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From Antitrust Law Daily, December 27, 2013

Dismissal of refusal to deal, predatory pricing claims against Microsoft upheld

By Jeffrey May, J.D.

The U.S. Court of Appeals in New York City has affirmed the dismissal of an antitrust action brought against Microsoft Corporation by MiniFrame, Ltd.—a developer of PC-sharing software (MiniFrame Ltd. v. Microsoft Corp., December 23, 2013, Per Curiam).

MiniFrame brought the action in 2011, contending that Microsoft violated Section 2 of the Sherman Act. MiniFrame asserted two theories of anticompetitive conduct: (1) refusal to deal and (2) predatory pricing. Both theories were rejected by the district and appellate courts.

Refusal to deal. MiniFrame’s refusal to deal claim was based on Microsoft’s decision to change the terms by which it licensed its Windows operating system to customers, purportedly in response to MiniFrame’s new technology. For a time, Microsoft’s Windows license required customers to install and use Windows on only one computer. MiniFrame developed its SoftXpand PC-sharing product to allow multiple users to simultaneously access a single copy of Windows on a single computer without violating the Windows license. In response, Microsoft changed its licensing terms to prohibit Windows from being used by more than one user at a time, rather than restricting use on a per computer basis. MiniFrame contended that the change amounted to a refusal to deal.

There is a limited exception to the general rule that a firm has a right to decide with whom it will deal. A monopolist may be liable for refusing to deal when it seeks to terminate a prior, voluntary course of dealing, the court explained. However, MiniFrame did not allege that Microsoft had any prior dealing with it. Rather, MiniFrame alleged that Microsoft changed the terms by which Microsoft licensed its product to its customers. Microsoft never officially approved the use of SoftXpand, it was noted.

Predatory pricing. MiniFrame also unsuccessfully attacked Microsoft’s alleged predatory pricing of its competing multi-user software, called MultiPoint Server. MiniFrame failed to provide an appropriate measure of cost for judging the alleged below-cost pricing. MiniFrame merely compared retail prices. It alleged that Microsoft charged less for a bundle that included MultiPoint and Windows than it did for Windows alone. Since there was no allegation that Microsoft was pricing below cost, MiniFrame failed to state a claim based on predatory pricing, the court ruled.

The case is 13-1607-cv.

Attorneys: Robert W. Morris (Kramer Levin Naftalis & Frankel LLP) for MiniFrame Ltd. Robert A. Rosenfeld (Orrick, Herrington & Sutcliffe LLP) for Microsoft Corp.

Companies: MiniFrame Ltd.; Microsoft Corp.

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