US vs Microsoft

Study Guide

  • Antitrust Overview
  • Antitrust - What's the big deal? 
  • Why was the antitrust case bought up against microsoft? 
  • Who is taking Microsoft to court?
  • What are the remedies to end the monopoly of Microsoft?
  • Microsoft and Monopolies
  • What now?
  • Antitrust - What's the big deal?

    Antitrust proceedings in the USA got their start thanks to the efforts of Senator John Sherman in 1890.  The point of the law, according to Senator Sherman was to, "protect the consumers by preventing arrangements designed, or which tend, to advance the cost of the consumer".  The Sherman anti trust act was signed into law by by President Benjamin Harrison on 2 July 1890, after passing by a 51 - 1 vote in the Senate on 8 April 1890 and by a unanimous vote of 242 - 0 by the House of Representatives on 20 June 1890.

    According to Dr. Keith Poole, a professor of political science at the University of Houston, "The legislative history of the Sherman Act is not simple nor clear. There is no question that nearly everyone wanted to outlaw monopolies and create competition. However, there was serious disagreement about what part of the Constitution -- the Commerce Clause, the Judicial Clause, or the taxing power -- was the legal basis for outlawing illegal restraints of trade. In addition, in the Senate, there were two completely different bills at one point.

    The result has been that Anti-Trust law changes according to the prevailing mood of legal opinion. Because legal opinion is in part a function of the politics of the day, Anti-Trust law has always been one of the most politicized portions of the legal code. What was illegal in the early 20th Century may not be illegal today. Other than a general agreement by everyone that monopoly is generally not a good idea, Anti-Trust law shifts constantly in time. Something that Microsoft Corporation is now discovering."

    So where did Microsoft go wrong? And did they behave unethically?

    Dr. Poole's message is something that Microsoft's notoriously apolitical chairman, Bill Gates, failed to take seriously. As a computer scientist, Gates was used to applying algorithms to problems and having the algorithms work the same way every time. But the law is not an algorithm that is guaranteed to be interpreted the same way each time. And the are no "Ethics algorithms" to guide the way. Law is supposed to be based on universal ethical principles, but unfortunately, there are no universally accepted norms as to what those principles should be!  What Microsoft failed to predict was the effect of its overwelming success on the psyche of it's competitors, and indeed, on society at large.

    One thing is certain, although Microsoft and it's engineers may have had some ethical lapses, their software innovations have changed the world in which we live forever.

    Why was the antitrust case bought up against microsoft?

    The Justice Department and the states believe that Microsoft has used its monopoly in operating system software to protect its dominance and eliminate competitors. The government says that in the long run, consumers will be harmed, because there will be less competition and fewer choices. 

    More specifically, the government contends that Microsoft has engaged in actions to preserve its Windows monopoly that violate antitrust laws. The government also maintains that the company has used the power of its Windows monopoly to attempt to monopolize the market for Internet browsing software. In addition, government lawyers allege that the company has committed other anti-competitive acts.

    Microsoft contends that it is simply trying to innovate its products. The company contends that its actions are legal and says that there's no grounds of consumer indignation over the practices that the government is targeting.

    Who is taking Microsoft to court?

    The U.S. Government and 20 state attorney generals.

    What are the remedies to end the monopoly of Microsoft?

    No matter who wins, the case almost certainly will be appealed, probably all the way to the Supreme Court. If the government wins at the trial court, it has already specified that it wants Microsoft to cancel contracts deemed exclusionary. In addition, the government wants Microsoft either to strip out its Internet browsing technology from Windows 98 or to include a rival browser made by Netscape Communications Corp. The government also indicated in October that, should it win, it would seek an additional  hearing where it would suggest additional sanctions that should be placed on Microsoft. Ultimately, though, it is up to the judge to decide what penalties to levy upon Microsoft should he rule in the government's favor.

    Practically speaking, if Microsoft loses, industry analysts expect the company to place Netscape's software in Windows 98 because removing Microsoft's Internet Explorer software would be extremely difficult. It is impossible, however, to determine the consumer impact of other "remedies" the government may suggest.

    It's difficult to speculate on the company's possible stock performance should they lose the case. Microsoft's stock price dipped during the recent market turmoil, but has stayed relatively level throughout the investigation.

    Negative publicity hurts, and could erode sales or make it harder for the company to do business deals with partners. Some industry analysts also fear that Microsoft management could get so distracted by the lawsuit that they might make poor business decisions.

    Microsoft and Monopolies

    • A Recent court Ruling has declared Microsoft a an illegal monopoly. Before looking at the ruling and information invovled, It is a good idea to take a look at what a monopoly is.
    • After getting an understanding of what a monopoly is, we can take a look at the most recent developments in this case. 
    • Now look at the opinions and papers on MS and its track record and form your own opinion and try to back it up. Is Microsoft a monopoly? To be a monopoly you have to harm consumers through your actions as a company, Has microsoft done this? 

    What now?

    Microsoft has been undergoing antitrust legislative actions for some years now.  The claim against them is that they have unlawfully maintained their monopoly of personal computer ("PC") operating systems and have unreasonably restrained trade ( ).

    • What is currently happening in the Microsoft antitrust case?
      • In June 2000, Judge Thomas Jackson ordered Microsoft to be split into two companies.
    • Why??
      • Judge Jackson "declared the software giant an 'untrustworthy' monopoly that refuses to abandon illegal business practices that crush competitors and harm consumers" (  )
    • Anti-Microsoft
      • Opponents of Microsoft, such as Joel Klein, believe that splitting up Microsoft will stimulate competition in the PC operating-system and the software industry.  Our entire economic system is based on the idea of many producers, which leads to the lowest prices and highest quality products for the consumer.  The US government has broken up other such monopolies in the recent past, such as AT&T.
    • Pro-Microsoft
      • Supporters of Microsoft deny all claims that are put against them.  The Ayn Rand Institute claims that Microsoft is not anti-competitive and in restraint of trade, it is the government that is guilty of these charges   ( ).  They also say that Microsoft is being punished for qualities that are generally respected in the United States, hard work, creativity, and achievement.
    • Browser Wars
      • The term "browser wars" here is referring to the controversy that has surrounded Internet Explorer and Netscape Communicator in the last few years.  It especially refers to the fact that Netscape claims that Microsoft attempted to put them out of business by including Internet Explorer free in the Windows Operating System.
        Microsoft was accused of using its power as a monopoly to put Netscape out of business.  Microsoft denies these claims, and states that any support for those claims are incorrect and taken out of context 
        ( ).
    • What Now?
      • Currently, Microsoft will have restrictions imposed until a higher court affirms the ruling.  This process could take a year or longer.  Microsoft is confident that a higher court will not affirm the ruling.
        If Microsoft loses the case, it will have a huge impact on the software industry and the nation as a whole.