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July 1, 2008 8:15 PM PDT

Justice Department to review Google-Yahoo deal

by Steven Musil
  • 14 comments

Updated at 7:40 a.m. PDT Wednesday with comments from a former Department of Justice antitrust attorney, and a Department of Justice spokeswoman.

The U.S. Department of Justice plans to gather information from third parties in a probe of the advertising deal struck last month between Google and Yahoo, according to sources familiar with these types of investigations.

Within the next week, the Justice Department is expected to issue civil investigative demands (CIDs) that seek documents from the third parties, said one source, noting the information requested could range from a general request on the competitive landscape to very specific requests involving Yahoo and Google.

Third parties that are expected to receive the CIDs include competitors, customers such as major advertisers, and potential partners, the source added.

Representatives for Yahoo and Google did not immediately return requests for comment. But the Justice Department made a brief statement.

"We're looking at the proposed transaction. We're conducting a civil investigation," spokeswoman Gina Talamona said, declining to offer details about the process or how long it would take.

Yahoo announced the nonexclusive partnership in June under which rival Google would supply it with some search ads, a move that could increase Yahoo search revenue but that also gives Google even more power in the market. Yahoo expects the 10-year deal to raise revenue by $800 million in its first year and to provide an extra $250 million to $450 million in incremental operating cash flow.

The partnership idea came to light during Microsoft's attempt to acquire Yahoo, which put more pressure on the Internet company to improve its financial results.

Faced with that financial challenge and a desire to push the Google ad deal through, Yahoo proposed to regulators that it subject the search advertising deal to a review process similar to one used for major mergers under the Hart-Scott-Rodino Act, said a source familiar with Yahoo.

Under the proposal, which was made to regulators when Microsoft still had a buyout offer on the table for Yahoo, the Internet search pioneer said it would give the Justice Department three and half months to review the deal before it implements the search advertising partnership.

After Microsoft's offer to acquire all of Yahoo was withdrawn, Yahoo could not tell the Justice Department it would not honor its earlier proposal, said the source familiar with the Internet company. The Justice Department and Yahoo later signed a memorandum of understanding that would give regulators time to review documents and interview executives and board members.

"This has been a formal investigation since day one, given its high-profile. There was never the option to have an informal investigation done," said the source, noting a formal investigation entails the Justice Department staff receiving the blessing from a superior like the assistant attorney general in the antitrust division. "And it would be negligent not to issue CIDs to third parties, when conducting a formal investigation."

Only general document requests made so far
The Justice Department has made very general document requests of Yahoo, noted the source. Such requests range from the paperwork and correspondence of executives and board members that address how a transaction or agreement would affect competition to documents on the search market and competitors. And while the document requests are currently general in nature, Yahoo will likely see more specific type of requests in the next 30 to 40 days, added the source.

To date, the Justice Department has not yet interviewed Yahoo executives or board members, but such requests are expected to be made between now and the first week in August, the source noted.

If the Yahoo-Google investigation moves at a pace similar to that of other antitrust cases, the Justice Department may get down to specific issues it wants to address within four to five weeks after Labor Day.

"When the DOJ says, 'We have concerns about...,' it usually means the field has been narrowed," said the source.

One former Justice Department antitrust attorney said the regulators will likely focus on one of two issues, or both--whether Yahoo will have an incentive not to compete as hard as it previously did against Google and whether there is a coordination of competition.

In an effort to dispel antitrust concerns surrounding the deal, Yahoo CEO Jerry Yang went to Capitol Hill in June and met with Sen. Herb Kohl (D-Wis.), who chairs the Senate Antitrust Subcommittee.

Kohl had previously expressed concerns that the deal between two technology search rivals could affect competition and have ramifications for advertisers and consumers. He said at the time that the antitrust subcommittee would investigate the competitive and privacy implications of the deal.

A congressional investigation, however, is separate from a Justice Department investigation.

In this particular case, which is not a merger of two companies, the Justice Department can't force Yahoo and Google to comply with its wishes in order to receive clearance on the deal. Instead, the regulators can either file a lawsuit before, during, or after Yahoo and Google begin their search advertising partnership.

In April, a limited two-week search ad deal was declared a success by Google and Yahoo, but even the limited partnership raised antitrust hackles at Microsoft. Microsoft brought up antitrust concerns when the search ad test began, saying the move would reinforce Google's dominance in the search ad business.

Google countered that search ads are only a narrow part of the online ad market and that Yahoo is the strongest company when it comes to the graphical "display" ads.

Google's share of the U.S. search market reached 68.29 percent in May, according to Hitwise's most recent numbers. Yahoo's share of the market declined to 19.95 percent from 20.28 percent at the same time.

The Washington Post first reported news of the CIDs on its Web site Tuesday evening, citing sources close to the inquiry.

CNET News.com's Dawn Kawamoto and Stephen Shankland contributed to this report.

June 19, 2008 6:36 AM PDT

Beijing considering antitrust suit against Microsoft? (UPDATE)

by Matt Asay
  • 6 comments

As I was pining for the good ol' days of predatory Microsoft, I read that the Jekyll side of Microsoft never really left. From All Things D:

In a status report filed with Federal antitrust regulators yesterday, Microsoft said it had done much to comply with its 2002 antitrust consent decree....

In the states, perhaps. But apparently not in Asia. Because not 24 hours later, China's State Intellectual Property Office said it's investigating the software giant for discriminatory pricing. And according to the Shanghai Securities News, it may sue Microsoft under a new antitrust law scheduled to go into effect Aug. 1.

Let me make sure I understand this: China has long benefited from stealing Microsoft's software. Now it's considering suing because Microsoft charges too much for the software it pirates?

Apparently, China's State Intellectual Property Office may be organizing a group of companies to sue Microsoft for using its market power to charge high prices in China, where the cost of Microsoft's software can easily exceed the hardware costs for a new PC.

But isn't this the land of piracy, where Microsoft's software is basically free, whatever the list price may say? Microsoft has used piracy as a strategic weapon in China. It's somewhat ironic to see China complaining about Microsoft's pricing. Does the government have an alternative in mind?


UPDATE: China's anti-piracy agency is now denying an investigation into an antitrust suit against Microsoft, the AP reports.

"Our office has never conducted research on monopoly behavior aimed at any enterprises," the [agency] said. "And at present we have no plan to conduct this work."

Right hand, meet left hand.

Originally posted at The Open Road
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure.
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June 19, 2008 6:22 AM PDT

China antipiracy agency denies probing Microsoft

by Dawn Kawamoto
  • 2 comments

China's State Intellectual Property Office on Thursday denied reports that Microsoft and other software behemoths were under investigation, according to an Associated Press report.

The antitrust agency's statement was a response to a Wednesday report by the Shanghai Securities News saying the Intellectual Property Office was investigating allegations that large software companies were using their market position to gain favorable pricing, as well as curtail research and development by local Chinese companies.

The Chinese news agency also reported that some local companies were contemplating filing antitrust lawsuits, based on a new law that is set to take effect August 1.

Although the Shanghai Securities News did not cite Microsoft, specifically, in its report, it quoted a source, who referenced Microsoft and its pricing practices.

June 18, 2008 8:58 AM PDT

Microsoft, DOJ issue status report on interoperability compliance

by Dawn Kawamoto
  • Post a comment

Federal antitrust regulators and Microsoft issued a joint status report Tuesday on the software giant's compliance with the 2003 final judgment on interoperability with third parties.

In the interim report, the parties focus on efforts by the U.S. Department of Justice to enforce the final judgments of the 2003 order and Microsoft's work on complying with those judgments.

The final settlement stems from a 2002 consent decree, which the court, in a ruling earlier this year, extended by two years. Under the settlement, Microsoft agreed to be subject to antitrust review for compliance of the consent decree, which calls for Microsoft to share its interoperability information with rivals and other third parties.

Microsoft and the Justice Department give their respective assessments in the status report, and the parties currently have a status conference scheduled for next Tuesday. (Here is a PDF of the report).

In the interim report, the Justice Department claims three issues have arisen that affect Microsoft's progress in improving the documentation it supplies to third parties. The documents relate to its Milestone schedule, including the last group of documents designed to cover an update to Windows Server 2008, or Longhorn, product.

Here are excerpts of those three issues raised by the Justice Department:

First, the TC (Technical Committee) determined that in the process of revising the technical documentation, Microsoft removed a number of protocol elements that were included in previous versions of the documentation. When this same issue arose last year, Microsoft and the TC discussed that Microsoft would not remove protocol elements from the documentation without first discussing it with the TC in order to ensure that there was no substantive disagreement. Plaintiffs are concerned that the same problem has occurred again. In some cases there may be perfectly valid and sufficient reasons for removing certain protocol elements (2), but it is important for the stability of the documentation that the TC review the proposed deletions before they occur, as Microsoft and the TC previously agreed.

Second, and on a related note, the TC has suggested to Microsoft that it would be extremely beneficial to the TC and licensees to create a mechanism for detailing changes between versions of the documentation. Currently, it is difficult to tell exactly what has changed when Microsoft releases a new version of the documentation. This slows down the TC in its work by making it difficult to evaluate revisions to the documentation and causes issues such as the one discussed in the previous paragraph, where it is difficult for the TC (and Microsoft itself) to determine whether protocol elements have been removed from the documentation. Licensees have also informed the TC that the absence of version-to-version change information complicates product development. Microsoft was receptive to the TC's suggestion and will work with the TC to develop an effective mechanism to track changes to the documentation.

Finally, at the beginning of the year Microsoft changed the schedule for publishing updated technical documentation from monthly to quarterly. The TC's experience with this change has not been positive, as it creates a longer lag time between the identification of issues in the documentation and the publication of fixes to those issues. Licensees have expressed similar concerns to the TC. The TC therefore raised this issue with Microsoft in a recent meeting, and Microsoft agreed to increase the frequency of publishing updates to the documentation.

And here is footnote (2) for the first issue of concern raised by the technical committee, which deals with the "valid and sufficient reasons for removing certain protocol elements":

2 For example, Microsoft or the TC might have discovered that a particular protocol element does not actually pass over the wire between a Windows server and a Windows client, but rather is merely internal within the Windows server and therefore does not need to be documented as part of the MCPP (Microsoft Communications Protocol Program).

The Justice Department further notes that as part of the original documentation plan Microsoft said it would produce to give an overview to third parties on how the MCPP protocols work together, the software giant developed a template for the system documents and will discuss potential modifications to the template with the technical committee.

To date, Microsoft has developed a list of 19 system documents it plans to create and an approximate schedule for producing the paperwork. Microsoft expects to publish drafts of the 19 documents by the end of March and a final version by late June 2009.

Microsoft's licensing policy for the interoperability information will be further tweaked, after the Justice Department raised several issues over the software giant's new patent license. The Justice Department wanted to ensure that future licensees had the "same legal rights under the license that existing licensees possess."

And in the issue of Vista's successor, Microsoft recently authorized the technical committee to review another early build of the Windows 7 operating system. And as the Windows 7 builds progress, the technical committee will conduct middleware-related tests to ensure Vista bugs don't reappear in Windows 7.

Microsoft, meanwhile, notes it's made progress in complying with the final judgment order of 2003. The software giant stated that although it has received seven complaints or inquiries since the last joint status report in late February, none of these issues is related to Microsoft's compliance obligations under the 2003 final judgment.

Since making its communications protocols available for free on its Web site, users pulled 146,000 downloads of the documents since the first of this month, Microsoft noted.

Also, 49 companies have licensed patents for the communications protocols since the final judgment, with 36 of the companies signing aboard for a royalty bearing license.

The software giant also noted it is working toward providing additional information on its protocol documentation.

Microsoft stated in the report on its progress in communications protocol licensing:

While Microsoft firmly believes that the current protocol documentation available to implementers enables interoperability with Windows and fully complies with the Final Judgments, in response to the Technical Committee's ("TC") request, Microsoft is undertaking a new effort to supplement the existing protocol documentation with additional "System" documents.

And on its progress in modifying the technical documentation, Microsoft notes it is currently examining ways to present changes to its various document versions in an efficient fashion, as well as working on ramping up the frequency of publishing protocol documentation from a quarterly cycle. Microsoft anticipates presenting its revised schedule in the coming weeks.

The software giant also addressed its progress in resolving technical documentation issues via protocol test suites, which tests newly rewritten protocol documentation; as well as its interoperability labs, which offers direct access to the software giant's product development teams and engineering staffs for technical support to test licensees' implementations of MCPP protocols.

To date the interoperability labs, which are offered free to MCPP licensees at its Microsoft Engineering Center, Microsoft completed an interoperability lab with one licensee in March and another in May.

"Microsoft received very positive feedback from licensees on both events," Microsoft stated in its status report.

June 4, 2008 9:40 PM PDT

South Korea regulators fine Intel $25 million

by Steven Musil
  • Post a comment

South Korea's antitrust regulators announced Wednesday that they would fine Intel 26 billion won ($25.4 million) for allegedly abusing its dominant position in the local chip market.

The Korea Fair Trade Commission said in a statement that the chip giant had offered rebates to two PC makers in South Korea in return for not buying processors from rival Advanced Micro Devices. Regulators also ordered Intel to stop offering the rebates.

Bruce Sewell, general counsel for Santa Clara, Calif.-based Intel, criticized the ruling, and told the Wall Street Journal that the company is likely to appeal the KFTC's decision. "The conduct they're seeking to attack is the conduct at the heart of competition. It is offering lower prices in order to sell your products," he said.

The charges mirror those Intel faces from the European Commission, which also alleges that the chipmaker violated antitrust laws by abusing its dominant market position.

The KFTC charged Intel with violating South Korean antitrust laws last year after completing a two-year probe.

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May 18, 2008 12:50 PM PDT

AMD court papers allege special Intel deals with PC makers

by Brooke Crothers
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Advanced Micro Devices filed more legal papers this week alleging monopolistic practices by Intel. Some of AMD's allegations involving PC makers are the most intriguing. Even when large blocks of text have been redacted. Moreover, the stridency of the language approaches that of the attacks from Nvidia's CEO in previous weeks.

(Credit: AMD)

AMD in June 2005 filed an antitrust complaint against Intel claiming that Intel illegally maintained a monopoly in the market for microprocessors.

As part of the ongoing legal process, AMD filed a response (to Intel's Preliminary Pretrial Statement) on Thursday with the U.S. district court in Delaware concerning Intel's alleged monopolistic practices.

The document contains broad allegations as well was vendor-specific ones. Most of the particulars of allegations regarding "exclusive dealing" agreements are redacted (blackened out), but tantalizing prefaces to the redacted areas remain.

Allegations related to Sony and Toshiba are significant because Sony is still an exclusive user of Intel chips in its mainstream notebooks (as is Apple), while Toshiba broke a long stretch of exclusivity last year.

"Sony and Toshiba were 100% Intel exclusive for five and seven years respectively." After some redacted text, the allegations continue: "(although Sony's five year clock continues to tick as it remains exclusive today). Intel denies that this long term exclusivity had anything to do with the millions of dollars that Intel funneled into each company."

There are also allegations related to IBM. "Intel denies that it ever 'paid IBM' to limit IBM's marketing of Opteron-based systems or to 'shelve' development of Opteron servers."

After a swath of redacted text, the allegation continues. "So, between 2000 and 2005...Intel conditioned its grant of discounts, rebates, special funds and other consideration on IBM's explicit agreement to maintain its Intel exclusivity and to cancel or defer launches of AMD-based products."

Intel's statement that predates the AMD filing claimed that "AMD's lawsuit is part of a larger strategy to secure greater success by deterring Intel from aggressive competition. Stripped of hyperbole, AMD's complaint accuses Intel of competing too aggressively, by offering customers attractive, discounted prices and marketing and technical support to win their business."

Intel also stated that "AMD's case appears based on the logical fallacy that despite AMD's strong success in the market segments in which its products offered advantages, it should have been even more successful, and thus Intel must have competed unfairly."

Intel continued. "AMD...has often floundered, introducing products that often failed to live up to expectations, even after embarrassing delays. And while AMD seeks to portray itself as the innovator in the microprocessor industry, its brief period of a computing performance advantage with the Opteron microprocessor cannot mask AMD's historical and current position as a laggard in computing performance."

And in an Intel response filed on Thursday, the company said: "Inconvenient facts--such as AMD's 'capture [of] nearly 60% of HP's U.S. retail sales,' according to AMD's own complaint...are swept aside to preserve the dramatic effect."

"Moreover, the argument that Intel's discounts are provided on an 'all or nothing' basis, or that OEMs are subject to punishment or retaliation, is wrong. All of the major OEMs doing business with Intel received significant discounts, whether or not they bought from AMD, and AMD does not contend otherwise."

In AMD's response filed this week the company says: "There is a fundamental distinction between exclusion of a rival through straight-forward underselling (price predation) and exclusion by means of a conditional discount that, on a unit-by-unit basis, is nominally less than the rival's discount."

AMD also makes some more sweeping allegations, including: "What this case is...about is Intel's conditional payments, conditional discounts, punishments, threats, coercion, and assorted technological chicanery that in combination closed AMD's heightened window of opportunity and thereby prevented it from achieving sustainability as a long term innovation rival. Intel is in denial when it says nothing of the sort happened. The record even at this early and preliminary stage of discovery is replete with instances of just such misconduct."

Intel's Response to Plaintiff's Joint Preliminary Case Statement

Plaintiff's Joint Response to Intel's Preliminary Pretrial Statement

Intel Preliminary Pretrial Statement

Originally posted at Nanotech - The Circuits Blog
Brooke Crothers is a former editor at large at CNET News.com, and has been an editor for the Asian weekly version of the Wall Street Journal. He writes for the CNET Blog Network, and is not a current employee of CNET. Contact him at mbcrothers@gmail.com. Disclosure.
May 9, 2008 11:02 AM PDT

Microsoft to appeal EC's $1.39 billion fine

by Dawn Kawamoto
  • 8 comments

Microsoft announced Friday it's appealing the $1.39 billion fine the European Commission imposed for failure to comply with its historic 2004 antitrust order against the Redmond giant.

Microsoft filed an application with the Court of First Instance in Luxembourg, seeking to annul the Commission's decision from late February, in which it imposed a fine of 899 million Euros, or $1.39 billion, against Microsoft.

"We are filing this appeal in a constructive effort to seek clarity from the court. We will not be saying anything further," Microsoft said in a statement.

When the Commission imposed the fine, it was specifically designed to address sanctions over the pricing structure Microsoft had set for licensing of its interoperability protocols and patents.

The pricing issue was the last of three parts of the Commission's March 2004 order, which called for the software giant to provide accurate and complete interoperability information to rivals. The purpose was to allow rivals' software to work with the Windows operating system and to provide that license information under "reasonable and nondiscriminatory" terms."

Two years ago, the Commission hit Microsoft with a fine of 280.5 million euros, or $434 million, for failing to comply with the other two parts of its sanctions related to providing complete and accurate interoperability protocol information to rivals. Microsoft initially appealed that 2006 fine, but withdrew it last fall.

Microsoft sought to overturn the Commission's March 2004 order, but last fall the Court of First Instance upheld the Commission's order, which found the software giant had abused its market dominance in the operating system market.

The European Commission said it remains steadfast in its decision to issue its historic fine against the software giant.

"The Commission is confident that the decision to impose the fine is legally sound," said Jonathan Todd, a spokesman for the European Commission.

The fine levied in February marked the largest penalty the Commission had ever imposed on a single company. To date, the Commission has imposed roughly $2.6 billion in its long-running antitrust dispute with Microsoft.

That figure also includes the original fine of 497 million euros, or $769 million, that the Commission imposed in 2004, when it first issued its order against the software giant.

March 25, 2008 4:00 AM PDT

Sirius-XM, Microsoft-Yahoo, and White House 2009: The predictions

by Anne Broache
  • 3 comments

Delphi booth with XM Skyfi2 satellite radio (File photo)

(Credit: Declan McCullagh/CNET News.com)

CNET News.com's Declan McCullagh and Anne Broache wrote this article.

It may seem that the Bush administration's approval of the Sirius-XM merger should invite a rush of deals before the next presidential administration, which could be Democratic and therefore more hostile to billion-dollar corporate combinations.

After all, Democrats have spent years alleging that the Bush crowd is overly merger-happy--with the corollary implication that a Clinton or Obama administration won't be. One 2006 column in the New York Times charged that there was a "lack of interest in antitrust enforcement these days," and one frequent liberal lament has been that the incoming Bush Justice Department settled too quickly with Microsoft in late 2001.

But academics who have compared the antitrust enthusiasm of Democratic and Republican administrations have found that the reality of antitrust challenges is more complex, and perhaps even a bit counterintuitive. (This matters for mergers including Microsoft's planned purchase of Yahoo, which is already facing antitrust scrutiny.)

A 2001 study by economics professors from the Georgia Institute of Technology and the University of Cincinnati found that "politics, as measured by the party of the president and the Republican versus Democrat composition of the House and the Senate, does not have a clear impact" on the number of antitrust cases filed by the government.

Subsequent research by economists Tom Fomby and Dan Slottje of Southern Methodist University arrives at the same conclusion by analyzing criminal and civil antitrust filings by the Justice Department from 1925 to 2002. They found that the political party in the White House doesn't matter; neither does whether it's an election year or not.

What does seem to matter is economic activity. When unemployment is increasing, they concluded, Justice Department officials are less likely to bring antitrust cases (perhaps for fear of creating more unemployment). When inflation is increasing, on the other hand, antitrust litigation is more likely (perhaps based on the belief that monopolies cause inflation). They dubbed this the "Economic Reticence Index," and believe that unemployment is a more important factor than inflation.

If that's true, and if the Bush administration is no different from its Republican predecessors, a housing-led recession dragging on through 2009 and 2010 could yield relatively easier approvals for Microsoft-Yahoo and other possible mergers. The bust following the unsustainable boom--created by an expansion of the money supply--has already caused layoffs in the housing sector, and greater overall unemployment seems likely to follow.

But the assumption that the Bush Justice Department is similar to other Republican Justice Departments may not be true. Vivek Ghosal, the Georgia Tech professor who co-authored the 2001 study, told CNET News.com in an e-mail message on Monday that the Bush administration "has been a true outlier with a very low level of merger scrutiny and challenges."

Translation: Any two companies eyeing a wedding had better hurry up with the nuptials.

"The Bush administration has apparently never seen a telecommunications merger it doesn't like," said Rep. Edward Markey, the Massachusetts Democrat who leads a House of Representatives telecommunications and Internet panel. "Its decision to approve the XM-Sirius merger without conditions is therefore unsurprising."

Sen. Herbert Kohl, the Wisconsin Democrat who leads the Senate's antitrust panel, similarly accused the Bush administration's Justice Department of repeatedly "failing to oppose numerous mergers, which reduced competition in key industries" and "not bringing a single contested merger case in nearly four years."

"You're certainly not going to be better off waiting for another administration, and you may very well be worse off," said Mark Ostrau, co-chairman of the antitrust and unfair competition group at Fenwick & West in Mountain View, Calif. "I think (Bush administration officials) have been, on the margin, more permissive than others."

Ostrau said he thought that if, for example, the XM-Sirius or the Whole Foods-Wild Oats mergers had been subject to scrutiny by the Clinton administration's Justice Department, it would have "either challenged or sought some concessions," although he acknowledged that the Federal Communications Commission, which is still reviewing the satellite radio deal, may still do that.

In the communications sector alone, the Bush administration has approved the sizable mergers of AT&T and BellSouth, AT&T and SBC Communications, Verizon and MCI, Google and DoubleClick, and Microsoft and Aquantive, to name a few.

"The general attitude among antitrust professionals today is that the Bush administration has been less aggressive in its merger policy than prior Democratic administrations," added Albert Foer, an attorney who serves as president of the American Antitrust Institute, a think tank that supports more extensive use of antitrust law. "This is borne out in the numbers and in surveys of practitioners and seems unrelated to the rise or decline in numbers of mergers."

Should a Democratic president be elected this fall, his or her Justice Department might require companies to acquiesce to more regulatory demands to get mergers approved, and where the situation might be a close call, it might be more inclined to stop the merger than the current administration would, Foer said.

Some mergers, such as Microsoft's Aquantive deal, have been allowed to proceed without an extended probe. One way of gauging the merger-friendliness of an administration is whether it opts to open such a review, said John M. de Figueiredo, a professor of law and strategic management at the University of California at Los Angeles.

"If one looks at the number of cases...it is generally seen that Republican administrations, when backed up by a Republican Congress, are more favorable to mergers and acquisitions than is a Democratic president when it's a Democratic Congress," he said in a telephone interview.

Still more research suggests that, when it comes to the Federal Trade Commission, the likelihood of merger challenges is related to interactions between the White House and the U.S. Congress--which oversees the Justice Department and the FTC and approves their budgets. (The two agencies share responsibility for challenging mergers.)

"A company wanting to press a questionable merger might want to time it to be handled by the current administration," Foer said. "But many other considerations besides antitrust policy go into the strategic decisions that corporations make."

March 17, 2008 8:31 AM PDT

U.S. Supreme Court rejects Microsoft antitrust appeal

by Martin LaMonica
  • 43 comments

The U.S. Supreme Court on Monday denied a Microsoft appeal to an antitrust case that dates back to Novell's desktop PC software business in the mid-1990s.

The move leaves standing a lower court ruling that says Novell can sue Microsoft under federal antitrust laws. Novell argued that Microsoft used its monopoly power to sink Novell's QuattroPro spreadsheet and WordPerfect word processor.

The court had no comment and Chief Justice John Roberts abstained because he is a Microsoft shareholder, according to the Associated Press.

"Microsoft specifically targeted WordPerfect and Novell's other office productivity applications because they threatened Microsoft's Windows monopoly," according to the Novell court filing quoted by the Bloomberg news service.

In its case, Novell also said that Microsoft withheld technical information to make WordPerfect work with Windows 95.

In its appeal, Microsoft argued that federal antitrust laws don't apply to the case because Novell does not compete in operating systems.

In the late 1990s, Microsoft settled federal and state antitrust suits against it, which includes ongoing oversight over the company's actions.

The Novell case is the largest of remaining private suits against the company.

Microsoft contended in its appeal that Novell can't invoke the U.S. antitrust laws because it didn't compete against Windows in the operating system market.

Update 12:23 pm Pacific: Microsoft released a statement on Monday regarding the case, explaining its rationale to appeal the lower court's ruling.

"We realize the Supreme Court reviews a small percentage of cases each year, but we filed our petition because it offered an opportunity to address the question of who may assert antitrust claims. We look forward to addressing this and other substantive matters in the case before the trial court. We believe the facts will show that Novell's claims, which are 12 to 14 years old, are without merit."
March 10, 2008 8:43 AM PDT

iPhone rules pose Net neutrality, antitrust concerns

by Chris Soghoian
  • 33 comments

Apple's recent announcement of the iPhone application software development kit is drawing criticism from Net neutrality activists. While the company has previously angered many for its practice of bricking unlocked phones, it is now being accused of anticompetitive behavior.

Could Apple take Comcast's place as the poster child for the Save The Internet movement? Furthermore, by blocking competing Web browser Firefox, could Apple draw Microsoft-like antitrust lawsuits?

Control

Thursday, Apple released its eagerly awaited iPhone software development kit. Putting an end to hopes of user choice, Apple has declared that the only way for users to install applications will be through its App Store via the iPhone or iTunes. If the company doesn't like an application, it will be removed from the store, with no other way for a user to install it.

In a Q and A session with reporters, CEO Steve Jobs was asked if voice applications such as Skype will be permitted. Jobs replied by saying that VoIP (voice over Internet Protocol) will be allowed when the iPhone is using a WiFi connection, but forbidden over AT&T's cellular data network. How this will be enforced remains unclear. At the very least, Apple can blacklist from iTunes any application that doesn't play nice over AT&T's network.

In addition to the anti-VoIP rules, Apple seems to have also set its sights on the Firefox Web browser. Deep in the legal agreement for developers, Apple states:

"No interpreted code may be downloaded and used in an Application except for code that is interpreted and run by Apple's Published APIs and builtin interpreter(s)...An Application may not itself install or launch other executable code by any means, including without limitation through the use of a plug-in architecture, calling other frameworks, other APIs or otherwise."

As a member of the Firefox development team has already noted, this is a big deal.

Both the Firefox and Opera Web browsers, which compete with Apple's pre-installed Safari browser, are forbidden as they support hundreds of user-created add-ons. Furthermore, the Web browsers support Javascript, which is a key component of most Web 2.0 content. Javascript is an interpreted programming language, and thus forbidden as per Apple's terms of service.

Also banned from the iPhone: programming languages Ruby, Python, Perl, and Java. Quake, the video game engine ported to practically every platform (including Google's Android), as well as Microsoft's Word, Excel, and .NET are also persona non grata.

Sun announced last week that it is readying a version of Java for the iPhone. Once the restrictive iPhone license was pointed out, Eric Klein, the vice president of Java marketing at Sun, backpedaled somewhat on his own personal blog, writing that "I'll leave those (legal) questions to another forum, but we really do want to deliver a JVM if at all possible." This alone should make for an interesting fight, as Sun is no stranger to filing antitrust complaints.

Net neutrality complaints

Apple's blocking of Skype and other voice applications raises the same Net neutrality issues as Comcast's blocking of BitTorrent. Critics have argued that Comcast does this because the P2P video apps compete with the cable giant's own video programming.

Apple is now engaging in a similar practice, blocking any VoIP application that competes with the voice services offered by AT&T--the company with which Apple signed an exclusive five-year contract.

The company will be unable to borrow Comcast's line, and claim that the restriction is "reasonable network management." After all, watching a couple YouTube videos eats up far more data than a VoIP call.

This is not the first time that a company has attempted to block VoIP traffic to protect its own business model. Madison River Communications, a North Carolina ISP was fined and forced to change its behavior by the FCC when it started blocking VoIP providers like Vonage in 2005.

Paging Congressman Markey

Apple's sexy iPhone has attracted the attention of those in power before. Congressman Ed Markey (D-Mass.) held up an iPhone during a congressional hearing last year, before he sharply criticized the practice of locking such devices to a specific carrier's network.

Just a couple weeks ago, Markey introduced the Wireless Consumer Protection and Community Broadband Empowerment Act of 2008, which would require wireless carriers to sell unlocked phones without contracts for reasonable prices. In introducing the bill, Markey clearly had the iPhone in mind.

Markey's other well-publicized cause is Net neutrality. The congressman spoke at the Comcast/BitTorrent FCC hearing just a couple weeks ago. He has previously held hearings on the subject, and introduced legislation in February to stop ISP data favoritism.

With Apple's recent adoption of Comcast-style filtering, Markey can combine two of his passions: wireless phones rules and Net neutrality regulation.

Antitrust

Microsoft's bundling of Internet Explorer back in the late '90s led to major antitrust lawsuits brought by Department of Justice and 20 different states. While consumers were free to install Netscape and other competing browsers, it was the preferential treatment of its own browser that lead to legal problems for Microsoft.

Apple is now engaged in an even more egregious practice. It bundles the Safari browser with its iPhone, it makes it impossible for consumers to remove the browser, and the company now forbids competing companies from making their browsers available to the millions of iPhone users. Firefox has over 40 percent market share in some European countries, but it forbidden from making a version for the iPhone platform.

If Apple doesn't rapidly backtrack on its anti-Firefox and VoIP rules, I predict that it will soon be looking at investigations from multiple government agencies, both here in the U.S. and EU. The FCC and Congress will most likely look into the Net neutrality complaints, while the European antitrust regulators will probably take a keen interest in the Firefox issues. This would, of course, not be the first time that the Europeans have investigated Apple's iTunes store for dirty tricks.

Disclosure: I worked for Apple as a summer intern in 2005. While I love Markey's positions on Net Neutrality, he did publicly call for my arrest back in 2006. He changed his mind two days later.

Originally posted at Surveillance State
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