In Re Microsoft Corp. Antitrust Litigation
127 F. Supp. 2d 728, 2001 WL 120506, 2001 U.S. Dist. LEXIS 306 (2001)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
To state a claim for conspiracy to monopolize under Section 2 of the Sherman Act, a plaintiff must allege specific facts demonstrating that the alleged co-conspirators shared the monopolist's specific intent to maintain the monopoly, not merely that they knowingly acceded to the monopolist's restrictive demands for their own competitive advantage.
Facts:
- Microsoft Corporation, a dominant software company, entered into a variety of restrictive licensing agreements with original equipment manufacturers (OEMs) Compaq, Dell, and PB Electronics.
- These agreements required the OEMs to pay per-processor licensing fees, enter long-term distribution contracts, and bundle Microsoft's operating system with its Internet Explorer browser.
- The OEMs also allegedly agreed not to alter the Windows boot-up sequence, which plaintiffs claim gave Microsoft an unfair advantage over competing browser suppliers.
- Plaintiffs Gravity, Inc. and Mark H. Dickson purchased personal computers from the defendant OEMs with pre-installed Microsoft software.
- Plaintiffs alleged that the restrictive agreements preserved Microsoft's monopolies in operating system and application software markets.
- As a result of these agreements, plaintiffs alleged they paid supra-competitive prices for Microsoft software and were denied competitive choice and innovation.
- The OEMs allegedly benefited from their acquiescence to Microsoft's terms through inducements such as more favorable pricing, which helped them compete against other OEMs.
Procedural Posture:
- Gravity, Inc., and Mark H. Dickson filed a class action lawsuit against Microsoft Corporation, Compaq Computer Corporation, Dell Computer Corporation, and PB Electronics, Inc.
- The case was consolidated with sixty-three other antitrust actions against Microsoft by the Multi-District Litigation Panel.
- The consolidated case was assigned to the U.S. District Court for the District of Maryland.
- The defendants filed a motion to dismiss all claims.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a complaint state a claim for conspiracy to monopolize under Section 2 of the Sherman Act by alleging that original equipment manufacturers (OEMs) agreed to a monopolist's restrictive licensing terms to gain competitive advantages, without pleading specific facts showing the OEMs shared the monopolist's specific intent to maintain its monopoly?
Opinions:
Majority - Motz, District Judge
No. A complaint fails to state a claim for conspiracy to monopolize where it does not allege facts sufficient to infer that the alleged co-conspirators shared the monopolist's specific intent to perpetuate its monopoly. To establish a Section 2 conspiracy, it is not enough to show that the OEM defendants acceded to demands made by a monopolist to gain an advantage over their own rivals; the plaintiffs must plead facts showing the OEMs affirmatively adopted the goal of maintaining the monopoly. Here, the court found that the plaintiffs' Section 1 and Section 2 conspiracy claims coalesce because the sole alleged purpose was the perpetuation of Microsoft's monopolies, thus requiring the heightened 'specific intent' standard of Section 2. The court reasoned that it is economically irrational for purchasers, like the OEMs, to conspire to maintain the monopoly of their supplier, as it would lead to higher input costs for them in a fiercely competitive market. While plaintiffs alleged the OEMs received benefits, making the conspiracy plausible, plausibility is insufficient without concrete factual allegations supporting the element of specific intent. The OEMs' conduct—bargaining for better prices and accepting restrictions imposed on all OEMs—is just as consistent with lawful, independent, competitive behavior as it is with an illegal conspiracy. Furthermore, the court noted the complaint alleged a 'rimless wheel' conspiracy, with Microsoft at the hub and each OEM as a spoke, but failed to allege any agreement among the OEMs themselves (the rim).
Analysis:
This decision significantly raises the pleading standard for plaintiffs in antitrust cases alleging a 'hub-and-spoke' conspiracy to monopolize. It establishes that merely alleging vertical co-conspirators (like distributors) benefited from going along with a monopolist's restrictive practices is not enough to survive a motion to dismiss. The ruling requires plaintiffs to plead concrete facts showing that these alleged co-conspirators affirmatively adopted the monopolist's illegal goal as their own, rather than simply acting in their independent economic self-interest when faced with the monopolist's market power. This precedent makes it more difficult for plaintiffs to proceed to costly discovery based on conclusory allegations of conspiracy, thereby protecting defendants who may have simply been making rational business decisions in a market dominated by a monopolist.
