The FTC began investigating Microsoft in 1990. Twice, on a 2-2 tied vote, the commission failed to issue a complaint. Then, after President Clinton appointed Ann Bingaman to head the Justice Department's Antitrust Division, Bingaman committed vast resources to reinvestigate claims that Microsoft is a monopolist. (The reinvestigation was unprecedented. In every other case, each agency has refused to second-guess the result of an investigation by the other agency--even in the case of tied votes.)

Despite that unprecedented investigation, the only conduct that the government found worthy of challenge was Microsoft's so-called "per processor" license for its operating system. That license obliged computer manufacturers to pay Microsoft a royalty for each machine shipped with an Intel-type processor, regardless of whether Microsoft's operating system was installed on the machine. As a result, according to the government, manufacturers had a disincentive to install competing operating systems, since they would have to pay Microsoft a royalty anyway.

Ironically, the government indicated that the provision was not responsible for Microsoft's large share of installed PC operating systems; Microsoft's luck in being the official operating system on IBM PCs was responsible for its share. The government's concern was that the per-processor license was a barrier to potential new operating systems. Given that market forces, not the per-processor license, are responsible for Microsoft's share of PC operating systems, it is no surprise that Microsoft's share has continued to increase since Microsoft agreed to stop using the per-processor license.

Rather than incur the expense and distraction of defending what was probably an unimportant practice anyway, Microsoft entered a consent decree prohibiting the per-processor license (as well as a few other practices that Microsoft had not engaged in previously). It is not clear that Microsoft would have lost if it had chosen to litigate. The government would have been required to prove that Microsoft had monopoly power--no easy task in rapidly changing information markets. And even if the government carried its burden on that issue, Microsoft might still have been able to justify the license. For example, Microsoft might have argued that the license prevented piracy and minimized its costs of monitoring copying of its operating system. Finally, it is not clear that the government could have proved that the license had an exclusionary effect.

District Judge Stanley Sporkin refused to approve the consent decree, citing a number of other practices that he felt the government should also have prevented. For example, Microsoft's critics persuaded him that "vaporware"--the practice of announcing new software before it actually exists--was wrong and deceptive, though not necessarily a violation of the antitrust laws. The government disagreed. The time lapse between Microsoft's pre-announcement of new products and their actual appearance tends to be shorter than competitors'. The government and Microsoft appealed to the Court of Appeals for the D.C. Circuit, which found Judge Sporkin had exceeded his jurisdiction and removed him from the case. Judge Thomas P. Jackson got the case on remand and promptly entered the decree that both parties had agreed to.