Microsoft as a Monopoly

Since the early 1990’s, the United States government and the Microsoft Corporation have ensued upon a battle in the United States courts. The main issue at hand is ultimately money, but one more importantly, the supposed “Microsoft Monopoly.” The federal government maintains that Microsoft's monopolistic practices are detrimental to United States citizens, creating higher prices and potentially downgrading software quality, and should therefore be stopped. Microsoft and its supporter’s claim that they are not breaking any laws and they are just doing what they do; making money and providing a service. The only thing Microsoft is guilty of is taking advantage of free enterprise. There have been many arguments and issues that have been raised with the controversy over Microsoft and the U.S. Department of Justice’s claim against Microsoft of monopolistic practices in bundling its internet browser “Internet Explorer” into its popular Windows computer operating system. By doing this, Microsoft would effectively crush its competitors and acquire a monopoly over the software that people use to access the Internet.

Sherman Anti-trust Act was passed in 1890. The Sherman Act says “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 Sherman Act also provided for "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 Sherman Act put the responsibility in the hands of the government to investigate and prosecute those suspected to be guilty of this crime.

In 1914, the Clayton Act was passed in conjunction with the Sherman Anti-trust Act to assist with anti-trust cases. The Clayton Act prohibited price discrimination between different purchasers if such discrimination substantially lessens competition or tends to create a monopoly ion any line of commerce. The Act also prohibits sales on the condition that the buyer or leaser not deal with the competitors of the seller or lesser “exclusive dealings”, or that the buyer also purchases another different product, but only when these acts substantially lessen competition. Mergers and acquisitions where the effect may substantially lessen competition are prohibited also by the act. The last prohibition of the act is that no person can be the director of two or more competing corporations.

Microsoft's antitrust problems began for them in the early in 1990, when the Federal Trade Commission began investigating them for possible violations of the Sherman and Clayton Antitrust Acts. This investigation continued until about 1993 without resolution, until Novell, maker of DR-DOS (a PC compatible operating system IMB compatible computers), a competitor of Microsoft's MS-DOS (Microsoft Disk Operating System), filed a complaint with the Competition Directorate of the European Commission in June of 1993. (Moore 2) Doing this delayed the investigations even more, until August of 1993; the Federal Trade Commission decided to hand the case over to the Department of Justice. The Department of Justice (DOJ) moved rapidly, with Anne K. Bingaman, head of the Antitrust Division of the DOJ, leading the way. The case was finally ended on July 15, 1994, with Microsoft signing a consent settlement. (Moore 1)

The settlement focused on Microsoft's selling practices. Before the contract, Microsoft would sell MS-DOS and Microsoft's other operating systems to original equipment manufacturers (OEM's) at a 60% discount if that OEM agreed to pay a percentage to Microsoft for every single computer that they sold regardless if it had a Microsoft operating system installed on it or not. After the settlement, Microsoft would be forced to sell their operating systems according to the number of computers shipped with a Microsoft operating system installed, and not for computers that ran other operating systems. (Stross 59)

Another practice that the Justice Department accused Microsoft of was that Microsoft would specify a minimum number of operating systems that the retailer had to buy, eliminating any chance for another operating system vendor to get their system installed. In addition, Microsoft also would sign contracts with the vendors for long periods of time. In order for a new operating system to gain recognition, it would have to do so quickly, in order to show potential buyers that it was worthy. (Stross 60) With Microsoft signing long-term contracts, they abolished the chance for a new operating system to gain the popularity needed, quickly.

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