Microsoft Anti Trust

In 1975 Bill Gates and Paul Allen entered into an informal business arrangement after creating Microsoft Basic and called their newly formed business Micro-Soft. The following year the Microsoft name is officially trademarked with the state of New Mexico. At the end of 1978, the company’s year end sales equaled more than 1 million dollars and they have their first international office open in Japan. In 1980 Microsoft enters into a contract with IBM who needs an operating system designed. 1982 brought even more changes with DOS being licensed to 50 hardware manufactures. Also during this time they began developing early prototypes of what is known today as Microsoft Windows.

The licensed numbers of Windows users total more than 25 million in 1993. Windows 95 and Windows 98 were introduced followed by Windows 2000. That year they also acquired one of the largest business diagramming and technical drawing software companies, Visio Corporation.

With Microsoft strong power in the market for Intel-compatible PC operating system, if they choose to they could solely in terms of price. It could charge a price for Windows substantially above that which could be charged in a competitive market. They could do so over a long period of time without losing an unacceptable amount of business to competitors. In this relevant market, Microsoft enjoys a monopoly power. A monopoly is a term used by economist that refers to a situation in which there is one seller of a product or service to multiple buyers for which there are no close substitutes.

There are three facts that indicate this power. First; Microsoft’s share of the market for Intel-compatible PC operating system is extremely large and stable. Second; Microsoft huge market share is protected by a high barrier to entry and third; largely as a result of that barrier, Microsoft’s customers lack a commercially viable alternative to Windows.

Microsoft’s share of the market for Intel-compatible PC operating system has stood above ninety percent. For the last 2 years running there share has been over ninety five percent, and analyst’s project that the share will climb higher over the next few years.

The United States Department of Justice (DOJ) and twenty U.S. states filed a civil action against Microsoft Corporation on May 18, 1998. The case was against Microsoft Corporation for using its monopoly position in the operating system market to unfairly mute competition in other technology markets. The U.S. Department of Justice and the twenty states were claiming that Microsoft was performing business in violation of the Sherman Antitrust Act of 1890.

Underlying these arguments were questions over whether Microsoft altered or manipulated its application programming interfaces to favor Internet Explorer over third party web browsers. Microsoft said key elements of the Windows system could not operate without the inclusion of the browser technology. A browser’s enables a computer user to find and retrieve information on the internet.

The Microsoft antitrust trial (United States vs. Microsoft) has been one of the biggest investigations of antitrust behavior since the turn of the century. Microsoft raised 6 key points as the bases of their defense against the charges filed by the Federal Trade Commission.

Microsoft argued that since the court of appeals had ruled on their side in 1998 that Microsoft could legally add the Internet Explorer on to the Window’s platform in accordance with their ruling. Microsoft alleged that it was simply competing against Netscape and that it had not done any thing that doesn’t naturally take place in the business world and that as a leader in the market it has promoted innovation vice trying to hinder it. They also stated that there position in the market could be replace at any time due to the intense competition. Microsoft argued that they did not have a monopoly in the operating system market. Finally Microsoft argued that the public benefited from the lower prices and was not harmed by their actions.

Was that the case when Microsoft was charged with violation of the antitrust law? Economists widely agree that competition between companies encourages innovation and allows consumers freedom of choice based on price and other features. (findlaw.com, 1999)

Microsoft witnesses were mainly the executive who was responsible for the dealings with those companies to dispute the individual charges, which caused some embarrassing moments for Microsoft. One example, a videotaped deposition by Microsoft executive Jim which lasted between 20-minute to an hour long and took three days of questioning by David Boies, the Government's lead attorney. There were so many inconsistencies in the tape it was not clear if the tape actually showed lab results or was a combination of things that were spliced