Excerpt #5, U. S. Court of Appeals, February 27, 2001
"Let the Bitch Slapping Begin"
The Court of Appeals wonders about an OS without a Browser, and AOL shipping a Browser

 
What happens when your case is filled with utter stupidity
(Image from www.bitchslapped.com)

Preface: The DOJ wants Microsoft to ship a version of Windows without a Browser.  The items in red parenthesis are my sarcastic interpretation of what the Appeals Court Justices must be thinking to themselves.

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THE COURT: Mr. Roberts, can you reasonably argue that there is a separate market for browserless operating systems? (Hey, stupid ass, why would I want to buy Windows without a browser. Isn't that like buying a car without headlights or tires?)

MR. ROBERTS: Findings of fact 149 to 154.

THE COURT: I'm looking at them right now and I've read them over and over again. And I .. because .. and maybe I'm thinking too much about what I think I know as opposed to focusing on the record. So I'm being honest with you.

It seems to me .. I won't say it's an absurd proposition. It's a highly questionable proposition for anyone to now suggest that there is a separate market for a browserless operating system in part because all operating systems include browsers and for lots of other reasons. It's a fairly absurd proposition. (You guys are idiots. Of course consumers want operating systems to come with browsers, you dickhead.)

So I was very curious to figure out what the District Court opinion had to say about that, and I must say, as I trace what I think are a number of speculative observations about the District Court, I can't find any underlying hard information to back up the inference. There is no clear finding.

There is some speculation about inconvenience and employers don't like to have the Internet available to employees. There is no data that I can find. Maybe it's there and you can point me to it.

MR. ROBERTS: There are two separate points and I want to distinguish between them. The first is the precise question you asked: Is there a market for a browserless operating system?

THE COURT: Right. And where's the data to support that? (That was my question.  Don't point it back to me. Answer my question.)

MR. ROBERTS: But the second point, which is related, and if they follow sequentially in the findings, do consumers want to choose their operating system separately from choosing their browser?

And there was the testimony, for example, of the representative from Boeing, that they like .. they use different operating systems. They want a standard browser so they don't want to buy them to get them. They want to choose them separately.

The District Court did find that there is sufficient consumer demand for a browserless operating system, particularly referring, as Your Honor, did to companies that their employees have no business surfing the web or they may in some circumstances but they obviously want some without a browser.

THE COURT: The makers of operating systems who were willing to remove the browser, did they offer any discount?

MR. ROBERTS: I'm not aware of that, Your Honor. I do know ..

THE COURT: I think that Mr. Schmalensee's contention on that has no rebuttal. The government has done nothing to call my attention to any rebuttal material. (Idiot. Of course people want browsers with their operating systems)

MR. ROBERTS: First of all, those companies, that constitutes every other company besides Windows.

THE COURT: That's right.

MR. ROBERTS: Besides Microsoft. Microsoft was the only company that enforced the tie.

THE COURT: Let's focus for a moment, and it's really what I was struggling with Mr. Urowsky on. In terms of pricing, which after all is very important in these things, the purchasers of other operating system makers were in fact required to take the option of a browser. Isn't that correct? (Everyone else bundles a browser with their Operating System)

MR. ROBERTS: They were .. no. They were allowed to remove the browser from the operating system.

THE COURT: But when they got the operating system, they got with it an entitlement to the browser; right?

MR. ROBERTS: Correct.

THE COURT: It seems to me Jefferson Parish and the other tie.in cases are reasonably clear. The concern is about this forcing of the consumer because once having paid for an item, it's silly to go buy another.

It was a great concern, in Jefferson Parish explicitly about the poor competitor who was trying to break into that market and has a hard time doing so, because the person who stocked, sold the tying good already has the tied product; isn't that correct?

MR. ROBERTS: That's correct. But there is evidence on the market and there is no reason to speculate.

THE COURT: I understand you're arguing there may be different contract clauses between Microsoft and the other producers. But the basic theme, it seems to me of Jefferson Parish and looking at separate demand is to ask the question, and this is the Areeda reading of the text, are competitive sellers also bundling the item? (Dunderhead, Sun, Apple, OS/2, etc, are also bundling the browser. Why can't Microsoft?)

If they are, partitian is taking care of this and the forcing that is going on, the fact that people find themselves in possession of one maker's product is therefore innocent or at least not covered by Percy.

MR. ROBERTS: I think that's a critical point. It's the difference between bundling, combining and forcing. There is no problem with Microsoft putting together the operating system and the browser and offering it as one package. The problem ..

THE COURT: But that act alone, in terms of the pricing concerns, that have historically driven tie.in law, ends the case. (Your reference case does not make any sense, you dope)

You're moving into new territory of a peculiar situation where the defendant has said, in a sense, you can't throw it away or we're going to make it slightly hard for you to throw it away. You have to move the icon on your machine.

But that kind of thing has not driven tie.in law. You're taking tie.in law into a new and interesting territory. (Are you trying to rewrite the laws as we move forward in this trial?)

MR. ROBERTS: With respect, Your Honor, I think not. I think Kodak and Jefferson Parish as well point out this critical distinction. The question is not show us the benefits from a combination. In your hypothetical ..

THE COURT: I agree.

MR. ROBERTS: The other manufacturers do offer them together.

THE COURT: And therefore, it follows someone who isn't in a position to tie, independent seller of the tied good is cut off at the knees.

MR. ROBERTS: The difference is that no other vendor requires them to be kept together. And that's important. And if you look back at the ..

THE COURT: It may be important for your monopoly maintenance. Maybe not ..

THE COURT: Section 2 question is not a tying question.

MR. ROBERTS: It certainly is. It is the forcing aspect that raises the tie.

THE COURT: Do you have any tying case that turns on some sort of requirement that the consumer actually keep possession of the tied good as opposed to being forced to buy it? (There is no precedent for this)

MR. ROBERTS: It's not a question of keep possession.

THE COURT: Wasn't Jefferson Parish .. I mean, there is not a big market for surgery without anesthesia; is there?  (If you have heart surgery, you need anesthesia, so hospitals usually bundle the two together.  Kinda like an operating system and a browser, you moron)

MR. ROBERTS: No.

THE COURT: Or even the other way around.

THE COURT: So if we give you the package, I mean, you can do away with the anesthesia if you want to and have your operation, but ..(But if you want heart surgery without anesthesia, you are pretty damn stupid or have big balls)

MR. ROBERTS: But that is the key distinction, because it is .. and we need to emphasize, it is not the combination. Given the package; there is nothing wrong with that. Preventing the OEMs from taking off the icon in response to consumer demand, that's what the consumers want.

THE COURT: Let me give you a hypothetical and see if you think it's a tying case. Suppose that Microsoft offered the operating system with IE, said you can take it off or do whatever you like with it, erase the code. But it had plugged into the operating system a few lines of code that as soon as Navigator was added, caused the entire system to collapse. Right? Disaster. Terribly unfair competition and probably antitrust violation of some sort. Not a tie. Not a tie.

MR. ROBERTS: That's where it analyzes the so.called reverse tie. In other words, as soon as you try to .. if you do try to add something else, you have a disaster. I think that would probably be what's called the reverse tie like the New England Journal case.

Again, if I could just emphasize the important distinction. Combination is fine. That's why all this argument about, oh, this is going to chill innovation, how do we tell it to do, you can combine to your heart's content.

But the problem comes in when you say, and you, the OEMs, who are sensitive to consumer demand, you can't take that off, even if, as the facts show, that is what the consumers want.

THE COURT: I didn't hear your answer to Judge Randolph. (You are evading our question.) What is the answer to the hospital case? The hospital did not allow the patient to say, okay, I'll pay for the anesthesiology but I want to get my own. I'll pay you for yours but I want to throw it away and bring in my own. That wasn't allowed. (Answer my question, ass wipe)

MR. ROBERTS: That's right. That was forcing. And given the proper market power in that case, they recognized that they were dealing with separate products.

If you go back and look at the older so.called technology tying cases, Berkey Photo, Telex case out of Oklahoma and some of those, that language from those cases is often quoted for the proposition that courts need to be reluctant and not enmesh themselves in design decisions. And that's right. But in those cases the vendor continued marketing the standalone products.

THE COURT: Who won Jefferson Parish?  (Because I think you are citing an incorrect case)

MR. ROBERTS: It was found not to be a violation. But it was not because they were not separate products. The Court held that they are separate products.

And as I was saying in the Berkey Photo situation, the distinction is they continue to market them as standalone products. So they were letting the market decide.

THE COURT: The other operating system makers are not marketing operating systems as standalone products. True they are more permissive than Microsoft in letting you destroy the extra code or remove it in advance, whatever the system is but you pay for it.  (When you buy a Mac, OS/2, Sun, Red Hat, etc, they do not market a broswer as a separate product.  You get it for free with the operating system)

So you're in exactly the position that the court in Jefferson Parish is very concerned about. The consumer finds himself with the tied good and therefore has no interest in any competitor's version of it.

MR. ROBERTS: There is no forcing. There is no forcing to make .. that makes the bundling ..

THE COURT: The price bundle is the forcing and the other producers do it equally. The practice of the other competitive sellers in the market is enough, for example, to distinguish in radiology for the Court to regard that as a single product.

MR. ROBERTS: There were separate, as the Court found, consumer demand for the products separately. Microsoft ..

THE COURT: But you get it by looking at the practices of the sellers. It isn't a matter of whether the consumer is out there saying I would like a car without a radio. I would like a car, a GM car with a Ford radio. (Now that would be stupid for GM to do that.  Yet one of your arguments in the trials was for the Microsoft operating system to ship a Netscape browser.  Do you get the analogy?)

What do the producers actually do? What the producers do in this field is to include, some of them, offering the option of deleting the extra tied item. But no discount.  (Kinda like Windows and IE. You get it, if you want to delete it yourself off the desktop, go ahead.)

MR. ROBERTS: That's not the way the Supreme Court looked at it in Jefferson Parish. They did ask patients and they asked doctors, do you want a separate anesthesiologist from that provided by the hospital?

THE COURT: They certainly looked at the behavior of competing firms with respect to anesthesiology as opposed to the other things, which they distinguished. The Areeda reading of the text is to look at what firms in competition do as a sign and if there's a profit to be made by separating in terms of the competition we'll do it.

MR. ROBERTS: Jefferson Parish looked at consumer demand, the ultimate consumer. That is what the findings of fact ..

THE COURT: -- largely reflected in the behavior of the providers.

MR. ROBERTS: Reflected in a way .. we're dealing with doctor's recommendations if that's what Your Honor means rather than the patient. But they're consumer preferences, and that's of course what Jefferson Parish and Eastman Kodak say. You look at consumer demand.

THE COURT: Let me ask you again so that you can help me. This is one of the cases, one of the places for me, where the failure of the findings of fact to point to any record, citations, makes it very, very difficult on appellate review because they are very conclusionary statements here that I tried to trace to determine whether there was any real data to support the observation that there was a market for browserless operating systems. It is certainly not intuitive given that all of the operating systems offer browsers that can be removed or deleted.  (All Operating Systems come with browsers.  All of them.  Every single damn one of them.)

But in making your argument that in all the other cases they can be removed and therefore Microsoft is forcing, you're ignoring Microsoft's counter.argument which is they don't integrate as deeply.

But in any event, make that your second answer. Tell me if there is any data to back up .. I quite frankly .. I hear my colleagues in the first part of this argument that we're supposed to defer to factual findings. But when I find factual findings that look very conclusionary and there is no citation to anything, I don't think my obligation as an appellate court is to defer to them. So what is the data? (You have no facts) 

MR. ROBERTS: I would refer the Court primarily to the government's proposed findings of fact, which is sort of an annotated compilation of the evidence that supports the proposed findings. I remember offhand the Boeing example. There is testimony from Boeing, we want a browserless ..

THE COURT: Is there anything other than Boeing? (Boeing?  They wanted a browserless operating system?  Do they make airplanes?  Hey Harry, can you make sure my next plane flight is not on a Boeing made jet.  Those guys sound kinda stupid.  Does Boeing have an option to customers to sell them a jet without wings?  Humm..)

MR. ROBERTS: Yes. I cite it as the one I recall. They are detailed in the proposed findings of fact. I think that's where I would look to find the underlying evidence.

But I don't understand Microsoft to contend that those findings are clearly erroneous. What they contend is they're beside the point. They have a different focus. They are saying we're going to put these together and because there are benefits, it is not separate products.

And that approach has been definitively rejected by the Supreme Court. In Kodak they dealt with it specifically.

THE COURT: Given the present development that Judge Edwards is talking about, it's almost like you're saying I would like to buy a clock radio without a clock. (You are a simpleton. You are worthless.  Let's make this REAL simple for you to understand)

MR. ROBERTS: I think not.

THE COURT: That's a tied product under your theory because even though they are technologically integrated, there are separate markets for clocks and separate markets for radios. 

MR. ROBERTS: It makes a difference to consumers. The OEMs were telling Microsoft that people want Navigator. So let us take IE off.

THE COURT: See, the people wanting Navigator is a different question. And that does go to your Section 2 claim. It doesn't prove to me anything about whether there is a true separate market for browserless operating systems. (You lose, because you are stupid)

MR. ROBERTS: Well, the browserless operating systems, those are again addressed in the findings of fact, and our proposed findings of fact details the evidence in the record that supports that. They refer to companies that don't have a use for the browser. Their employees are not supposed to be using the browser. So they don't ..

THE COURT: Let me ask you about that. Presumably there are two kinds of purchasers who end up with browser networks. One is browsers .. consumers of the kind you're talking about, who don't want one at all. (humm....let me think about this.  Do I know a single person in the world that wants to buy a computer, and never wants to use a browser....hum.....)And then there are consumers that want a different browser; right?

MR. ROBERTS: Right.

THE COURT: The ones that don't want it at all, there is this language in Jefferson Parish that suggests that while that may be a harm to the consumer, it's not a harm to competition because they wouldn't buy one otherwise. (If people want a browserless operating system, it doesn't help a competing browser manufacturer, because they didn't want one in the first place, and I would assume they wouldn't buy one)

MR. ROBERTS: That's right. And we don't think .. that doesn't show the impact in the tied product market. But we do think it's pertinent to deciding whether they are separate products. Yes, we don't rely on consumers who don't want a browser to show foreclosure in the tied product market.

Consumers who do want a browser want a different browser.

THE COURT: Consumers want a different one, which they can then get free as it turns out. (Netscape is free. If they want a different browser, then can get a different browser. What is the damn problem here?)

MR. ROBERTS: It turns out, as the District Court emphasized that the key to usage .. and it's important to recognize that distinction. Millions of downloading and all that, that's not the important point. Usage is what's important in terms of whether it has the potential to become a competing platform for software applications.

The District Court specifically found if you're out of the OEM channel, if you're not in the box that the consumer buys, that's going to affect usage. And the OEMs were not interested in putting two browsers on the products. Because again, the findings of fact are clear. That takes away their profit margin ..

THE COURT: But the consumer has access to the alternative browser at no charge. (It is free. They can get it for nothing. If they want, the get it)

MR. ROBERTS: The consumer has access, yes.

THE COURT: If we're just focusing on the question of whether the tie forecloses access by the consumer, the answer is no; right? (You have no case.  Why don't you just waive the white flag and give up, and we can all go home.)

MR. ROBERTS: Findings of fact 239 to 241 point out that Microsoft was successful in foreclosing Navigator's access to the OEM channel.

THE COURT: To the OEM channel. But the question is, were they foreclosing consumers from getting it? 

MR. ROBERTS: The impact on consumers is made at the point of the OEM channel. That is the way this business works. If you're not going to get on the computer the fact that you could get a browser from somewhere else ..

THE COURT: Remember, we're talking only about consumers who wanted the other browser. Right? We crossed that bridge a moment ago. The ones who didn't want Navigator are irrelevant. The ones who want Navigator are the ones we're looking at. And they can get it. (Man, you guys are ignorant.  We have this DSL connection here in the court, you see, and in about 90 seconds, I can download the Netscape browser off the Internet.)

And then you've got this statement, let me ask you what you do with it, in Jefferson Parish. I read it earlier. The evidence indicates that some surgeons and patients preferred respondent's services to those of Rhue but there is no evidence that any patient who was sophisticated enough to know the difference between the two anesthesiologists would not also be able to go to a hospital that would provide him with the anesthesiologist of his choice. 

Do you see the parallel? (You have no case)

MR. ROBERTS: What we do with that, is to rely on the findings of fact which show that what is available as a practical matter to consumers is decided by the OEM channel. Microsoft knew this.

THE COURT: What about the consumers who want Navigator? Those are the only ones we're interested in; right?

MR. ROBERTS: They don't know. The competition is snuffed out because they don't know. There would be no objection ..

THE COURT: So does Microsoft have an obligation to tell them or simply to not get out of .. not get in their way if they want to access it?

MR. ROBERTS: Microsoft has an obligation not to tie separate products as a means of forcing Navigator out of the OEM distribution channel, which is exactly what happened.

THE COURT: Channel to consumers who want Navigator. By definition, they must already know about it or they couldn't want it. (Hello, is anyone in that brain of yours?)

MR. ROBERTS: Your Honor, that is not correct. My point is, there should be competition to decide what is the browser the consumers want.

And Microsoft was unwilling to engage in that competition. And we know exactly why. They said so in their documents. We are not going to win so we have to, quote, it's important to leverage the OS asset to make people use IE instead of Navigator.

Now, if they don't know that Navigator would be a better choice, that doesn't mean that they are .. the benefits of competition are not also lost to them because Microsoft is leveraging the OS asset to make people use IE. It would have been perfectly all right if they'd offered the package it and said you can compete. But by ..

THE COURT: Is there a loss of consumer surplus when the consumer doesn't know? I guess that's the question. 

MR. ROBERTS: I guess my answer would be yes. I mean, there is no great benefit to ignorance. And there is loss of competition, and the harm ..

THE COURT: But the consumer can't have the loss of something it values if it doesn't know that it exists. 

MR. ROBERTS: The overriding harm of course is the fortification of the applications barrier to entry that protect --

THE COURT: That was this morning. (Focus.  We are discussing something different here)

THE COURT: That's not a tying argument at all. (Focus on your argument, because you are looking stupider by the second)

MR. ROBERTS: The tying argument is that by the tie they were able to force Navigator out of this distribution channel.

THE COURT: You may have a claim entirely based on the particular way in which IE was included in the monopoly maintenance but it's not a tying claim.

You're relying on a per se rule. What do you see is the function of the per se rule? Why should the Court set aside a narrow group of, a narrow type of conduct in the per se treatment?

MR. ROBERTS: The District Court didn't even address the question ..

THE COURT: No, it's a question of law. Why is it per se? Why is there a special rule of the per se tie.in?

MR. ROBERTS: Because the Court can assume that there is going to be an impact on competition.

THE COURT: Can the Court make that assumption very validly when it mechanically applies rules derived from areas where the idea of a consumer throwing the thing away is unthinkable.   (Meaning that a consumer would never throw away anesthesia prior to heart surgery.  Kinda like saying that a consumer would never throw away a browser.)

MR. ROBERTS: In this ..

THE COURT: You're a pioneer. You should take credit for it. (But unfortunately, we work on precedents, and law. You are making shit up here.  Go to Russia and get a job as a prosecutor, because you can make up your own damn rules there.  In Russia, you can prosecute people that everyone knows is innocent.  You can throw them in the gulag and torture them if you like for no reason.  But you are representing the United States of America, and you are acting like a communist.  Shame on you.)

MR. ROBERTS: No, Your Honor. We're trying to get the Court to apply what we think are unambiguous guidelines of determining separate products set forth in Jefferson Parish and Eastman Kodak.

The harm .. to establish the tie.in case, and it satisfies under the facts of this case, the rule of reasonable approach or per se approach, which is why that is not an issue on which the parties have joined or the District Court made any conclusions. It's not necessary. There is sufficient foreclosure in the market for the tied product.

I mentioned the operating system monopoly simply to emphasize that this is not one of those areas of tying where all the economists say you're silly to worry about it because there's only one monopoly rent or anything like that. That is because the browser represented an innovative threat to the applications barrier to entry. That was the point the District Court ..

THE COURT: Back to Section 2, now?  

MR. ROBERTS: I'm just explaining why this tie in particular is of particular concern to the government.

THE COURT: I don't understand how you think that the mere tie itself forecloses market entry. It's the additional acts that are the subject of Section 2 that you may or may not be right. We certainly understand your argument.

The mere tie does not foreclose Netscape from being a competitor, from being a viable competitor. (There was no harm done to Netscape. Can't you see that?)

MR. ROBERTS: The District Court found that it did for this reason.

THE COURT: The District Court, like I said, there are some findings that are merely just conclusions and I find no basis for them. So I'm not in that camp that says because the District Court lists something under findings of fact it's gospel. There has to be a fact in fact. (Judge Jackson severely fucked up. We can see that. Microsoft can see that. Normal people can see that. Why can't you?)

THE COURT: It has to be supported. (You have no facts)

THE COURT: And it has to be supported by something other than the mere statement of the District Court. (Because they are idiots, so we don't believe any statements that they say)

MR. ROBERTS: And what the District Court said is plainly supported by the facts. Microsoft's documents explain it, that they won the browser war. We are not making up the fact that Navigator is out in the cold and IE has steadily increased its usage share while Navigator's goes down.

That's ignoring the reality, and the reality is clearly documented in the District Court's findings that say, for example, there are only in four of 60 OEM channels.

THE COURT: The District Court wasn't saying that, I don't think. If so, explain to me how so, by virtue of the mere, what you call, tie. It was because of the alleged Section 2 predatory conduct. 

MR. ROBERTS: The combination of all of the conduct, certainly.

However, the foreclosure from the tie comes from the simple fact and you may not think it's correct or you may think it is. But the District Court found that an OEM is not going to put two browsers on the machine, and that most people who open up the box on Christmas morning are going to look to see if it has a browser. They are not going to go shopping for another browser once it has a browser.

THE COURT: Is it a general principle that an OEM will not put two on? Is that sort of the way gravity works?

MR. ROBERTS: The District Court found that it caused consumer confusion.

THE COURT: In effect some OEMs are reluctant to put two on. Is that really in terms of .. I'm looking beyond the conclusionary terms. The actual evidence was some OEMs were reluctant to put two on.

We have to assume they would have some affirmative motive to do so, right, before we even have to worry about it. So presumably, it's only among the set of OEMs who have a desire to put Navigator on independently that we are concerned with.  (Meaning, what manufacturer explicitly said, "We don't want IE and Navigator, we don't want IE, we want an OS with just Navigator.  Again, like a GM car with a Ford Radio)

MR. ROBERTS: Their motive was to respond to consumer demand. The Court gave a reason. And the reason is one that would apply across the board. That you find that when you have two on, it causes confusion. People call up. They say, I have two browsers here. Which one am I supposed to use, sort of thing. And if you get three phone calls from owners, you've lost your profit on the machine. So it's not worth their while. That affects the benefits of competition for the consumer.

THE COURT: Is there any data beyond the three calls per consumer? In other words, if you get three calls per consumer, you lose the profit on the unit you sold to that consumer. When they had experience with two browsers, to the extent there was any experience, did they find out how many buyers out of the thousand called?

MR. ROBERTS: No, I am not aware ..

THE COURT: So you lose your profit on that unit. But that unit is just a few units out of millions. What's the difference? (you are stretching the argument here….and you are losing)

MR. ROBERTS: You have to assume that we're dealing with companies that are going to be acting rationally. If there were no costs to putting two browsers on, then, yeah, they could put two browsers on.

But there were costs and the District Court found, finding of fact 159, Microsoft knew that. That's why they undertook this browser war. They were going to win the browser war by increasing the usage of IE. And they increased the usage of IE by tying it to the operating system that every OEM had to put ..

THE COURT: Could Microsoft lawfully bundle both IE and Netscape?  (Let' set another trap)

MR. ROBERTS: I don't know that there are other browsers out there. But I think the answer would be no. In any event, they were still going to be separate products. And they are separate products because the consumer demand for them is separate.

THE COURT: Wait a minute. (You idiot, one of the governments proposals was to make Microsoft bundle both IE and Navigator, and Gates told you guys to fuck off, just like GM would tell you to fuck off if you wanted them to put a Ford radio in their cars?  Now you are saying it would be illegal?)  By the logic of your case, I think it would have to be yes. If they bundled them both, then there was no foreclosure of Netscape.

MR. ROBERTS: I was assuming that the same rules applied and you're not allowed to remove anything.

THE COURT: Yeah.

MR. ROBERTS: There is nothing wrong with them putting together whatever combination they want. It is the forcing aspect that becomes the problem: Saying you .. we put it together and you can't take it off.

THE COURT: You have to leave Netscape on; we'd still be here.

MR. ROBERTS: You have to leave it on.

Now, if there was some reason people want to take it off it could be a tying case. It may not meet the other requirements of tying. But it wouldn't fail because they were not separate products. Browser and the operating system are separate products. Because there is separate consumer demand for them.

THE COURT: But you also argue that if we apply our opinion in Microsoft 2, you win on that score.

MR. ROBERTS: It certainly is a steeper hill to climb but I think ..

THE COURT: Could you make the attempt because I'm not clear?

MR. ROBERTS: Sure. The opinion of Microsoft 2, construed from the consent decree provision, providing for an integrated product. It further has to be plausible, facially plausible benefits.

I think the first question is benefits to whom? The District Court found that the combination presented no benefits to the people who wanted a browserless operating system found that it introduced degradation and bugs. The District Court specifically found ..

< SNIPPED HERE>
===============More questioning by the Court of Appeals Judges=======

THE COURT: The whole market or just the OEM? What about IAP?(Internet Access Provider) (Let's see what happens if I set him up. AOL is an IAP, and AOL bought Netscape) If the leading IAP with a market power and a large share said, look, if you want my service, you have to take Navigator, is that illegal tying?

MR. ROBERTS: I would think it would be. It would be separate. Well, I guess I'm not sure if it was a separate products between what the IAP is providing and what the browser is providing. But if they were separate products ..

THE COURT: Well, the browser is a separate product according to your argument here, isn't it? (This guy is stepping right into the doo-doo that I just put on the floor)

MR. ROBERTS: You also have to look at the other requirements for a tie.in. That's why ..

THE COURT: If it forecloses.

MR. ROBERTS: But is there market power?

THE COURT: I assumed there was. (Doesn't AOL own most of the Internet Access Provider market?)

MR. ROBERTS: If it is forced, yes, if there is foreclosure. If all the elements are met, it would satisfy that test.

But, again, in the case of the OEMs, for the same reason that caused the Supreme Court such concern in New England Journal.

And I would just like to state again ..

THE COURT: I would like to pursue Judge Randolph's hypothetical, suppose you had much more of a sophisticated IE market and AOL has a huge share. Let's suppose all the other little IAPs also the minute you sign up, they send you whatever their browser is.

When you download it, just automatically flows in so everyone is signing up and then the IAP finds himself with some browser. But they only paid, they paid just the way they pay ordinarily. Their 20 bucks a month; right?

I think on your theory, even though they're absolutely free to switch browsers, you've got a tie. Per se tie. (So you are saying AOL can't distribute Netscape to its users to connect to AOL? You IDIOT.  You have shit all over your shoe)

MR. ROBERTS: If they are free to switch, there is no forcing.

THE COURT: You can switch here.

THE COURT: You are free to switch by having one sign up with the IAP. You get a free browser without any difficulty. They just pop at you from the net.

MR. ROBERTS: But that's not how it works with the OEM channel. And that's the difference. The difference there is the consumer --

THE COURT: The browser went beyond the OEM channel. They are heading towards the net, aren't they?

MR. ROBERTS: Certainly. They not only foreclosed the OEM channel but took actions with respect to the IAPs, with Internet service vendors across the board.

THE COURT: People are free to switch. (They can use IE or Netscape)

MR. ROBERTS: If people are free to switch then there is no forced tie.

THE COURT: If I buy equipment that has only IE on it, I'm free to switch. (You idiot)

MR. ROBERTS: You're free to switch. But what the District Court found is that the OEM channel is the key one for effective competition. Consumers are going to basically take what comes with the system. And that is not the result of competition. That is the result of Microsoft leveraging its OS asset, as it explained.

THE COURT: It sounds like a Section 2 case.

THE COURT: What do you make of the 60 million downloads?

MR. ROBERTS: Well, there's a difference between usage and distribution. Again, the District Court found the key question is usage. It doesn't mean 60 million people are using Navigator.

THE COURT: No, no, but does it mean 60 million people took a look at it?

MR. ROBERTS: The significance of that number is very unclear. We don't know what it means. What it means, 20 of those 60 million are me trying to download it.

THE COURT: That makes 30 between us.

(Laughter.)

MR. ROBERTS: I don't know what it means. But again the critical point, it does not mean usage. And usage is the key question when it comes to whether it would develop into an alternative platform for software applications.

THE COURT: There may be some ambiguity about what the 60 million means. But it must mean at the very least, must it not, a significant number in the millions of individuals downloaded Netscape and used it? (Doesn't sound like a distribution problem to me?  Where is the anti-trust portion of your argument)

MR. ROBERTS: I'm unwilling to speculate that it even means that, Your Honor.

THE COURT: You put, the government put an exhibit in, it's Government's 23 at the remedy stage, showing that in 1998, when this 60 million download figure was, that Netscape had a 50 percent market share that dropped by March 2000 to less than 20 percent.

MR. ROBERTS: I've got the chart .. Appendix 14.

THE COURT: Right. We may be getting ahead of ourselves. But if you had some .. had an evidentiary hearing on that chart, then maybe we would have some indication of what 60 million downloads means.

MR. ROBERTS: We don't think Microsoft has shown that the findings of fact in 239 to 241, that say, for example, that Navigator had only a tiny percentage of the distribution through the OEM channels, we don't think they have carried their burden of showing that that is clearly erroneous.

THE COURT: The answer to the 60 million downloads is yes, that was 1998. Look what happened after that.

MR. ROBERTS: Well, it was a sharp drop because, of course, the browser was already there. The OEMs were not going to put another one on. And that's what consumers got.

THE COURT: But you're losing sight of the difference between usage and availability. If the download really means that some number, some number, let's say, between 10 and 60 million people, downloaded it, had access to it and nonetheless decided to use IE, you don't have any complaint about that, do you?

MR. ROBERTS: No. If they are comparing Navigator and IE, and they are choosing IE, that's competition. We have no gripe. 

THE COURT: Well, this highly suggestive datum, 60 million downloads, suggests that people are .. people who have already bought a PC, so by definition they have, by your account, have been forced fed Explorer, are now downloading Navigator; right? 

It's not people who don't have a PC. It's not people who don't have IE. It's people who do have it. (Idiot)

MR. ROBERTS: I don't think there is any basis for speculation that it's not being used because IE is a better product. The District Court found there is no basis for assuming that IE was a better product. It found that there's a steady decline in usage and they found that that usage was caused by the tie and the other effort that Microsoft ..

THE COURT: If the 60 million means 60 million people actually had it on their machine and the usage is plummeting, do you have a problem with that?

MR. ROBERTS: If it's as a result of competition, no. But if it's the result of competition, why does Microsoft have to force people to take them to get it? If they are willing to compete, why don't they do .. what was the case in the prior ..

THE COURT: Maybe because they are entering a market where Netscape has 80 percent.  (So Microsoft has to be aggressive to get market share)

MR. ROBERTS: But that's always the case when there are barriers to entry. It's what protects them in the operating system market. But that doesn't mean that they're free to engage in what constitutes illegal conduct under Section 1 of the Sherman Act.

THE COURT: You're time is up, sir. (You are stupid. Please don't appear before this court again. You soil the floors you walk upon)