PublishedJune 17, 1999

CCIA: Is Microsoft’s New Defense Defensible?

New Study Reveals Microsoft Monopoly Not Threatened By AOL/Netscape Deal

Washington, DC, June 17, 1999 – The Computer and Communications Industry Association (CCIA) today released a study that discredits the foundation of Microsoft’s defense strategy in its antitrust trial.  The study, Is Microsoft’s New Defense Defensible? concludes that the merger of America Online and Netscape has no impact on the software giant’s past anti-competitive conduct, and no realistic likelihood of mitigating its monopoly power in the future.

“After crushing Netscape in the marketplace through monopolistic conduct, Microsoft has tried to resurrect the company in the court room, in combination with AOL, to defend and preserve its monopoly,” said Edward Black, President of the CCIA.  “The fact is that Microsoft has no credible defense for its actions and no real competition in most of its core markets, so it is using AOL/Netscape as a way to make believe it has both.  But even Bill Gates can’t sell this fantasy as reality.”

An ongoing theme of Microsoft’s defense has been that this merger reflects the “dynamic character” of the industry, a fact that was supposed to prove it was not a monopoly, or make it unnecessary to impose strong remedies in order to restore competition.

The CCIA study contradicts the various assertions Microsoft has made about how the AOL/Netscape merger bears on the case.  The report concludes:

  • The   AOL/Netscape   merger   has   nothing   to  do  with   Microsoft’s  past,   current   or   future   abuses   of monopoly power.  AOL/Netscape is in the Internet portal market and does not make operating system or applications software for PC desktops, which are the core of the Microsoft monopoly.
  • AOL purchased Netscape for its portal at a distress price well below that of other Internet companies, not for its browser.   Even if AOL decided to compete aggressively with Microsoft in the browser market, it faces substantial barriers to entry that did not exist in the original browser wars that began in 1995 including: Microsoft had no browser of its own, had not yet integrated the browser with Windows, and was not leveraging its desktop control into the portal  marketplace through  embedded links to Microsoft content  sites.
  • Despite the emergence of non-PC devices for Internet access, no serious technological forecast predicts the demise of the desktop PC within the next decade.  While his defense team has raised the specter of the decline of the PC, Bill Gates himself said recently that the PC will remain the central Internet appliance in homes and businesses for decades.

“AOL/Netscape is nothing more than a phantom defense strategy that has no basis in fact or law,” said Black.  “If Microsoft’s best defense is to pretend it has competition, that speaks volumes about the power of their monopoly and the weakness of their legal case.”

For a copy of the report, call Bill Cinnamond at 202-783-0070 or visit our web site at ../../.


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