Microsoft And The AnitTrust Law Essay Research

Microsoft And The Anit-Trust Law Essay, Research Paper

Microsoft and the Anti-Trust Law

Now a day’s when one hears the words “Anti-trust Law”, everyone automatically thinks about the Anti-trust Lawsuit against the Microsoft Corporation. But many people wonder what exactly has Microsoft done to bring up these charges, and how does this law apply to Microsoft.

To start with, the economy found with in the United States, is one that is dependent on competitive competition, and on the operation of a multiple market force. In other words, it is the condition of which there is economic rivalry among firms of both production and services. In order for this competition to remain, Congress felt it nessisscary to pass a law in order to keep this competition equal among all parities.

This first act, which still remains the most important, is the Sherman Act. The most important parts of this lawsuit can be found in Sections One and Two of the Sherman Act.

Section One of the Sherman act prohibits “contracts, combinations, and conspiracies in restraint of trade.” Section Two prohibits “monopolization, attempts to monopolize, and conspiracies to monopolize.” Restated, Section One’s focus is on the collisions among firms which are to be acting on an independent basis while making, basic decisions within the business realm. Section Two, on the other hand, focuses on the single-firm domination of a market, and the prohibition of such a firm.

On July 15, 1994, the United States commenced an action against the Microsoft Corporation under Section Two of the Sherman Act, for unlawfully maintaining its monopoly in the market for the personal computer (PC) operating system. The complaint alleged, among other things, that Microsoft had engaged in anti-competitive agreements and marketing practices directed at OEM’s (or Original Equipment Manufacturers). These agreements included contracts that required OEM’s to pay Microsoft for each non-Microsoft operating systems that they distributed and long-term agreements that required, unreasonable large “minimum commitments” from OEM’s. In turn the effect of Microsoft’s practices and agreements were unlawfully used to maintain their monopoly in the PC operating systems market. The United States has presented this prior face along with many more. The natures of some of these findings are as follows:

1. Microsoft posses (and for several years has possessed) a monopolistic power in the market for personal computer operating systems.

2. There are high barriers to entry in the market for PC operating systems. One of the most important barriers to entry is the barrier created by the number of software applications that must run on an operating system in order to make the OS to end users. Because end users want a large number of applications available, because most applications today are written to run on Windows, and because it would be prohibitively difficult, time consuming, and expensive system that would run the programs that run on Windows, a potential new operating system entrant faces a high barrier to successful entry.

3. Microsoft’s Christian WildFeuer wrote in February 1997, that Microsoft had concluded that it would “be very hard to increase browser share on the merits of Internet Explorer 4.0 alone. It would be more important to leverage to OS assets to make people use Internet Explorer 4.0 instead of Netscape’s Navigator. ” Thus, Microsoft began, and continues today, a pattern of anti-competitive practices designed to thwart browsers competition on the merits, to deprive customers of a choice between alternative browsers, and to exclude Microsoft’s Internet browser competitors.

In other words, with its resources and programming technology, Microsoft was well positioned to develop and market a browser in competition with Netscape. Indeed, ongoing competition on the merits between Netscape Navigator and Microsoft Internet Explorer could have been expected to result in greater innovation and the development of better products at lower prices.

The competitors had offsetting advantages — Microsoft with its size and dominant position in desktop software, and Netscape with its position as the browser innovator and leading browser supplier — and the benefit to consumers of product differentiation could have been expected to sustain continued competition on the merits between these companies into the future.

Microsoft, however, has been unwilling to compete purely on the merits. Instead, Microsoft began, and continues today, a pattern of anti-competitive practices designed (1) to stifle the potential competitive threat to its operating system monopoly, and (2) to extend its monopoly to the Internet browser market.

In May 1995 Microsoft tried to convince Netscape to enter into an agreement not to compete and to divide the browser market. Microsoft proposed in part that Netscape provide the sole browser for non-Windows 95 operating systems and that Microsoft provides the sole browser for Windows 95 operating systems. When Netscape refused, Microsoft reacted — it began a pattern of exclusive dealing arrangements, agreements not to distribute or promote competitive Browsers, tie-ins, and other exclusionary and predatory conduct that excludes competition on the merits, and one that robs OEMs and consumers of the opportunity to make their own choices, and det