The Antitrust Case Against Microsoft

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The U.S. government charged that Microsoft had violated antitrust law. Microsoft disagreed. Do you agree with the U.S. government, or with Microsoft? In answering this question, you may wish to address two issues. Was Microsoft a monopoly? Did it use its monopoly to compete unfairly against other companies?

Commencing in 1990, Microsoft was investigated and then charged with violation of the Sherman Antitrust Act which governs United States businesses. The company was determined to be a monopoly, and one which used anti-competitive practices to keep its leading edge on the market. As would most any organization on the receiving end of the allegations, Microsoft did not agree with the charges and sought to defend its business practices and reputation. An evaluation of the case findings and Microsoft’s defense led me to agree with the Court. The first step in reaching this opinion was to determine if Microsoft is in fact a monopoly.

Monopolization is proven by two elements. One is that the company “possesses monopoly power in a properly-defined market.”1 The other element is that the monopolizing organization “obtained or maintained that power through conduct deemed unlawfully exclusionary.” 2 Based on the fact that Microsoft is part of the computer software industry, there could be arguments that show the company to actually be part of a natural monopoly, due to the premise “that multiple firms providing a good or service is less efficient (more costly to a nation or economy) than would be the case if a single firm provided a good or service.” 3 My belief is that Microsoft actually falls in both categories.

The Court’s Findings of Facts clearly identified several situations in which Microsoft abused its power to fend off potential competitors and maintain its hold of the lion share of the computer software market, which stood at over 90% for the last ten or more years.4 Simply by that calculation alone, this consumer perceives Microsoft to be the monopolizing entity in the software world. In fairness however, the company also appears to be in a natural monopoly industry. When evaluating the concept of efficiency of service by one organization rather than many, it is clear that one leader is truly the better way to handle software development, especially in the arena of computer operating systems. Too many options could lead to limited progress, in that a high rate of competition could potentially render operating systems obsolete at a rate higher than the average consumer’s ability to adapt, let alone fund the purchase of continual upgrades.

While Microsoft could be considered part of that natural monopoly environment, the abuse of power and seemingly unethical business practices proved it to be a monopolizing entity in behavior as well. Throughout the mid-1990’s, Microsoft engaged in several anti-competitive situations that were at the core of the case against them. They were found to be compelling their business partners to promote only their web browser (Internet Explorer), making questionable offers to their major internet browser competitor Netscape, and bundling their Internet Explorer with the Windows operating system to ensure sale of the software. The company’s anti-competitive practices related to operating systems as well as the internet browser software. Interestingly, it seems that both systems could lead to two different opinions. Barring the user-friendly MAC system, Windows is definitely the most popular and widely used operating system on PC’s today.

Internet Explorer, however, has definitely been the recipient of very mixed reviews. A test was done to compare the browser with its stiffest competitor Netscape Navigator. The test compared varying scenarios and tasks in both browsers, and reviewed timeliness, ease of function and accomplishment, and overall consumer satisfaction. Interestingly, Netscape was shown to be better than Internet Explorer in most areas. The test participants...
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