Industrial Organization: Contemporary Theory and Empirical Applications, 5th Edition

8

Commodity Bundling and Tie-In Sales

On November 5, 1999, Judge Thomas Penfield Jackson issued his “Findings of Fact” in the Microsoft antitrust trial that served subsequently as the basis for Judge Jackson's guilty verdict in the trial five months later on April 3, 2000. Among other things, Judge Jackson concluded that Microsoft's Windows operating system and its Internet Explorer web browser constituted separate products that could, in principle, stand alone but that Microsoft had bundled together as one package. Judge Jackson's focus was on the use of such bundling as an illegal tying of the two products aimed at extending Microsoft's operating systems monopoly to the browser market. Any defense against this charge must offer an explanation for such bundling that is not related to extending monopoly power.

The remedy that Judge Jackson ordered was that Microsoft be broken into two separate companies, one that would produce the operating system and the other that would produce software components such as Microsoft Office and Internet Explorer. Judge Jackson's judgment was reversed on appeal, with the proposed settlement being that Microsoft share its application programming interfaces, making it easier for competitors seeking to offer Windows-based applications to ensure that their software would operate seamlessly on the Windows platform.

A subsequent complaint was brought by the European Commission, accusing Microsoft of abusing its dominant position by bundling Windows Media ...