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236. In February 1997 a Microsoft account representative told his counterpart at Gateway that Gateway's use of Navigator on its own corporate network was a serious issue at Microsoft. He added that Microsoft would not do any co?marketing and sales campaigns with Gateway if the firm appeared to be anything but pro-Microsoft. If Gateway would replace Navigator with Internet Explorer, Microsoft would compensate Gateway for its investment in Netscape's product. If Gateway refused, Microsoft might be compelled to audit Gateway's internal use of Microsoft products. Gateway was separately told by Microsoft representatives that its decision to ship Navigator with its PCs could affect its business relationship with Microsoft. Despite the pressure from Microsoft, Gateway refused to switch its internal use to Internet Explorer or to stop shipping Navigator with its PCs. Although Microsoft did not implement its more specific threats, Gateway has consistently paid higher prices for Windows than its competitors. Microsoft's actions not only corroborate the evidence of its interest in suppressing the usage of Navigator, they also demonstrate its ability to threaten recalcitrant customers without losing their business.

237. Similarly, in early 1997, Microsoft tried to convince the IBM PC Company to promote and distribute the upcoming release of its new browser, Internet Explorer 4.0. At a meeting with IBM executives in March 1997, Microsoft representatives threatened that, if IBM did not pre-load and promote Internet Explorer 4.0 to the exclusion of Navigator on its PCs, it would suffer "MDA repercussions." One of the Microsoft representatives in attendance, Bengt Ackerlind, stated that in return for IBM shipping its systems without any software that competed with Microsoft, IBM would receive "soft dollars," marketing assistance, improved access to the source code of Windows 95 and Microsoft's BackOffice product, and the ability to self-certify for Microsoft''s Windows Hardware Quality Lab provisions. In a follow-up meeting three weeks later, Microsoft representatives again insisted that IBM distribute and promote Internet Explorer exclusively and again offered soft dollars, marketing assistance, and MDA reductions in return. Later that day, in a smaller meeting that Microsoft referred to as "secret discussions," Ackerlind stated Microsoft's desire that IBM promote Internet Explorer 4.0 exclusively and warned that if IBM pre?installed Navigator on its PCs, "We have a problem."

238. The IBM PC Company refused to promote Internet Explorer 4.0 exclusively, and it has continued to pre?install Navigator on its PCs. The difference in the ways that Compaq and IBM responded to Microsoft's Internet-related overtures in 1996 and 1997 contributed to the stark contrast in the treatment the two firms have since received from Microsoft.

d. Effect of Microsoft's Actions in the OEM Channel

239. Microsoft has largely succeeded in exiling Navigator from the crucial OEM distribution channel. Even though a few OEMs continue to offer Navigator on some of their PCs, Microsoft has caused the number of OEMs offering Navigator, and the number of PCs on which they offer it, to decline dramatically. Before 1996, Navigator enjoyed a substantial and growing presence on the desktop of new PCs. Over the next two years, however, Microsoft's actions forced the number of copies of Navigator distributed through the OEM channel down to an exiguous fraction of what it had been. By January 1998, Kempin could report to his superiors at Microsoft that, of the sixty OEM sub-channels (15 major OEMs each offering corporate desktop, consumer/small business, notebook, and workstation PCs), Navigator was being shipped through only four. Furthermore, most of the PCs shipped with Navigator featured the product in a manner much less likely to lead to usage than if its icon appeared on the desktop. For example, Sony only featured Navigator in a folder rather than on the desktop, and Gateway only shipped Navigator on a separate CD-ROM rather than pre-installed on the hard drive. By the beginning of January 1999, Navigator was present on the desktop of only a tiny percentage of the PCs that OEMs were shipping.