Microsoft And How ItS A Monopoly Essay

Microsoft And How It.S A Monopoly Essay, Research Paper

Microsoft And How It.s A Monopoly

Since 1990, a battle has raged in United States courts between the United States

government and the Microsoft Corporation out of Redmond, Washington, headed by Bill

Gates. What is at stake is money. The federal government maintains that Microsoft.s

monopolistic practices are harmful to United States citizens, creating higher price and

potentially downgrading software quality, and should therefore be stopped. While

Microsoft and its supporter.s claims that they are not breaking any laws, and are just

doing good business.

Microsoft.s antitrust problems began for them in the early months of 1990, when

the Federal Trade Commission began investigating them for possible violations of the

Sherman and Clayton Antitrust Acts, which are designed to stop the formation of

monopolies. The investigation continued on for the next three years without resolve, until

Novell, maker of DR-DOS a competitor of Microsoft.s MS-DOS, filed a complaint with

the Competition Directorate of the European Commission in June of 1993. Doing this

stalled the investigations even more, until finally in August of 1993, the Federal Trade

Commission decided to hand the case over to the Department of Justice. The Department

of Justice moved quickly, with Anne K. Bingaman head of the Antitrust Division. The

case was finally ended on July 15, 1994, with Microsoft signing a consent to settlement.

The settlement focused on Microsoft.s selling practices with computer

manufacturers. Up until now, Microsoft would sell MS-DOS and Microsoft.s other

operating systems to original equipment manufacturers (OEM.s) at a 60% discount. Only

if OEM agreed to pay a royalty to Microsoft for every single computer that they sold

regardless if it had a Microsoft operating system installed on it or not. The number of

computers shipped with a Microsoft operating systems installed, and not for computers

that ran other operating systems.

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. This would eliminate any chance for another operating system vendor to get their

system installed until the retailer had installed all of the Microsoft operating systems that

it had installed.

In addition to specifying a minimum number of operating systems that a vendor

had to buy, Microsoft also would sing contracts with the vendors for long periods of time

such as two or three years. In order for a new operating system to gain popularity, it

would have to do so quickly, in order to show potential buyers that it was worth

something. With Microsoft signing long term contracts, they eliminated the chance for a

new operating system to gain the popularity needed quickly.

Probably the second most controversial issue, besides the per processor

agreement, was Microsoft.s practice of tying. Tying was a practice in which Microsoft

would use their leverage in one market area, such as graphical user interfaces, to gain

leverage in another market. In the preceding example, Microsoft would use their

graphical user interface, window to sell their operating system, by offering discounts to

manufacturers that purchased both MS-DOS and Windows, and threatening to not sell

Windows to companies who did not also purchase DOS.

In the end, Microsoft decided to suck it up and sign the settlement agreement. In

signing the agreement. Microsoft did not actually have to admit to any of the alleged

charges, but were able to escape any type of formal punishment such as fines.

The settlement that Microsoft agreed to prohibits it, for the next six and a half

years from. Charging for its operating system on the basis of computer shipped rather

than on copies of MS-DOS shipped; Imposing minimum quantity commitments on

manufacturers; Signing contracts for greater than one year; Tying the sale of MS-DOS to

the sale of other Microsoft products. Although these penalties look to put an end to all of

Microsoft.s evil practices, some people think that they are not harsh enough.

On one side of the issue, there are the people who feel that Microsoft should be

left alone. I am one of these people, feeling that Microsoft does more good than bad, thus

not necessitating their breakup. I feel this way for many reasons, and until Microsoft does

something terribly wrong or illegal, my opinion will stay this way.

With Microsoft creating the standards for the rest of the computer industry, they

are able to create better standards and build them much faster than if an outside

organization or committees were to create them. With these standards set, other

companies area able to create their applications and other products that much faster, and

better, and thus the customers receive that much better of a product.

Take f

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