here is that Microsoft could exert price pressure on OEMs, and they would have no alternative other than to pay, for lack of competitors, and that this amounts to a de facto exclusive dealing arrangement.
Microsoft presented economics expert (and MIT Dean), Richard Schmalensee to rebut Dr. Warren-Boulton’s work. He argued that operating systems were not a “relevant market”, stating “That’s my testimony; that that market is not relevant or necessary to answer the questions posed” during cross-examination. He continued “One can address, for instance, the issue of monopoly power, which [plaintiff’s attorney] raised earlier, without performing that exercise [defining the market] and I attempted to [do so.] There are circumstances when one doesn’t want to define a market; one wants to address it directly.”
The judge would not find this line of defense compelling, ultimately finding “that the licensing of all Intel-compatible PC operating systems worldwide does in fact constitute the relevant market in the context of the plaintiffs’ monopoly maintenance claim”.
With the relevant market established, and Microsoft’s dominance therein, the stage was set for the main thrust of the case; tying the Internet Explorer browser to the operating system, such that competing browsers would become obsolete.
Internet Explorer
Having established that PCs were essentially Windows machines, web browsers became the focus of the case. With the release of Windows 98, Microsoft’s Internet Explorer browser was pre-installed on just about any PC that a consumer might purchase. Prior to that, Netscape was the most common browser, with a ninety percent market share.
Netscape wanted to develop the browser into a more complete suite of applications and application development tools, including an email client, web authoring tools, etc. Microsoft saw this as an end-around into OS development, and asked Netscape to discontinue this work. Declining to do so, Netscape released the Communicator suite in 1996, along with other software to aid in development. In the court’s Conclusions of Law, it would determine:
Microsoft realized that the extent of developers’ reliance on Netscape’s browser platform would depend largely on the size and trajectory of Navigator’s share of browser usage. Microsoft thus set out to maximize Internet Explorer’s share of browser usage at Navigator’s expense. The core of this strategy was ensuring that the firms comprising the most effective channels for the generation of browser usage would devote their distributional and promotional efforts to Internet Explorer rather than Navigator. Recognizing that pre-installation by OEMs and bundling with the proprietary software [. . .] led more directly and efficiently to browser usage than any other practices in the industry, Microsoft devoted major efforts to usurping those two channels.
Cross-Examination of Glenn Weadock
In addition to Dr. Warren-Boulton’s direct testimony, star technical expert Glenn E. Weadock’s cross-examination was pivotal. In his report, he testified that Microsoft had essentially made upgrading Windows 95 to the latest version, or upgrading to Windows 98, tied to using Internet Explorer:
Many organizations, having standardized on Windows 95 for a large portion of their operating system needs, have sought, at some cost, to remove Internet Explorer from their PCs by either deleting the means of access to Internet Explorer or standardizing on the original version of Windows 95, which did not come with Internet Explorer at all.”
He continued, “Some organizations, having moved to Windows 98 or considering doing so, are confronted with the inability to remove Internet Explorer from the operating system, and accordingly view themselves as having little or no choice but to standardize on Internet Explorer.”
In cross, Microsoft was unable to mount a successful defense, first attempting to impugn Mr. Weadock’s credentials. Rather than simply answering with a ‘yes’ or ‘no’, he clarifies at multiple points to avoid getting trapped:
Q. You have, however, never provided consulting services to a software company concerning the design or development of operating software, have you, sir?
A. No. That’s correct. There’s lots of different kinds of computer consulting.
Moments later, the defense tries again, with a question implying that Mr. Weadock’s publications were less authoritative, because they were not peer-reviewed:
Q. That was my question, sir. And it’s true, isn’t it, sir, that you have never written anything about Windows 98 that has been published in a peer-review journal or publication?
A. In a peer-review — no, that is certainly correct. My books on Windows 98 are commercial books for the general public to buy. They are not subject to peer review, except in marketplace.
He continued to escape trap after trap, as the defense looked to his C.V. Here, Mr. Weadock had provided a list of cases he had worked on that was illustrative of the type of work he did. Microsoft attempted, unsuccessfully, to paint his experience as strictly consisting of that list of cases:
Q. Of the 17 organizations listed in your expert report and on your C.V., only one organization, the U.S. Department of Justice, is a present client [. . .] is that correct?
A. Yes. Yes. That is correct. I should point out in the interest of clarity that [my company] has other consulting clients that are not on this list.
[. . .]
Q. Isn’t it also true, sir, that you have not provided consulting services for any of the other 16 organizations listed in your expert report and on your C.V. in the last four years?
A. That is probably roughly true, and, again, in the interest of clarity, I would just point out to the court that this is not, nor was it ever represented to be, a comprehensive list of [my] clients.
In clarifying his answers, rather than being led by the defense, Mr. Weadock maintained his credibility on the subject matter he was hired for.
Microsoft continued the cross-examination, eventually getting to the question of whether not merely including, but making Internet Explorer a key, integrated component of the Windows operating system was monopolistic. Essentially, the defense argued that any feature set marketed as part of the operating system, made it a legitimate part of the operating system. Microsoft compared accessing a local hard drive with accessing the Internet, implying that a web-browser is simply a way to access non-local resources, and a normal part of low-level operating. Mr. Weadock was not having it:
- You agree, don’t you, that the ability to access data stored on the computer’s local hard drive and then display the data on the computer screen is an operating system function?
- I typically think of it that way
- And you agree, don’t you, sir, that web browsing in its simplest form is simply locating HTML data stored on a remote server and then displaying the data on a computer screen, correct?
- No, I think — I’m very concerned that you’re trying to draw a very precise analogy. I think that there are lots of people — lots of corporate customers — I mean Michael Dertuzos, who is a Ph.D from MIT and runs the computer lab over there, has stated that the browser world and world of local computer resources are two different worlds in many respects. So I think we have to be very careful in stating that these are, in fact, the same things. In their essence, I think they are two quite different things.
Microsoft’s counsel uses the repetition tactic, mirroring their previous question:
Q. But do you agree with me, sir, that web browsing in simplest form is simply locating HTML data on a remote server and then displaying the data on the computer screen? Do you agree with that statement?
A. No, I don’t. I think web browsing is much more than that. Web browsing also involves the ability to navigate between pages, the ability to provide various handy features for the user, like a list of their favorite places on the internet, and the ability to go back through a history list of places they have been in the past. Web browsers do a lot more, typically, than just displace HTML pages.
Later, Mr. Weadock uses humor to parry a question regarding his choice of words to describe Internet Explorer’s integration in his expert report:
Q. Now, you state in your direct testimony that you used the word “commingling” to be roughly synonymous with integration; correct?
A. Commingling, integrating, mixing, combining, joining. There are lots of synonyms.
Q. But you decided to use the synonym “commingling,” though, instead of “integration” because commingling makes the practice sound more pernicious; correct?
A. No. I think there are many examples of delightful commingling.
Q. As Mr. Warden will say, I will not touch that.
The Ruling
Obviously, the court did not rely solely on the testimony of two expert witnesses. This was a years-long matter with extremely technical and complex issues, but the pivotal role that the DOJ’s experts played was on full display in Judge Jackson’s Conclusions of Law. He ruled on June 7, 2000, that “Not later than four months after entry of this Final Judgment, Microsoft shall submit to the Court and the Plaintiffs a proposed plan of divestiture. The Plaintiffs shall submit any objections to the proposed plan of divestiture to the Court within 60 days of receipt of the plan, and Microsoft shall submit its response within 30 days of receipt of the plaintiffs’ objections.”
The Aftermath
On June 28, 2001, less than a month after the ruling, The D.C. Circuit Court of Appeals vacated Judge Jackson’s ruling in a 125-page opinion, affirming in part and reversing in part the previous conclusions. To the extent that the appeal was affirmed, Microsoft appealed to the Supreme Court, ultimately resulting in a settlement whereby Microsoft would not be split up, but it would make it easier for OEM’s to include substitute products. Netscape sued individually in the interim but settled for an undisclosed amount.
Conclusion
While Microsoft ultimately prevailed inasmuch as they were not broken up, the importance of expert witnesses in mounting a successful offense cannot be understated. The tireless work of the DOJ’s experts set an example for both attorneys and other expert witnesses. Detailed expert reports, maintaining credibility throughout cross-examination, and avoiding traps resulted in one of the most effective uses of expert witnesses in modern history.
For over 30 years, Round Table Group has been connecting litigators with skilled and qualified expert witnesses. If you are interested in being considered for expert witness opportunities, contact us at 202-908-4500 for more information or sign up now!