United States v. Microsoft: Doctored Videos and an Overturned Breakup

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By 1986 a workplace PC had better than a 90 percent chance of running Microsoft's operating system, and in 1995 Netscape Navigator threatened to make Windows irrelevant by becoming a platform of its own. The FTC opened an investigation in 1990, deadlocked, and passed it to the Department of Justice, whose 1994 settlement still let Microsoft integrate new features into Windows. Microsoft gave Internet Explorer away, wove it into Windows, argued it was a feature rather than a separate product, and barred PC makers such as Dell and Compaq from putting Netscape on the desktop. In 1998 the DOJ and 20 states sued under the Sherman Antitrust Act before Judge Thomas Penfield Jackson.

Bill Gates's videotaped deposition, in which he quarreled over the meaning of words like compete and ask, was undercut by his own emails, and an Intel executive testified to talk of cutting off Netscape's air supply. Microsoft withdrew a video meant to show that removing Internet Explorer broke Windows after it proved to be stitched together, then admitted a second video about installing Netscape had been edited. Jackson ruled Microsoft an illegal monopoly and ordered it split into an operating system company and an applications company, but in 2001 the D.C. Circuit threw out the breakup because he had given embargoed interviews comparing Gates to Napoleon, while keeping his findings of fact. A settlement requiring API sharing and a three-person oversight panel was approved in 2004.

• Told to offer Windows without the browser, Microsoft gave PC makers a choice of an obsolete version or one that would not boot properly.
• Gates and Steve Ballmer reportedly discussed leaving the company over the breakup order.
• The Supreme Court declined to fast-track the appeal, sending it to the D.C. Circuit Court of Appeals.
• Several states called the settlement far too weak, and its compliance obligations expired between 2007 and 2012.
• The government dropped its tying claim on appeal, which scholars read as conceding bundling had consumer benefits.