Bonum Certa Men Certa

Studying Exclusionary Deals with OEMs

Concrete proof shows how Linux was
excluded, just like today's 'non-taxable' Linux


Yesterday we wondered whether Microsoft's exclusionary deal with OEMs are similar to exclusionary Linux deals. Particularly, we wondered if these are similar to exclusionary contracts with government departments. What remains clear is that there is a pattern here. In order to understand this pattern better, let's delve into concrete evidence and explore the past.

Here is Microsoft's old contract with Compaq [PDF]. It reached the light during the Comes vs Microsoft case in Iowa.

LICENSE AGREEMENT

for

MICROSOFT APPLICATIONS PRODUCTS

Between MICROSOFT CORPORATION a Washington Corporation

and

COMPAQ COMPUTER CORPORATION a Delaware Corporation


You can dissect the nature of the deal for yourself (OCRing is not hard, but plenty of editing must follow because of the poor quality of the scan). Mind the following bit in page 22. It's just one outstanding example among many others.

The following provisions shall apply to all Products listed in this Exhibit C:

(1) Preinstallation

the above royalties require that COMPAQ distribute the Products preinstalled on all customer systems.


See the use of the words "all customer systems"? This is very similar to the issues which were raised and discussed yesterday.

Dell is another nice example. Here is their out-of-date contract with Microsoft [PDF].

Microsoft OEM LICENSE AGREEMENT FOR MINIMUM COMMITMENT PAYMENTS

#2811-7060 dated march 1, 1997 with DELL COMPUTER CORPORATION


There is a lot to be found there as well. Web browser discrimination and a Microsoft-centric programs set are some of the recurring patterns in these contracts. There are many more such contracts which were intended to remain secret at the time of signing, just like Microsoft's deal with BECTA and the deal with Novell, among other deals. In Linspire's case, very little was revealed because it is a privately-held company.

Dell's affair with Linux and Microsoft brings up a lot of 'smoking guns'. Examples include this story about Dell's Linux business in China.

Dell's love affair with Linux is a clandestine affair these days, conducted in secret, away from disapproving eyes. But now the pair have been spotted in China.

When Michael Dell first saw the web-footed beauty, he fell head over heels. Six years ago Dell pledged a series of strategic investments in Linux companies, including Eazel and Red Hat. The romance attracted the disapproval of Microsoft however, and barely lasted weeks. Very quietly, Dell dumped the bird.

It later emerged that Microsoft's OEM enforcer Joachim Kempin had promised Steve Ballmer that he'd be putting the screws on PC builders, or "hitting the OEMs harder" in his words.


Here is another disturbing example.

The States' remedy hearing opened in DC yesterday, and States attorney Steven Kuney produced a devastating memo from Kempin, then in charge of Microsoft's OEM business, written after Judge Jackson had ordered his break-up of the company. Kempin raises the possibility of threatening Dell and other PC builders which promote Linux.

"I'm thinking of hitting the OEMs harder than in the past with anti-Linux. ... they should do a delicate dance," Kempin wrote to Ballmer, in what is sure to be a memorable addition to the phrases ("knife the baby", "cut off the air supply") with which Microsoft enriched the English language in the first trial. Unlike those two, this is not contested.

[...]

Earlier memos described that it was "untenable" that a key Microsoft partner was promoting Linux. Kuney revealed that Dell disbanded its Linux business unit in early 2001. Dell quietly pulled Linux from its desktop PCs in the summer of 2001, IDG's Ashlee Vance discovered subsequently, six months after we heard Michael Dell declare his love of Linux on the desktop the previous winter.

Compaq was also mentioned in other memos, with Microsoft taking the line that OEMs should "meet demand but not help create demand" for Linux.


There are several more I am aware of, some of which involve Dell. To move further, however, let's take a more 'holistic' view on this problem. kuro5hin.org has a good article on this issue as a whole.

They are, in short the secret to Microsoft's success. And the word secret is to be taken quite literally: No OEM may talk about the contents of his contract, or he will lose his license, and (assumption) likely be sued for breach of contract as well.


You may then also consider the Iowa Petition [PDF]. It shows how Microsoft essentially blocked its competitors (Linux in this case) from reaching the sales channel.

Microsoft's Predatory Response to GNU/Linux

142. GNU/Linux is an "open source" operating system that runs on Intel-compatible PCs. Microsoft has targeted the competing operating system by pressuring Intel, as well as various major OEMs such as Dell and Compaq, to boycott Linux. In late 2000, for instance, Microsoft executive Joachim Kempin described his plan of retaliation and coercion to shut down competition from Linux: "I am thinking of hitting the OEM harder than in the past with anti- Linux actions" and will "further try to restrict source code deliveries where possible and be less gracious when interpreting agreements - again without being obvious about it," continuing "this will be a delicate dance."

143. LindowsOS (now known as Linspire), which is developed and marketed by Lindows.com, Inc., is an Intel-compatible PC operating system based on Linux and which competes directly with Microsoft on the. PC desktop. On information and belief, Microsoft interfered with Lindows.com, Inc.'s ability to distribute its product through the OEM channel. Microsoft also initiated a lawsuit against Lindows.com, Inc. that adversely affected Lindows.com, Inc.'s ability to exist, obtain; funding and conduct business. Microsoft's Anticompetitive Agreements With OEMs To Foreclose Competition

144. Microsoft Chairman and former CEO, Bill Gates, reportedly summarized the effects of the DOJ's 1995 consent decree--which banned "per processor" licenses, among other exclusionary licensing terms mas "nothing." Microsoft was able to devise other restrictive OEM agreements to foreclose competition in th...

145. A "per system" license was the practical equivalent of the "per processor" license. Under the "per system" license, the OEM had to pay royalties to Microsoft for every computer of a particular "model" or "system" that it shipped--again, as with the "per processor" contracts, regardless of whether the PC contained Microsoft's operating system. Microsoft defined "system" and "model" so broadly in its contracts that virtually all of an OEM's production was subject to Microsoft's "double tax" if the OEM wanted to give the consumer a choice of operating systems. Microsoft did not agree to give up its "per system" licenses in the 1995 consent decree, even though the Department of Justice warned the federal district court that "per system licenses, if not properly fencet in, could be used by Microsoft to accomplish anticompetitive ends similar to 'per processor' licenses"--and in fact were.

146. Another way that Microsoft found to circumvent the federal court's 1995 injunction forbidding its use of "minimum commitment/per processor" licenses was what Microsoft calls its "Market Development Agreements" ("MDAs"). Microsoft contrived the MDA as a device to evade the Court's decree prohibiting Microsoft from requiring OEMs to adhere to "minimum commitments." As Steve Ballmer (Microsoft's current CEO) acknowledged: "We have always given better prices to customers who work with us to make the market. Those used to take the form of commits [i.e., minimum commitments] which we do not do anymore as a result of the [federal court's] decree but we still believe in rewarding people who help us create demand. Hence the iMDA." Under the MDAs, Microsoft granted large discriminatory price concessions to those OEMs that would agree to market and promote Microsoft's Windows to the exclusion of any rival operating system. These discounts were calibrated so as to force the OEM to sell most of its computers with a Microsoft operating system in order to obtain the lowest price.

147. Because the OEM market is so competitive and profit margins are so thin, every OEM had to get the lowest price it could from Microsoft in order to survive. In March 2002, a Gateway marketing executive (Anthony Fama) testified before Judge Kollar-Kotelly in State of New York et al. v. Microsoft, Case No. 98-1233 (CKK), about how Microsoft used its MDA program in order to force OEMs to market Microsoft's operating system exclusively: "Given the substantial nature of these discounts, participation in the MDA, as a practical matter, is not optional. In other words, not receiving :these discounts would put Gateway at a substantial competitive disadvantage, and Gateway has communicated that self-evident proposition to Microsoft." Microsoft also used its MDAs to lock OEMs in and competitors out by offering a discriminatory price to the OEM in a later year provided (a) the OEM reached Microsoft's imposed goal of Windows sales over competitive sales in the prior year and (b) renewed its exclusionary contract with Microsoft for the later year. This placed the OEM on a perpetual treadmill, eliminating competition indefinitely. Microsoft continued these exclusionary terms at least past April 2002.

148. One method for encouraging competition in the operating systems market would have been the sale by OEMs of "naked machines" (i.e., computers that are sold without a predetermined suite of software forced upon the consumer). "Naked machines" would allow consumers to choose their computer's software configuration from an array of competitive software products, either for preinstallation by the OEM or installation by the end user. Microsoft sought and obtained the agreement of the OEMs to refrain from selling "naked machines." Instead, OEMs universally agree to "bundle" Microsoft applications and operating systems with their computer hardware, effectively depriving consumers of any competitive choices. These restrictive agreements exited before 2000 but, in 2000, Microsoft ratcheted the restriction up so that OEMs are forced to forfeit all discounts otherwise earned if they ship any "naked machines" to consumers. This heightened restriction, which (on information and belief) continues to the present, prohibits PC users and PC retailers from buying and installing lower priced or better quality operating systems of their choice.


Articles were written at the time to cover some of the issues raised by the lawyers in Iowa. Here is one such article. (the page has expired since I grabbed a copy)

A judge on Friday told jurors they must accept as fact that a federal court found in 1999 that Microsoft holds a monopoly over computer operating systems and that it restricted computer manufacturers' ability to use competing systems.

[...]

She said she'll show that the company used its monopoly power to exclude competition and control prices and that it conspired with other companies to restrain trade, maintaining what she called a chokehold on software competitors and computer manufacturers.

"It isn't illegal to be successful," Conlin said in opening remarks. "We applaud that. ... But you can't freeze out competitors and punish and retaliate against people who cooperate with competitors. Microsoft did all that and more."

Conlin warned jurors that she would say some unflattering things about Microsoft and its billionaire founder Bill Gates, who serves as company chairman.

[...]

Conlin's first 3 1/2 hours of opening arguments delved deeply into computer industry history and how Microsoft fought off competitors attempting to design rival software.


Here is another decent bit of coverage.

Going back now to as early as 1998, Microsoft starts to realize that Linux might pose a possible threat, and Vinod Valloppillil, who is a program manager at Microsoft, is asked by Mr. Allchin, Jim Allchin, to analyze potential strategies for combatting open-source software, and specifically Linux. His memos are leaked to the press in April -- I beg your pardon -- in October of 1998 and become known as the Halloween documents. And the evidence will be that Microsoft uses its influence in the OEM channel, the computer manufacture channel, to make sure that end users have a difficult time buying PCs with Linux preinstalled.


Some apologists might get off their seats and argue, "it's all in the past and Microsoft has changed since." Well, not so fast! The same tricks have not reached and end and they may never cease. Consider Windows Vista.

PC Manufacturer Acer is complaining that Microsoft has jacked up the price of Vista, and that the basic versions are so basic no one will ship them. Since the collapse of the Microsoft Anti-trust Case under the Bush Administration in 2001, manufacturers have no choice but to accede, adding hundreds of dollars to the cost of each PC. With Gates now proclaiming victory over European Regulators, Microsoft once again seems unstoppable. But Microsoft had drawn itself close to the Republican Party. With the Republicans now evicted from the House and Senate, is it time to look at the Microsoft Anti-trust Suit? Could Microsoft be compelled to lower its inflating Vista prices, or to open their tech or even supply funding to Linux-flavored Windows such as Wine?


This bit from Slashdot presented an interesting perspective that shows the effect of having a monopoly. It is still being maintained using an iron fist. Even Novell admitted the problem last year, but it became a Microsoft 'partner' shortly afterwards, regardless of the severe consequences.

Microsoft Corp is using scare tactics to exert pressure on PC vendors not to explore the potential of desktop Linux, according to Novell Inc president and COO, Ron Hovsepian


The references provided in this article have hopefully shown that the nature of Microsoft deals, contracts, and negotiations are exclusionary and discriminatory by nature and by design. This is something to bear in mind in the future. This blog post may therefore be worth cross-referencing later on, if only to be considered as compelling evidence of a key contention.

Recent Techrights' Posts

Who Is This Backup FOR, the NSA?
As Admfubar put it, "backups for everyone..."
Microsoft's Siege of Libya Coming to an End
One might be tempted to guess the users deleted Windows and installed something else
New Talk by Dr. Richard Stallman Published Two Days Ago By CeSIUM - Centro de Estudantes de Engenharia Informática da Universidade do Minho (Portugal)
The FSF no longer mentions Richard Stallman's talks, but we will
Name the Threats and Threat Actors
Looking back to 2006, there was Novell and gregkh (partly salaried by Microsoft), so these are familiar territories
The "Other" SPLC
You know you're winning the debate when censorship is explored
Microsoft: By Default, Destroy Linux
Here is what the very "polite" Microsoft Boccassi had to say
Perens on a Stick
Remember what Novell did and how few (barely anyone) sided with Novell
Andrew Tanenbaum Gets an Award for His Work on MINIX
ACM one week ago
Twitter's Fall to Irrelevancy in Europe
Musk bought a dud
[Meme] 'Useless' Kids of EPO Examiners
malnourished?
Granting Loads of Monopolies in Europe (to Foreign Corporations of Epic Size and Far Too Much Power Inside Europe) is Vastly More Important Than Raising European Kids Properly?
"Efficiency" first? Whose? Corporations or families? No wonder so many young families are hesitant to have any kids these days; that's particularly true in east Asia and also in north America, not just Europe
Techrights in the Coming Decade: The Free Speech (Online) Angle
Free speech is a fundamental tenet of a free society
 
[Meme] EFF Became a 'Bunch of Pussies' Working for GAFAM (and Sponsored by GAFAM)
It won't protect people, except very rich people's interests
IBM Does Not Care for the Blind (Wayland Harms Accessibility)
What a punch in the gut
Tux Machines Past 20: Still Thriving
Now 20 years and 2 weeks old
[Meme] Microsoft is Coming /Home
"LOL, REAL SORRY!!!"
Gemini Links 25/06/2024: Old Computer Challenge; An Opinionated GNU/Linux Guide
Links for the day
Over at Tux Machines...
GNU/Linux news for the past day
IRC Proceedings: Monday, June 24, 2024
IRC logs for Monday, June 24, 2024
IEEE Computer Society on Andrew Tanenbaum, Winner of ACM Award, Who Also Inspired Linux Development
10 years ago
FSF Looking to Raise Money by Adding 200 New Members by July 19
The FSF is in good shape, according to Alexandre Oliva
Not Only Does It Not Add Security... (UEFI as a 'Bug Door')
SecureCore?
Data From Monaco Should Alarm Microsoft
Just how many people are deleting Windows and installing something else this year?
Linux in Central Sahel (Burkina Faso, Mali and Niger)
Vast area, vast number of "Linux users" (if one counts Android as such)
[Meme] Gagging One's Own Staff as a Signal of Corporate Distress
Censorship at Microsoft
Staying the Course
censorship isn't easy against sites that understand ways to resist it
The 'All-Seeing' Microsoft Eye
Microsofters are observing us closely
Links 24/06/2024: Long COVID and "How I Write Blogs"
Links for the day
Allegations That Microsoft is Covering Up Employee Dissatisfaction and Using a Survey to Catch 'Risk' to the Cult Mentality
This favours or gradually socially-engineers a company for sociopathy
'Linux Hint' Inactive for Nearly a Month (It Used to be Very Active)
Their Twitter account hasn't been active for a long time and it's not too clear what's going on
An Unexpected GNU/Linux Trend
Burkina Faso is changing and not just politically
Android (Linux) at New Highs in Burkina Faso, Now Measured at 72% (Windows Was Measured at 98% 15 Years Ago)
based on this month's estimates
With 0.76% for ChromeOS and 3.7% for GNU/Linux (4.5% Total) Burkina Faso Approaches 5% for 'Linux'
More if one counts Android as "Linux"
Gemini Links 24/06/2024: Being Dull and OpenSSH Autoban
Links for the day
EPO Issues in The Hague
a report dated 4 days ago about a meeting that took place 12 days ago
[Meme] Garbage in, Garbage Out (EPO Patent Quality)
"Get back to work"
When the Employer Makes You Too Sick to Go to Work (New EPO Document)
"registering when you are sick"
[Meme] Putin's Red Flags
Firefox ESR or Firefox USSR
The Corporate/Mainstream Media and Even Social Control Media is Distorting the Record About What Mozilla Actually Did (It Originally Surrendered to Vladimir Putin)
Mozilla being avoided for purely technical reasons (sites not being compatible with it) is one thing. Foolishly, Mozilla is giving people more political reasons to also shun Mozilla. This is suicide.
GNU/Linux Up Some More This Morning, Windows Down Sharply Even in Rich Countries
Microsoft is in trouble in the Muslim world
United Arab Emirates (UAE) Rising... Towards 5% for ChromeOS and GNU/Linux
the latest numbers show it growing from about 0.1% to around 2.4% for GNU/Linux, plus 2.01% for Chromebooks (ChromeOS), i.e. about 5% in total.
Links 24/06/2024: New Research, New Attacks on Justices Sceptical of Patent Maximalists, European Commission for Copyright Maximalists
Links for the day
[Meme] 12 Years a Fedora Volunteer
IBM gives me a 'free' Fedora badge as recognition
IBM Slavery: Not a New Problem
When IBM got rid of Ben Cotton it showed the world how much it valued Fedora
Why They Want to Abolish Master/Slave Terminology (Because This is What They're Turned Free Software Into)
It used to be about community; GAFAM turned that into exploitation and worse
Roy and Rianne's Righteously Royalty-free RSS Reader (R.R.R.R.R.R.) Version 0.2 is Released
They say summer "officially" started some days ago
Torvalds' Number Two Quit Linux a Decade Ago and Has Since Then Earned an Honorary Doctorate
Revisiting Fuzix and Alan Cox
GNU/Linux Reaches All-Time High in Tunisia
Based on statCounter
Over at Tux Machines...
GNU/Linux news for the past day
IRC Proceedings: Sunday, June 23, 2024
IRC logs for Sunday, June 23, 2024
Edward Brocklesby (ejb) & Debian: Hacking expulsion cover-up in proximity to Oxford and GCHQ
Reprinted with permission from Daniel Pocock
You Know the Microsoft Products Really Suck When...
"Qualcomm and Microsoft go 'beyond the call of duty' to stop independent Copilot+ PC reviews"
IBM and "Regime Change"
Change of regime is not the same as freedom
Microsoft Windows in Nicaragua: From 98% to Less Than 25%
Operating System Market Share Nicaragua
Techrights in the Coming Decade: The Community Angle
Somebody needs to call them out on their BS
Techrights in the Coming Decade: The Software Angle
Gemini Protocol has just turned 5 - i.e. roughly the same age as our Git repositories
Techrights in the Coming Decade: The Patent Angle
Next month marks 10 years since we began covering EPO leaks
Wookey, Intrigeri, Cryptie & Debian pseudonyms beyond Edward Brocklesby
Reprinted with permission from Daniel Pocock
[Meme] Choice Versus Freedom
So When Do I Start Having Freedom? Freedom is choice between the GAFAMs
Digital Liberation of Society at Times of Armed Conflicts and Uncertainty
We have technical contributions, not just written output
Links 23/06/2024: More Microsoft Cancellations, Growing Repression Worldwide
Links for the day
Gemini Links 23/06/2024: The Magician and the Hacker, tmux Tips
Links for the day
Links 23/06/2024: Twitter/X Wants Your Money, Google Reports a Billion DMCA Takedowns in Four Months
Links for the day
Digital Restrictions (Like DRM) Don't Have Brands, We Need to Teach People to Hate the Underlying Restrictions, Not Companies That Typically Come and Go
Conceptually, the hens should fear humans, not the farmer who cages them
Going Above 4% Again
Maybe 4% (or above) by month's end?
[Meme] Debian's 'Cannon Fodder' Economics
Conflicts of interest don't matter
Conviction, jail for Hinduja family, Debian exploitation comparison
Reprinted with permission from Daniel Pocock
According to Microsoft, It's Not a Code of Conduct Violation to Troll Your Victims Whose Files You Are Purging
The group of vandals from Microsoft think it's "funny" (and for a "nominal fee") to troll Microsoft critics
Microsoft Inside Debian is Sabotaging Debian and Its Many Hundreds of Derivatives With SystemD (Microsoft/GitHub Slopware With Catastrophic Bugs is Hardly a New Problem)
What is the moral of the story about The Scorpion and the Frog?
Links 23/06/2024: Hey Hi (AI) Scrapers Gone Very Rogue, Software Patents Squashed at EPO
Links for the day
Over at Tux Machines...
GNU/Linux news for the past day
IRC Proceedings: Saturday, June 22, 2024
IRC logs for Saturday, June 22, 2024
Gemini Links 23/06/2024: LoRaWAN and Gemini Plugin for KOReade
Links for the day