Microsoft’s Antitrust Battle

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I. Introduction to Microsoft

Microsoft Corporation was founded by William H. Gates III also known as Bill Gates and Paul G. Allen in 1975. Since their inception they have been credited for developing various operating systems to coordinate with the personal computer (PC). “Microsoft possesses a dominant, persistent, and increasing share of the world- wide market for Intel-compatible PC operating systems. Every year for the last decade, Microsoft's share of the market for Intel-compatible PC operating systems has stood above ninety percent. For the last couple of years the figure has been at least ninety-five percent, and analysts project that the share will climb even higher over the next few years (Justice).” Microsoft has also developed product lines such as office productivity software, software development tools, Internet Explorer, MSN online network, and Xbox which has helped to establish a foothold in the market they possess (Ferrell p399). Despite being highly recognized for innovation, Microsoft has been accused of violating various legal issues from its dominance of particular software markets. Since Microsoft has such dominance in the market, it seems that there has been much confusion to determine if the large firm has violated any antitrust laws.

The antitrust law that Microsoft as been accused of violating is the Sherman Antitrust Act and the Clayton Act. The Sherman Antitrust Act established July 2, 1890 provides: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal". The Act also provides: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony " The Act put responsibility upon government attorneys and district courts to pursue and investigate trusts, companies and organizations suspected of violating the Act (Sherman Antitrust).” The Clayton Act established in 1914 “extended the right to sue under the antitrust laws to "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws." Under the Clayton Act, private parties may sue in U.S. district court and should they prevail, they may be awarded treble damages and the cost of suit, including reasonable attorney's fees (Sherman Antitrust).”

One of the first implications of any antitrust violations occurred in 1990 when the Federal Trade Commission (FTC) decided to investigate Microsoft Corp for such suspensions. Later in 1993, the FTC was deadlocked in their decision and was not able to find fault with Microsoft and therefore, the case was handed over to the Department of Justice (DOJ) (Ferrell p399). Once the case was handed over to the DOJ, Microsoft settled the case without admitting to any of the charges. As part of the settlement Microsoft agreed to share documents with the DOJ to use in any further investigations.

Several actions that caused some of the accusations towards Microsoft were their practice of selling its MS-DOS software to original equipment manufactures (OEMs) at a discount of 60 percent (Ferrell p399). The agreement that Microsoft had with the manufactures provided that the manufactures paid Microsoft a portion of profit for every computer sold with the MS-DOS operating system as a “per processor agreement (Ferrell p399).” Some manufactures believed that Microsoft should only be compensated for the computers that only had MS-DOS preinstalled on the machines as a “per copy agreement (Ferrell p399).” The agreement that Microsoft had with the OEMs allowed them to receive payment for computers that did not have MS-DOS installed on them and Microsoft was receiving royalties at double the compensation. It was also argued that this practice was unjust...
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