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Bundling of Microsoft Windows

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The bundling of Microsoft Windows is the installation of Microsoft Windows in computers before their purchase. Microsoft encourages original equipment manufacturers (OEMs) of personal computers to include Windows licenses with their products, and agreements between Microsoft and OEMs have undergone antitrust scrutiny. Users opposed to the bundling of Microsoft Windows, including Linux users, have sought refunds for Windows licenses, arguing that the Windows end-user license agreement entitles them to return unused Windows licenses for a cash refund.[1] Although some customers have successfully obtained payments (in some cases after litigation or lengthy negotiations), others have been less successful.[2]

The "Windows tax"

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Microsoft encourages original equipment manufacturers (OEMs) to supply computers with Windows pre-installed,[3] saying that purchasers benefit by not having to install an operating system.[4] Analyst Vishal Tripathi said that many people purchase PCs with pre-installed operating systems because they do not want to deal with the "learning curve" and inconvenience of installing an operating system.[5] Virtually all large computer vendors bundle Microsoft Windows with the majority of the personal computers in their ranges. In 1999, Maximum PC wrote that non-Windows users "have long griped that machines from large companies can't be purchased without Windows".[6] In 1999, analyst Rob Enderle attributed the lack of computers without Windows available for individual purchase to economic impracticality, citing certification and warranty requirements.[6] In 1999, Dell stated that it only offered non-Microsoft operating systems on servers and as part of customized large orders, but if Linux became popular enough to make Linux pre-installation cost-effective, "we'd be foolish not to offer it".[6] The Guardian's computer editor Jack Schofield claimed that there were significant cost overheads associated with preinstalling Linux, in part due to Linux's small market share,[7] although Schofield had generally viewed Microsoft's bundling practices favourably, claiming in 1995 that Microsoft's incentives were not unlike promotional deals in other industries and that "Microsoft cannot be accused of beating PC manufacturers with a stick: at worst it is beating them with a carrot",[8] despite the well-established competitive impact of such practices on suppliers of competing systems software, acknowledged in a 1994 settlement with Novell.[9]: 208  Serdar Yegulalp of Computerworld said that in the late 1990s, because Linux was not fully developed, Linux computers were "a tough sell for non-technical users".[10]

Microsoft historically engaged in licensing practices that discouraged the installation of non-Microsoft operating systems. Microsoft once assessed license fees based on the number of computers an OEM sold, regardless of whether a Windows license was included. Beginning in 1983, Microsoft sold MS-DOS licenses to OEMs on an individually negotiated basis. The contracts required OEMs to purchase a number of MS-DOS licenses equal to or greater than the number of computers sold, with the result of zero marginal cost for OEMs to include MS-DOS. Installing an operating system other than MS-DOS would effectively require double payment of operating system royalties. Also, Microsoft penalized OEMs that installed alternative operating systems by making their license terms less favorable.[11]: 165–66  Microsoft entered into a consent decree in 1994 that barred them from conditioning the availability of Windows licenses or varying their prices based on whether OEMs distributed other operating systems.[12] Microsoft General Counsel Brad Smith said that the decree was effective in allowing Dell and HP to offer Linux computers,[13] and Jeremy Reimer of Ars Technica stated that the decree made it "fiscally realistic to sell computers with alternative operating systems".[12] In 1999, a Microsoft representative stated that their contracts with OEMs did not "stop[] any OEM from shipping any operating system on their PCs".[1] In 2010, Microsoft stated that its agreements with OEMs to distribute Windows are nonexclusive, and OEMs are free to distribute computers with a different operating system or without any operating system.[4] In a 2001 article in Byte, it was reported that license agreements between OEMs and Microsoft forbade OEMs from including Windows alongside another operating system on the same computer.[14] According to a 1999 New York Times article, "critics assert that the company continues to use its market clout to ensure that nearly all new personal computers come with Windows pre-installed."[15]

In 2009, Microsoft stated that it has always charged OEMs about $50 for a Windows license on a $1,000 computer.[16] In 2007, Dell stated that its computers with Ubuntu installed would be priced about $50 lower than comparable systems with Windows installed.[12] In a 2010 ZDNet article, Chris Clay wrote that Dell computers with Ubuntu preinstalled were priced higher than identical systems with Windows preinstalled, even though Ubuntu is distributed gratis.[17] The claimed increase in the price of a computer resulting from the inclusion of a Windows license has been called the "Windows tax" or "Microsoft tax" by opposing computer users.[12][18]

Some computer purchasers request refunds for Windows licenses included with their purchased computers because they do not want to use Windows, preferring an operating system such as Linux instead.[17] Jeff Walsh of InfoWorld said that businesses with site licenses can save money by requesting refunds of Windows licenses included with purchased computers.[1]

Users can avoid the "Windows tax" altogether by assembling a computer from individually purchased parts or purchasing a computer from an OEM that does not bundle Windows. Some smaller OEMs and larger retail chains such as System76 have taken to specializing in Linux-based systems to their advantage from major suppliers' paucity of non-Windows offerings.[10] Beginning in 2007, Dell offered computers with Ubuntu pre-installed.[12] In 2014, Hewlett-Packard stated that it sells "units bundled with a built-in OS and those without".[5] Some Linux distributors also run 'partnership' programs to endorse suppliers of machines with their system pre-installed.[19] Some vendors purchase computers from major OEMs, install Linux on them and resell them.[10] Chris Clay of ZDNet wrote that employee discount programs create a financial incentive to purchase computers from a large manufacturer, even if the manufacturer does not offer computers without Windows.[17]

Boot locking concerns

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See also: Windows 8 § Secure boot

Microsoft requires that OEMs support UEFI secure boot on their products to qualify for the Windows 8 Logo [case badge] Program.[20] Concerns have been raised that OEMs might ship systems that do not allow users to disable secure boot or install signing keys for alternative operating systems.[21][22] Such computers would be unable to boot any non-Windows operating system (unless that operating system was signed and its keys included with the computer),[23] further complicating the issue of Windows refunds. While Microsoft claims the OEMs would be free to decide which keys to include and how to manage them,[24] competing OS vendors' relative lack of influence on the desktop OS market compared to Microsoft might mean that, even if signed versions of their operating systems were available, they might face difficulties getting hardware vendors to include their keys, especially if end users won't be able to manage those keys themselves.[25] Boot locking was required for Windows Phone and RT devices,[26] but not for Windows 10 Connected PCs. In January 2012, Microsoft confirmed it would require hardware manufacturers to enable secure boot on Windows 8 devices, and that x86/64 devices must provide the option to turn it off while ARM-based devices must not provide the option to turn it off.[27]

License refund policy

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Microsoft does not provide refunds for Windows licenses sold through an OEM, including licenses that come with the purchase of a computer or are pre-installed on a computer.[28] A Microsoft Denmark representative stated that Microsoft's Windows license terms allow OEMs to offer a refund for just the Windows license.[29] Microsoft's End User License Agreement for Windows 11 states that:[30]

By accepting this agreement or using the software, you agree to all of these terms, and consent to the transmission of certain information during activation and during your use of the software as per the privacy statement described in Section 3. If you do not accept and comply with these terms, you may not use the software or its features. You may contact the device manufacturer or installer, or your retailer if you purchased the software directly, to determine its return policy and return the software or device for a refund or credit under that policy. You must comply with that policy, which might require you to return the software with the entire device on which the software is installed for a refund or credit, if any.

In 1999, the relevant text read[1]

If you do not agree to the terms of this EULA, PC Manufacturer and Microsoft are unwilling to license the SOFTWARE PRODUCT to you. In such event, you may not use or copy the SOFTWARE PRODUCT, and you should promptly contact PC Manufacturer for instructions on return of the unused product(s) for a refund.

In 1999, according to InfoWorld, "Some users are taking this EULA literally and plan to demand a cash refund."[1] In 1999, a Microsoft representative described requesting a Windows refund on the basis of rejecting the license as "a technicality where someone is twisting the language a little bit to come up with the idea that they can run back to the OEM with this".[1] Laurie J. Flynn of The New York Times characterized the license refund argument as using a loophole in the license agreement.[31]

OEM policies for refunding unused Windows licenses vary. Some OEMs have programs that specifically allow a user to receive a refund for an unused Windows license. Acer US has a Windows refund program where a user can ship a computer with an unused copy of Windows to the Acer service center and have the computer returned without Windows for a refund.[32] Acer's policy requires the customer to return items at their own expense, and the balance received by the customer can be as low as €30.[33] The same applies for EU, the reported refund as of 2014 is €40 for Windows 8.[34] Other vendors, like Dell, have ad hoc procedures for users to request a refund of a Windows license; one user who received a £55.23 refund from Dell said of the process, "I was pretty gob-smacked that it was so easy".[35] In some cases, vendors have asked that customers requesting refunds sign non-disclosure agreements.[36][37] In 1999, a Toshiba representative stated that a case where a user obtained a $110 refund was "not the typical policy and not what other people will run into if they try it".[1] Other vendors do not issue refunds for Windows licenses. In February 1999 InfoWorld reported that "No PC manufacturers are currently offering refunds for users who do not use Windows".[38] According to a 1999 Maximum PC article, Dell did not provide refunds for Windows licenses, interpreting the license agreement to "treat the hardware and software as a single package that must be returned".[6] In 2009, Sony refused to offer a partial refund for a customer who declined the Windows Vista EULA, instead offering a refund for the entire computer, which the customer declined.[39][2]: ¶20–21 

Litigation by users denied a partial refund for an unused Windows license has resulted in rulings in France and Italy that bundling Microsoft Windows and then refusing to offer partial refunds for just the Windows license violates applicable law.[40][41][42][43] In September 2014, the Supreme Court of Italy in ruling 19161/2014 decided that a laptop buyer was entitled to receive a refund of €140 for the price of a Microsoft Windows license and a Microsoft Works license on a computer, saying that bundling was "a commercial policy of forced distribution" and called this practice "monopolistic in tendency",[44][45][46][47] confirmed later with ruling 4390/2016.[48] In December 2020, the Court of Monza (Italy) in ruling 1734/2020 imposed upon the manufacturer punitive damages amounting to €20,000 for abuse of the appeal procedures.[49][50] In India, bundling is challenged by users as a violation of Competition Act 2002; one Indian citizen has sent a legal notice to HP.[5][51] However, in another license refund case, a French appellate court ruled in favor of the OEM, "holding that the sale at issue did not constitute the unfair commercial practice of coercive selling, which is not permitted under any circumstances, an unfair commercial tying practice, or a misleading or aggressive commercial practice."[39]: ¶24  The case is pending before the Court of Cassation.[39]: ¶26 

In September 2016, the Court of Justice of the European Union ruled that "the sale of a computer equipped with pre-installed software does not in itself constitute an unfair commercial practice within the meaning of Directive 2005/29 when such an offer is not contrary to the requirements of professional diligence and does not distort the economic behaviour of [purchasers]." The Court also ruled that Directive 2005/29 does not require OEMs to include a separate price for an operating system license.[52][2]

Public response

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Websites have been created for the specific purpose of spreading information about the issue and educating others on their options for getting a refund.[53] A 1999 rally opposing the bundling of Windows[54] attracted about 100 protesters[55] and gained media attention worldwide.[53][56][15][55] The overall goal of such events has been to get OEMs to expand their selection of computers without a copy of Windows pre-installed, with the additional goal of getting them to revise and improve their refund policies while the first goal has not been met.[57] An analyst stated that refund actions by individual users were "a publicity stunt [that] has no impact".[1]

References

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  1. ^ a b c d e f g h Walsh, Jeff (January 25, 1999). "PC buyers to demand refund for Windows". InfoWorld. 21 (4): 26.
  2. ^ a b c Baker, Jennifer (September 7, 2016). "Sony wins battle over preinstalled Windows in Europe's top court". Ars Technica.
  3. ^ Lettice, John (November 28, 2000). "MS: it's (nearly) illegal to buy PCs without Windows". The Register. Retrieved April 21, 2019.
  4. ^ a b Protalinski, Emil (January 7, 2010). "Italian class-action suit targets unwanted Windows installs". Ars Technica. Condé Nast. Retrieved December 28, 2012. However, consumers benefit from the preinstallation of Windows on PCs. It provides the best user experience from the time a consumer first turns on the PC, and saves consumers the substantial effort and resources associated with having to install an operating system that functions properly." ... "Computer manufacturers are free to sell PCs pre-installed with another operating system or no operating system at all," the [Microsoft] spokesperson continued. "It's also important to note that Microsoft's agreements with OEMs are nonexclusive.
  5. ^ a b c "21-year-old takes on HP for bundled OS". Times of India. September 11, 2014.
  6. ^ a b c d Future Us, Inc (April 1999). "Alternate OS Users Ask for Windows Refund". Maximum PC. 4 (4): 25–26. {{cite journal}}: |first1= has generic name (help)
  7. ^ Schofield, Jack (December 13, 2013). "Linux laptops: should you avoid buying Windows?". The Guardian. Retrieved January 11, 2016.
  8. ^ Schofield, Jack (February 1995). "The times they are a' changing". Personal Computer World. p. 314.
  9. ^ "Deal clears deck for Novell DOS 7.0". Personal Computer World. October 1994. p. 208.
  10. ^ a b c Yegulalp, Serdar (October 14, 2013). "Preloaded Linux systems: Weighing the options". Computerworld. Retrieved January 11, 2016.
  11. ^ Rosenbaum, David Ira (1998). Market Dominance: How Firms Gain, Hold, Or Lose it and the Impact on Economic Performance. Greenwood Publishing Group. ISBN 9780275956042.
  12. ^ a b c d e Reimer, Jeremy (May 25, 2007). "Dell goes Ubuntu; "Windows tax" is $50 according to pricing". Ars Technica. Condé Nast.
  13. ^ Fried, Ina (July 9, 2004). "Microsoft's 1994 consent decree: Boon or bust?". CNET. Retrieved February 5, 2013.
  14. ^ Hacker, Scot (August 2001). "He Who Controls the Bootloader". Byte. Archived from the original on December 17, 2001. Retrieved March 23, 2014.
  15. ^ a b Harmon, Amy (February 16, 1999). "Self-Proclaimed Computer Geeks Hold 'Windows Refund Day'". The New York Times. Retrieved November 12, 2010.
  16. ^ Protalinski, Emil (September 16, 2009). "OEMs pay Microsoft about $50 for each copy of Windows". Ars Technica. Condé Nast. Retrieved December 28, 2012.
  17. ^ a b c Clay, Chris (February 10, 2010). "Linux users, get your Windows refund today". ZDNet. Retrieved August 24, 2013.
  18. ^ Demerjian, Charlie (March 3, 2007). "Cost of Windows tax calculated". The Inquirer. Incisive Financial Publishing. Archived from the original on November 29, 2010.{{cite web}}: CS1 maint: unfit URL (link)
  19. ^ "Find a Partner". Ubuntu Partners. Canonical.
  20. ^ van der Hoeven, Arie (September 20, 2011). "Delivering a secure and fast boot experience with UEFI".
  21. ^ Garrett, Matthew (September 20, 2011). "UEFI secure booting".
  22. ^ Anderson, Ross (September 20, 2011). "Trusted Computing 2.0".
  23. ^ Leyden, John (September 21, 2011). "Windows 8 secure boot would 'exclude' Linux". The Register.
  24. ^ Sinofsky, Steven (September 22, 2011). "Protecting the pre-OS environment with UEFI".
  25. ^ Garrett, Matthew (September 23, 2011). "UEFI secure booting (part 2)".
  26. ^ Williamson, Aaron (January 12, 2012). "Microsoft confirms UEFI fears, locks down ARM devices".
  27. ^ Is Microsoft Blocking Linux Booting on ARM Hardware? - Open Enterprise Archived 2012-03-09 at the Wayback Machine
  28. ^ "Microsoft North American Retail Product Refund Guidelines". Microsoft. Retrieved August 27, 2012.
  29. ^ Gitte Bank Jensen (January 14, 2011). "Køb din computer billigere uden program" (in Danish). 24timer.
  30. ^ Microsoft Corporation (June 28, 2021). "Microsoft Software License Terms". Microsoft. Retrieved April 4, 2023.
  31. ^ Flynn, Laurie J. (January 25, 1999). "Linux Users Planning to Take Demands Straight to Microsoft". The New York Times. Retrieved August 5, 2015. The users are hoping to use a loophole that they say they have found in the end user licensing agreement for Windows
  32. ^ "How do I obtain a refund for the Microsoft Windows Operating System?". April 4, 2011.
  33. ^ "Man wins damages from Acer over Voleware refund". The Inquirer. Incisive Financial Publishing. September 22, 2007. Archived from the original on June 11, 2011.{{cite web}}: CS1 maint: unfit URL (link)
  34. ^ "Acer 2014 refund story (Czech Republic)". www.root.cz. Retrieved April 5, 2015.
  35. ^ Ward, Mark (November 14, 2006). "User refund for no Windows option". BBC News. BBC. Retrieved January 15, 2010.
  36. ^ Hillenius, Gijs (August 31, 2008). "CZ: Lenovo fails to silence GNU/Linux user on Windows refund". Open Source Observatory & Repository Europe. Archived from the original on July 20, 2011.
  37. ^ Lilian, Niv (December 3, 2008). "Dell customer awarded Windows refund". Ynetnews.
  38. ^ Infoworld Media Group, Inc (February 22, 1999). "End-users rally for Windows refund". InfoWorld. 21 (8): 18. {{cite journal}}: |first1= has generic name (help)
  39. ^ a b c Court of Justice of the European Union (September 7, 2016). "Judgment of the Court: Vincent Deroo-Blanquart v Sony Europe Limited".
  40. ^ "Italy: High Court shoots down Windows tax". Free Software Foundation Europe (quoting La Repubblica). September 12, 2014.
  41. ^ "Ruling: Acer must refund purchase price of pre-installed software that is not being used" (PDF). heise online. September 26, 2007.
  42. ^ "HP must reimburse Italian PC buyer the amount paid for Microsoft software". October 29, 2007. Archived from the original on March 4, 2009.
  43. ^ Sayer, Peter (February 7, 2012). "Lenovo ordered to pay €1920 for making French laptop buyer pay for Windows too". Techworld.
  44. ^ Windows Tax Shot Down In Italy, slashdot.org, 14 September 2014
  45. ^ Italy: High Court shoots down Windows tax, Free Software Foundation Europe, 12 September 2014, accessed 14 September 2014
  46. ^ Hp perde causa: il software preinstallato indesiderato è rimborsabile, La Republica, 11 September 2014, accessed 14 September 2014
  47. ^ Guerrini, Federico (October 10, 2014). "The Windows tax fight is finally over: Buyers can get a refund on their Microsoft OS in Italy". ZDNet. Retrieved August 5, 2015.
  48. ^ Pre-installed software license agreement not mandatory to accept for a brand-new notebook
  49. ^ "Refund of pre-installed Windows: Lenovo must pay 20,000 euros in damages". Free Software Foundation Europe. March 2, 2021.
  50. ^ "20,000 euros in damages for Windows refund (Italian)". Italian Linux Society. March 2, 2021.
  51. ^ "Refund for unused Microsoft Windows 8 Operating System Software" (PDF). Software Freedom Law Center, India. September 2, 2014.
  52. ^ Court of Justice of the European Union (September 7, 2016). "The sale of a computer equipped with pre-installed software does not constitute, in itself, an unfair commercial practice" (PDF).
  53. ^ a b "Windows refund day". BBC News. BBC. February 16, 1999. Retrieved January 5, 2010.
  54. ^ Merlin, Marc. "Windows refund day". Retrieved November 12, 2010.
  55. ^ a b Evangelista, Benny (February 16, 1999). "They Don't Do Windows". The San Francisco Chronicle. Hearst Communications. Archived from the original on April 27, 2009. Retrieved November 12, 2010.
  56. ^ "A tiny protest makes a big noise". Slashdot. February 17, 1999. Retrieved April 21, 2019.
  57. ^ Kosmin, Adam (June 27, 2003). "Windows Refund Day II: Next Steps". Linux Journal. Retrieved November 12, 2010.

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