How One Tech Monopoly Paved the Way for Another

from The New York Times I'm Sabrina. tavernes and this is the. [Music]. daily a landmark anti-rust ruling. against Google last week had at its. heart the story of another case one from. the. 1990s today my colleague Steve Lore.

on the influence of us V Microsoft and. what lessons that case may hold for the. future of big Tech. today it's Wednesday August. [Music]. [Applause]. 14th Steve welcome to the show nice to.

be here thank you so Steve we wanted to. have you on the show because last week. we finally got a decision in the big. case involving Google and that was of. course the case where the Department of. Justice was arguing that Google was a. monopoly and as we now know the judge in. the case agreed so just to start refresh. our memories about this case this is the. first big anti-monopoly case against uh. modern tech company there are others in. the works there's Amazon apple and meta. and those are to come but this is the.

first Salvo in this standoff between the. antitrust enforcers and the big tech. companies this one was actually filed in. the Trump Administration but picked up. with eagerness by the Biden. Administration and it centers on search. and the allegation here is that Google. used its Monopoly power to shut off. competition and control distribution of. its search engine to the disadvantage of. everyone else right and the way it did. that according to the government was by. paying companies like apple like Samsung.

to be the default search engine on their. platforms the doj of course said this is. illegal Google's response was in essence. no this is just good business these. platforms want us there because we're. the best and our customers see that. that's right but the judge ruled in. favor of the Department of Justice and. one of the things I think is quite. interesting about it is the continued. repeated references in the ruling to. this case from the 199 90s USV Microsoft.

it's really clear that this is a. template that the judge is is working. from you know this case that was the. last time the government took on a big. tech company and won and Steve we are. very lucky to have you in studio with us. today because you actually covered that. case for the Times back in 1998 so. there's no one better to help us. understand how that moment connects to. this one so let's start with a basic. explanation of that Microsoft case what.

do I need to know about it um it was a. huge. trial um this was the big showdown in. the Clinton Administration between the. Department of Justice and Microsoft. which was by far the dominant technology. company of its day just to paint the. picture here I mean in the early and mid. 1990s it is the personal computer era. Microsoft Windows operating system runs. on more than 90% of of the personal.

computers in the world it shapes. people's Computing experience and it was. more than that I they dominated this. industry in a way that if you were a. personal computer maker you had to deal. with Microsoft on their terms and the. reason why Bill Gates at the time was I. think neck and neck with Warren Buffett. to be the richest man in the world all. of that was because of the Microsoft. control of the personal computer. industry mhm and what really showed the. reach and power of Microsoft and Bill.

Gates both as a an economic force and a. cultural Force really came in 1995 with. the introduction of a new version of. Windows called Windows. 95 Bill Gates is on his way into. millions of American homes Through the. Windows Windows 95 one of the most hyped. consumer products ever the debut of. Windows 95 as nerdy as it was was a. cultural event welcome microsof night to. have you all here actually I'm here to.

tell you about this Windows 95 F let me. give you an idea give me an idea how. powerful Windows 95 is it is able to. keep track of all of OJ's aliis at once. pretty amazing. stuff the product was launched with an. event hosted by J Leno of The Tonight. Show well Windows 95 is so easy even a. talk show host can figure it. out as the product went on sale the. lights of the Empire State Building. where changed to me the company's red.

green blue and yellow logo wow uh uh. this is Jennifer Anderson I'm Matthew. Perry we're here to see Mr Bill Gates. about a possible starring role in the. video guide to Microsoft Windows 95. Microsoft even had a tutorial on how to. use Windows that starred Jennifer. Aniston and Matthew Perry who are the. who are the two lead stars of Friends. which was the most popular TV show at. the time task bars and email and. shortcuts oh my Emil and shortcuts oh my. and Microsoft had been pumping this for.

months millions of computer Buffs. swarmed into stores to buy the software. package that's described as the dawn of. a new era in personal Computing and the. company then announced it had sold a. million copies in the first 4 days so. it's hard to understate just how. pervasive Microsoft and windows were at. the. [Music]. time in the midst of Microsoft's. dominance something else is emerging and. it's the early commercialization of the. the. [Music].

internet and remember most people got on. the internet with what was called dialup. service it was literally you connect to. a telephone landline you know this. Symphony of the calling sounds and then. the you know loading early web pages. could you know you could go off and get. a cup of coffee um and come back and it. slowly came from the top of the screen. and gradually filled I mean it is an. that today would be so broken no one.

would hesitate for a moment just to junk. it but what you did see an attractive. easytouse shop window a gateway to the. riches of the internet this is a browser. what you did see is if you typed into. that small rectangular box at the top. the browser box typed in an address. ending with.com or.org it brought you. someplace for. nothing anything was accessible anywhere. in the world world and you could see.

that this is where you get finally a. commercial potential Challenger to. Microsoft what could possibly threaten. the survival of the world's largest. software company it revolves around a. part of the internet called the. worldwide web and it's this little. startup company called Netscape Netscape. was the first commercial Pioneer of. internet browsing software that was at. all successful.

Netscape is engaged in a battle over. whose software programs will be used to. access the internet so far Netscape is. winning its Netscape Navigator browser. program dominates the market the. founding software is written by two guys. at the University of Illinois AB brand. champagne the national Computing Center. one of whom is Mark andrees who is much. better known now as one of the leading. Venture capitalists in Silicon Valley at. 11:00 a.m. this morning Netscape stock. went public and Wall Street went Bonkers.

initially offered at a price of $28 a. share Netscape shot up to 72 within. minutes and so this company which is. basically founded in uh the spring of. 1994 hits an IPO in August of 95 which. is just you know rocket speed and the. IPO is extremely successful and so we. have this entity that starts to just. take off like. [Music]. wildfire it is this first commercial.

wave of the internet and Microsoft isn't. there I mean this is something outside. their realm and so Gates who's very. technical writes what becomes a famous. memo for internal circulation within. Microsoft called the internet tital wave. and he you know basically says it's an. incredible opportunity as well as a. challenge for us and identifies Netscape. as this competitor born on the internet. and their Chief Target so what does. Microsoft do Microsoft essentially goes.

to war with Netscape it starts by. developing its own browser which it. calls Internet Explorer but for years. it's clearly an inferior product to. netscape's navigator but Microsoft's. tactics don't stop there Microsoft then. bundles Internet Explorer into its. dominant product Windows it charges. nothing for it so gives it away for free. undermining netscape's ability to charge. for its browser and then it goes out and.

uses its dominance in the personal. computer industry to arrange contracts. that make it very difficult for PC. makers to feature Netscape on their. personal computers so really kind of. bare knuckle tactics by Microsoft what. does Netscape do Netscape still kept. doing well into 1996 they had over 80%. market share of the browser business but. the Netscape Executives sort of see. what's coming Microsoft is chipping away.

at netscape's lead in the browser Market. it is improved its browser Microsoft has. bundled it into windows it's clear that. on the current path Netscape is in real. trouble and so the leadership of. Netscape talks to its outside lawyer. says look do your research put together. a document that we can show of all the. misdeeds here and the chronology of what. our rise and what Microsoft has done and. we'll take it to the justice department. and that white paper it's over 220 pages.

and it's pretty detailed they take this. white paper to the justice department. and that is the beginning of a landmark. anti trust case which is USV. [Music]. Microsoft we'll be right. back so tell me about this case USV. Microsoft so in May 1998 today we are. taking another step to keep our.

Marketplace competitive Janet Reno who. is the head of the justice department. has a splashy news conference announcing. they are taking on Microsoft in a huge. antitrust case Microsoft's actions have. stifled competition in the operating. system and browser markets but most. importantly it has restricted the. choices available for consumers in. America and around the world months. later when the trial begins it is pandem. I mean everybody's there to cover it I.

was told that at the New York Times. there are only three trials where we. have written about every day that ran. for any length I mean one was the. Microsoft trial the other was the OJ. trial and the third was the Lindberg. kidnapping trial wow so it was a big. deal exactly and the trial lasted for. over eight months with 76 days of. testimony it really kind of boiled down. to two essential allegations were the. contracts that Microsoft had with. personal computer makers and others an. abuse of their Monopoly Power by.

restricting the distribution for. netscape's browser and was bundling. Microsoft's browser Internet Explorer. with its Monopoly product Windows was. that illegal and how was the government. making that case Steve what was it. arguing exactly this was the first real. email trial the justice department had. gathered troves and troves of members of. meetings and of email from inside. Microsoft and that gave you a glimpse.

inside how the company operated in a way. it just you know never would have. happened before in this email evidence. and in notes that were taken at private. meetings you have the kind of phrasing. like cut off their Air Supply you know. crush them knife the baby wow the tone. of this you know showed the kind of. unrestrained competitive culture within. Microsoft they were doing everything. they possibly could we have to leverage.

Windows more cuz we're not going to just. win with the Internet Explorer because. it's not that good a product yet all of. this kind of came out in the email okay. so there are these aggressive emails. with this very kind of remarkable. language what else did the government. introduce at the very start of the trial. I understand that you're one of the. co-founders of Microsoft is that correct. yes uh what's your present title. chairman and CEO there was excerts of. video tape deposition testimony from.

Bill Gates and he came off as he was. nitpicking actually in this last answer. I Ed the word believe so you're changing. the question well uh if believe and. conclude is different for you I I'll ask. it both ways yeah it's very different he. was uncooperative did you recall. receiving this memorandum or. email email no you don't recall. receiving this. email they showed him emails he didn't. remember any of this stuff what non. micros browsers were you concerned about.

in January of 1996 I don't know what you. mean. concerned what is it about the word. concerned that you don't understand I'm. not sure what you mean by it is the is. the term concerned a term that you're. familiar with in the English language. yes does it have a meaning uh that. you're familiar with yes but you have to. understand that the reputation of this. guy and he had appeared a lot in public. before is super smart on it totally up.

to speed on everything and this came off. as. dishonest and it it undermined The. credibility of the Microsoft case and. put together it was pretty damning and. perhaps even the nature of the arrogance. of the deposition sort of like spoke to. the Monopoly yeah no that's right that's. right and how do Bill Gates and. Microsoft respond what were they arguing. that what they were doing was good for.

consumers what's free Pro consumer I. mean what's better than that they were. innovating and you know the government. and others shouldn't get in the way and. their strongest push back was on the. bundling because if they couldn't bundle. anything they wanted to in their their. operating system into windows that was. government meddling in product design. and the government should not be. anywhere near this exactly Microsoft.

said this was going to be a terrible. precedent that it could essentially. allow government to meddle in The. Innovation economy which Microsoft was. at the Forefront of and they felt so. strongly about this they cast the issue. in no uncertain terms at one point. Microsoft's executive said we can bundle. anything we want into Windows including. a ham sandwich so it sounds a lot like. the way Silicon Valley in the tech. industry talk talks today about their.

mission right I mean you know when. people criticize the tech industry they. say we're just trying to be good and. we're just trying to do great things and. help the world innovate and it sounds a. lot to me like the arguments that are. being made today you know the government. can't understand the amazing things. we're doing and should not stand in our. way yeah you know the broad phrasing of. this is we're changing the world as. opposed to saying you know we are. digital tool makers. which they are but if that's the case.

then it invites outside scrutiny and. regulation how does all of this. ultimately shake out what happens in the. end I mean after this lengthly trial we. get a ruling from the judge and he sides. with the justice department that. Microsoft has abused its Monopoly power. and has repeatedly violated the nation's. anti trust laws and the judge fairly. quickly approved the Justice.

Department's preferred remedy which was. to split Microsoft into two companies. one would be the Windows operating. system and the other would be its office. suite of software products word. PowerPoint Excel and those would be. separate from Microsoft Windows now. Microsoft resisted and said a breakup. would be disastrous and is opposed. absolutely opposed to a breakup and that. break up never happens first an appeals.

court overrules it and sends it back to. the district court but what ultimately. ends this case is a change in the. political environment the Bush. Administration takes over from the. Clinton Administration they're less. aggressive about any trust and their. justice department is ordered to engage. in settlement talks with Microsoft and. they settle the case does that mean they. thrw everything out no the court rulings. still stand the findings of facts and. the the conclusion of law it was a big.

loss for Microsoft but it wasn't this. catastrophic breakup of the company. there could have been catastrophic. breakup of the company that they had you. know deathly feared and you had. restrictions placed as part of the. settlement you had restrictions placed. on the kinds of contracts for example. that. Microsoft could. impose on industry Partners so the p. makers could feature any software they.

wanted to on Windows MH and the other. thing was access to some of their. technology one of the concerns and the. threats the rest of the software. industry is you know if Microsoft. doesn't like you your stuff isn't going. to work very well on Windows and so this. it wasn't all opened up but some of it. was so this was not a remedy on the. skill of a breakup what was the ultimate. effect of this case in the end people. that to this day I mean on one side you.

have people say that had made no. difference whatsoever Market forces were. at work the internet was developing and. opening up and that the browser. competition would have taken care of. itself one way or another and new. innovators would have come in and for. Netscape you can argue that the ruling. and the outcome of the trial were too. little too late by that time Microsoft. had really taken in the upper hand in.

the browser market and Netscape was. eventually sold to America online and. Netscape as a company went away so if. this door opening was too late for. Netscape in a sense it still happened. and 4 months after the Microsoft trial. began a small startup called Google was. founded it had a thing called a search. engine it had no business model it had. you know but the door was open. amazing a lot of people think Microsoft.

became a less aggressive less utterly. unrestrained entity than it was and that. kept the door open for newcomers like. Google I mean it just all comes full. circle here Google sprouted from the. ground that had been made fertile by the. court case against Microsoft it really. opened the door for new companies and. and here we are today once again kind. been the same vote but it's Google this.

time not Microsoft yes and you can look. at Google search engine as the. equivalent of Microsoft's Windows. operating system okay so stepping back. here for a second we know that the. Microsoft case was one of the primary. influences on the judge who just. declared Google a monopoly we're still. waiting of course to see what remedies. that judge ultimately. recommends but I wonder how you think. the Microsoft case might shape way where. that judge lands in the end like what.

Clues does it give us here well we have. a whole separate hearing on remedies and. there's a lot of proposals everything. from just restricting certain contracts. Banning those kinds of payments to. having to split off either it's Android. operating system or it's Chrome browser. we have no idea but what I think you. have here is a signal of what kind of. behavior in this environment is going to. be viewed as suspect and what you should. avoid and again a lot of debate about.

these antitrust cases you know whether. they're worthwhile or not but I think. what you do have is is a sense of some. restraining influence on these dominant. companies some pulling back and some. opening of the door to opportunity for. innovators and we don't know what the. future is going to look like or who is. going to benefit I mean one irony is. that a winner could be Microsoft it has. the most directly competing search. engine to Google with being but I think.

the broader implication is the. uncertainty of new innovation and trying. to keep the door open for the kind of. things you may not have thought. [Music]. about just as nobody thought Google. would become what it did when it was. founded in the midst of the Microsoft. trial you don't know what the future is. going to hold but you want that window. of opportunity that door to be open so.

that whatever comes it has a better. chance of success than it might had had. otherwise which is fundamentally what. these cases are about. [Music]. exactly Steve thank you thank you. [Music]. we'll be right.

back here's what else you should know. today on Tuesday Hamas announced that it. would not take part in a long- awaited. round of ceasefire talks with Israel. planned for Thursday despite stepped up. pressure from the US to reach a. deal a representative for Hamas in. Lebanon said in an interview that Hamas. had decided not to participate because. its leaders did not think the Israeli. government had been NE iting in good.

faith the decision came after the times. reported that Israeli Prime Minister. Benjamin Netanyahu had quietly added new. conditions that negotiators fear have. created extra obstacles to a deal. netanyahu's office has denied that he. added new conditions and said that he. was simply seeking to clarify. [Music]. ambiguities today's episode was produced. by Ricky nety relle Banja and Sydney.

Harper with help from Nina Feldman it. was edited by Mark George contains. original music by Diane Wong Alicia bitu. Dan Powell and Pat mccusker and was. engineered by Alysa Moxley our theme. music is by Jim brunberg and Ben Lanser. of wonderly. [Music]. that's it for the daily I'm Sabrina.

Tavern see you tomorrow. [Music].