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Microsoft Antitrust Case By Adam Korngold
After many years of monopolizing the computer software industry and bullying their competition, Microsoft may face government restrictions. A federal judge has now made a factual finding that Microsoft has illegally used predatory pricing to gain a substantial lead in the Internet browser market. The United States Department of Justice had commenced a lawsuit in 1997 charging Microsoft with being a monopolistic violator of the antitrust laws. During the trial, Microsoft’s defense claimed they do not have a monopoly. Since Microsoft has a 95% market share in the operating system market, it was difficult for it to successfully argue that it does not have a monopoly. Also, Microsoft has a profit margin of around 40%, one of the highest of any corporations in the world. This high profit margin suggests that Microsoft charges very high prices, thus making huge profits because it does not have any competition. Microsoft refused to admit doing anything illegal or using its power to influence its customers. During the case, the Department of Justice under Joel Klein and head attorney David Boies proved that Microsoft is guilty of controlling the computer industry and hampering innovation. Judge Thomas Penfield Jackson ruled that Microsoft is a monopoly and has used its monopoly power to hurt competition, specifically in the browser market. Four years ago, executives at Microsoft were scared that they did not have the leading Internet browser software and realized they could lose their long-time monopoly of software companies. Microsoft decided to give away its Internet Explorer for free. People were slow to install Microsoft’s product, and Netscape still held an 80% market share in the browser market. Microsoft realized that it would need to force people to install Microsoft Explorer in order for it to compete with Netscape’s Navigator. Microsoft first included Explorer on the Windows CD, and eventually integrated Explorer into the Windows operating system which lead people to use Explorer. Once people have Explorer on their computer they usually don’t bother downloading and installing Navigator. Judge Jackson ruled that Microsoft should not have integrated the Internet browser with the operating system because they have two very different functions and not everyone who uses Windows also uses the Internet. The judge also found that Microsoft has also illegally forced its customers to promote its products. For example, until recently Compaq computer pre-installed Navigator with every computer they sold. Microsoft charged Compaq more money for Windows OEM royalties because they installed Netscape’s product on their computers. Eventually, Compaq agreed not to install Navigator and Microsoft agreed to charge Compaq the "lowest prices in the industry on Windows OEMs." In addition, Microsoft gives unlimited free Microsoft software to Compaq to use within its offices. Since all personal computer manufacturers except Apple rely on Windows, Microsoft has historically been able to influence its customers’ businesses. In 1995, IBM introduced OS2 Warp, an operating system that competed with Windows 95. Bill Gates was so upset that IBM would dare to compete with Microsoft that Microsoft increased IBM’s royalty charges by 400%, refusing to sell Windows to IBM at a discounted price. When IBM stopped developing OS2 Warp, Microsoft again lowered its price. Microsoft’s future is currently uncertain. Judge Jackson will not issue a final ruling over Microsoft until next year, and even after he decides Microsoft’s fate, Microsoft can still appeal his decision. It may be another five years before the case is finally decided. |
