## Facts

- Microsoft Corporation (Microsoft) was a leading seller of operating-system software, including Windows 95 and Windows 98, and it also sold Internet Explorer (IE), a web browser.
- Microsoft had market power in Intel-compatible PC operating systems and faced competition in web browsers and other software that could reduce reliance on Windows.
- Microsoft began bundling IE with Windows and imposed contractual and technical conditions affecting how computer manufacturers and others distributed Windows and related software.
- The United States (joined by multiple states and the District of Columbia) sued Microsoft under §§ 1 and 2 of the Sherman Act, challenging (among other conduct) the bundling of IE with Windows as an unlawful tying arrangement.
- After a bench trial, the district court found Microsoft liable for: (1) monopolization of Intel-compatible PC operating systems (§ 2), (2) attempted monopolization of web browsers (§ 2), and (3) unlawful tying of IE to Windows (§ 1), treating the tying claim as per se illegal.
- The district court entered a final judgment that included a structural remedy requiring Microsoft to be split into separate entities (an operating-systems business and an applications business), along with conduct restrictions.
- While the case was pending and before issuing final findings and remedies, the trial judge gave secret interviews to reporters and made public comments about the merits and witnesses (including disparaging remarks about Bill Gates’s credibility and comparisons of Microsoft’s conduct to drug trafficking), instructing that the interviews not be published until after judgment.
- Microsoft appealed, arguing (among other points) that the district court used the wrong legal standard for the tying claim and that the judge’s extrajudicial statements required vacatur and reassignment.

## Issues

1. Whether Microsoft possessed monopoly power in the relevant market for licensing Intel-compatible PC operating systems and willfully maintained that power through exclusionary conduct in violation of Sherman Act § 2.
2. Whether Microsoft attempted to monopolize the web browser market in violation of Sherman Act § 2.
3. Whether integrating and bundling Internet Explorer with Windows should be analyzed as a per se unlawful tie under Sherman Act § 1 or instead under the rule of reason.
4. Whether the district court’s remedial decree, including the divestiture (breakup) order, was valid and sufficiently supported by findings linked to the violations.
5. Whether the trial judge’s secret press contacts and public comments created an appearance of partiality requiring disqualification and reassignment on remand.

## Decision

- The D.C. Circuit held that Microsoft had monopoly power in Intel-compatible PC operating systems and affirmed liability for unlawful maintenance of that monopoly under § 2 based on a set of anticompetitive acts that impaired distribution and usage of rival middleware.
- The court reversed the district court’s judgment that Microsoft attempted to monopolize the browser market, concluding the proof did not satisfy the requirements for attempted monopolization (including the showing tied to market definition and dangerous probability of success).
- The court rejected the district court’s per se approach to the Windows/IE tying claim and remanded for rule-of-reason analysis, reasoning that software integration and design choices require fuller examination of competitive effects and justifications.
- The court vacated the district court’s final judgment and remedy, including the breakup order, because the remedy had to be reconsidered in light of the appellate rulings and because the remedial process required findings and procedures tied to the established violations.
- The court ordered reassignment to a different district judge on remand, holding that the trial judge’s secret interviews and public statements during the case created an appearance of partiality inconsistent with continued participation.

## Legal Principles

- Monopolization under Sherman Act § 2 requires (1) monopoly power in a properly defined relevant market and (2) willful maintenance (or acquisition) of that power through exclusionary conduct rather than through a superior product, business skill, or historical accident.
- Monopoly power may be inferred from a dominant market share protected by significant barriers to entry that prevent timely competitive responses.
- Exclusionary conduct analysis focuses on harm to the competitive process; where a defendant offers a nonpretextual business justification, the court weighs anticompetitive effects against the justification within an effects-based framework.
- Attempted monopolization requires anticompetitive conduct, specific intent to monopolize, and a dangerous probability of achieving monopoly power in a properly defined market.
- Per se tying rules are not automatically applied to technologically integrated products; in software markets, tying allegations generally require rule-of-reason analysis to assess competitive effects and efficiencies.
- Antitrust remedies must be based on an adequate record, must be linked to proven violations, and must not exceed what is necessary to address the unlawful conduct; structural relief demands especially careful support.
- A judge must be disqualified when extrajudicial conduct would cause a reasonable observer to question the judge’s impartiality; secret media contacts and public commentary on the merits can require reassignment to protect the fairness and appearance of fairness of further proceedings.

## Conclusion

United States v. Microsoft Corporation held that Microsoft unlawfully maintained its operating-system monopoly through exclusionary conduct, but the D.C. Circuit reversed the browser attempted-monopolization judgment, required rule-of-reason treatment of the Windows/Internet Explorer tying theory, and vacated the breakup remedy, remanding for further proceedings before a different district judge due to the trial judge’s secret interviews and resulting appearance of partiality.


United States v. Microsoft Corporation, 253 F.3d 34 (2001)