1^st October, 1999.

Ref CF/99/1402
Competition Policy Division
Office of Fair Trading (OFT)
Chancery House
53-64 Chancery Lane
London
WC2A 1SP

Dear Sir
Re your letter of the 6^th September, I do not think Microsoft's alleged predation is the main issue, though some details are provide to meet your request (these are a bit old).

By the beginning of the 1980s IBM had a monopoly of large computer systems. Then Microsoft was given the contract (without tendering) to provided the operating system for the IBM PC. This lead to them having a monopoly in PC 0Ss and increasingly in application software. Intel got it's monopoly in a similar way.

"Excessive prices or reduction in quality of service are typical of results of exploitation of a monopoly situation" (OFT Website). Microsoft are well known for slow, resource hungry, buggy programs at higher cost, their overall margin is now 60.2% ( Intel chips have also been known to be over priced sometimes).

Page 2: Ref CF/9911402

The evidence I have of Microsoft practices are not specific to one geographic area. Though it is highly likely that some of these practices happened in the UK I cannot say this with 100% certainty for the moment.

The following are some of the allegations that have repeatedly appeared in many computer magazines, books and other public (and private) sources.

Microsoft

Vaporware
Making product announcements when no product exists (or are at such a stage that they know that they will be unable to meet the dead line) to damage a competitor and or competitor's products, e.g. the Simply Interactive PC (SIPC) to damage Acorn and other produces of Set-Top-Boxes (STB)/Network Computers (NC). Sometimes vaporware products never ship.

Per processor licensing
From the USA courts, square brackets my comments.
"Beginning in 1988, and continuing until [at least] July 15, 1994, Microsoft induced many OEMs [Original Equipment Manufacturers] to execute anticompetitive "per processor" licenses. Under a per processor license, an OEM pays Microsoft a royalty for each computer it sells containing a particular microprocessor, whether the OEM sells the computer with a Microsoft operating system or a non-Microsoft operating system. In effect, the royalty payment to Microsoft when no Microsoft product is being used acts as a penalty, or tax, on the OEM's use of a competing PC operating system. Since 1988, Microsoft's use of per processor licenses has increased. In fiscal year 1993, per processor licenses accounted for an estimated 60% of MS-DOS sales to OEMs and 43% of Windows sales to OEMS. Collectively, the OEMs who have such per processor contracts are critical to the success of competing operating system vendors, but those OEMs effectively are foreclosed to Microsofts competitors."

NDAs
Non-Disclosures Agreements are normally used to prohibit disclosure of confidential information given to another company. With 'Windows 95' (giving inforination/software to companies, so that they could develop products for it) Microsoft added clauses that restricted the companies from working on competing products and technologies.

Destroyer Pricing
Microsoft has sold products below cost including giving software for free. Products below cost include OS, Graphics software and Intemet Browsers etc.

In 1995 Microsoft gave away for free a product called 'Microsoft Direct3D', to developers. They acquired this software by buying the company Rendermophics. Before this, competing British companies, including Argonaut Software, Criterion Software (formerly Canon Research Europe) and Rendermophics, had been selling real time 3D rendering software for up to $50,000 and more.

The original letter also included a page photocopied from Open Computing July 1994 (page 46), from an article called Waiting for Justice By Wendy Goldman Rohm.