Microsoft Antitrust Research Paper
Microsoft and Antitrust Laws
Nicole Sherwood
BUS670: Legal Environment
Alexis Hooley
April 2, 2012
Abstract Microsoft has spent 21 years fighting antitrust battles with the US government. These battles began with claims of Microsoft monopolizing the software market, specifically regarding internet browsers. Although the cases were settled in 2002, there is still discussion as to whether or not the claims against Microsoft were truly valid.
On May 18, 1998, the United States Department of Justice and 20 states filed civil actions against Microsoft based on the Sherman Antitrust Act of 1890. It was alleged that Microsoft created a monopoly with the handling of its operating system and web browser …show more content…
sales. Personal computers that had the Microsoft Windows operating system were also accompanied by Miscrosoft’s internet browser, Internet Explorer. The bundling of the programs was alleged to restrict the market from other competing web browsers, including Netscape and Navigator. (Chin, 2005). Microsoft continued to defend their position and right to bundle the Windows operating system and Internet Explorer.
Microsoft claimed that separating the operating system from the internet browser would cause the operating system to work more slowly and malfunction. In addition, they stated that the bundling of the Windows operating system and Internet Explorer was the result of much investment and innovation and was necessary to remain competitive in the marketplace, specifically in regards to Apple and the Safari browser. Microsoft continued to restate their position that the operating system and internet browser were truly one product and could not be separated. In 1999, Judge Jackson, who was presiding over the case, ruled that Microsoft had in fact created a monopoly in the marketplace, and was therefore in violation of antitrust laws. Microsoft immediately appealed, but in June of 2000, the court ordered that a break up of Microsoft, separating it into two separate units. One unit would produce the operating system and the other would produce other software components, including the internet …show more content…
browser. Microsoft appealed again, which ended in more favorable results for the company. The Department of Justice announced in September 2001 that it would seek a lesser antitrust penalty. At this time, Miscrosfot drafted a settlement. The settlement allowed personal computer original equipment manufacturers to adopt and add non-Microsoft software to the operating system. (Chan, 2011). In addition, there was a private antitrust settlement between Microsoft and AOL Time Warner. This settlement yielded $750 million to AOL Time Warner in January 2002. As part of the settlement, AOL will receive a “royalty-free, seven-year license to use Internet Explorer with AOL’s client software” (Weil & McMillan, 2003). “The industry giants will also collaborate on long-term initiatives for distributing digital media to consumers, and to support new business models for content owners” (Weil & McMillan, 2003). The combination of settlements by Microsoft allowed the company to avoid breakup and to continue manufacturing all software under one company. The validity of the claims against Microsoft can be disproved.
Capitalism is a great part of the American dream, but disproving the claims goes beyond believing that Microsoft was exercising their right and ability to be a capitalist company. The root of the belief that Microsoft had violated the antitrust laws was found in the fact that the Department of Justice claimed that Microsoft illegally bundled their software products to create one product to monopolize the market. However, Professor Edward Felten, the government’s computer science expert witness, clarified the distinction between the software products and their codes. Felten described the code and product as different things and therefore the products were two separate products instead of one product as thought by the Department of Justice. (Chin,
2005) There is a fine line between monopolizing the market and taking advantage of consumers and simply providing a more favorable product to the consumer. In this case and all of the surrounding cases, Microsoft produced two products that were favorable to the consumer. Although it was believed that the products were sold as one product, they were in fact two separate products that were sold together to assist the consumer in their installation and use of the computer. It is important that as the government strives to protect the consumer that they also remain mindful of the company and their right to create and be innovative. The balance that needs to be found can be best described in a statement by Leon E. Wein, a longtime Brooklyn Law School Professor, as written in his last law review article. (Chin, 2005) Let us not lose sight of the importance of innovation and creativity in this country. Competition among creative entrepreneurs seeking consumers has long been the engine of innovation. If consumers want ease of use, market mechanisms will spur its design and availability for sale, and human-centered technologies will be assimilated through an inevitable, albeit gradual, process. However, this assertion presumes a process of continual modification that provides consumers with desirable products of ever-greater value and ease of use. In any market, gaps necessarily exist between the demand for humane design, the availability of user-centered technology, and the willingness of entrepreneurs to invest in designs to suit people as well as to perform functions. When the market mechanism is inadequate to the task, the law’s role in stimulating anthropocentric design may well be pivotal.
References
Weil, N., & McMillan, R. (2003, May 29). AOL, Microsoft settle Netscape suit. PCWorld. Retrieved from http://www.pcworld.com/news/article/0,aid,110930,00.asp
United States v. Microsoft, (2002, 2006). Retrieved from http://www.usdoj.gov/atr/cases/ms_index.htm
Chan, Sharon Pian. (2011, May 11). Long Antitrust Saga Ends for Microsoft. The Seattle Times. Retrieved from http://seattletimes.nwsource.com/html/microsoft/2015029604_microsoft12.html
Chin, Andrew. (2005, March 31) Decoding Microsoft: A First Principles Approach. Wake Forest Law Review. Volume 40, Number 1, 2005. Retrieved from http://www.unclaw.com/chin/scholarship/decodingmicrosoft.pdf.
Nicole Sherwood
BUS670: Legal Environment
Alexis Hooley
April 2, 2012
Abstract Microsoft has spent 21 years fighting antitrust battles with the US government. These battles began with claims of Microsoft monopolizing the software market, specifically regarding internet browsers. Although the cases were settled in 2002, there is still discussion as to whether or not the claims against Microsoft were truly valid.
On May 18, 1998, the United States Department of Justice and 20 states filed civil actions against Microsoft based on the Sherman Antitrust Act of 1890. It was alleged that Microsoft created a monopoly with the handling of its operating system and web browser …show more content…
sales. Personal computers that had the Microsoft Windows operating system were also accompanied by Miscrosoft’s internet browser, Internet Explorer. The bundling of the programs was alleged to restrict the market from other competing web browsers, including Netscape and Navigator. (Chin, 2005). Microsoft continued to defend their position and right to bundle the Windows operating system and Internet Explorer.
Microsoft claimed that separating the operating system from the internet browser would cause the operating system to work more slowly and malfunction. In addition, they stated that the bundling of the Windows operating system and Internet Explorer was the result of much investment and innovation and was necessary to remain competitive in the marketplace, specifically in regards to Apple and the Safari browser. Microsoft continued to restate their position that the operating system and internet browser were truly one product and could not be separated. In 1999, Judge Jackson, who was presiding over the case, ruled that Microsoft had in fact created a monopoly in the marketplace, and was therefore in violation of antitrust laws. Microsoft immediately appealed, but in June of 2000, the court ordered that a break up of Microsoft, separating it into two separate units. One unit would produce the operating system and the other would produce other software components, including the internet …show more content…
browser. Microsoft appealed again, which ended in more favorable results for the company. The Department of Justice announced in September 2001 that it would seek a lesser antitrust penalty. At this time, Miscrosfot drafted a settlement. The settlement allowed personal computer original equipment manufacturers to adopt and add non-Microsoft software to the operating system. (Chan, 2011). In addition, there was a private antitrust settlement between Microsoft and AOL Time Warner. This settlement yielded $750 million to AOL Time Warner in January 2002. As part of the settlement, AOL will receive a “royalty-free, seven-year license to use Internet Explorer with AOL’s client software” (Weil & McMillan, 2003). “The industry giants will also collaborate on long-term initiatives for distributing digital media to consumers, and to support new business models for content owners” (Weil & McMillan, 2003). The combination of settlements by Microsoft allowed the company to avoid breakup and to continue manufacturing all software under one company. The validity of the claims against Microsoft can be disproved.
Capitalism is a great part of the American dream, but disproving the claims goes beyond believing that Microsoft was exercising their right and ability to be a capitalist company. The root of the belief that Microsoft had violated the antitrust laws was found in the fact that the Department of Justice claimed that Microsoft illegally bundled their software products to create one product to monopolize the market. However, Professor Edward Felten, the government’s computer science expert witness, clarified the distinction between the software products and their codes. Felten described the code and product as different things and therefore the products were two separate products instead of one product as thought by the Department of Justice. (Chin,
2005) There is a fine line between monopolizing the market and taking advantage of consumers and simply providing a more favorable product to the consumer. In this case and all of the surrounding cases, Microsoft produced two products that were favorable to the consumer. Although it was believed that the products were sold as one product, they were in fact two separate products that were sold together to assist the consumer in their installation and use of the computer. It is important that as the government strives to protect the consumer that they also remain mindful of the company and their right to create and be innovative. The balance that needs to be found can be best described in a statement by Leon E. Wein, a longtime Brooklyn Law School Professor, as written in his last law review article. (Chin, 2005) Let us not lose sight of the importance of innovation and creativity in this country. Competition among creative entrepreneurs seeking consumers has long been the engine of innovation. If consumers want ease of use, market mechanisms will spur its design and availability for sale, and human-centered technologies will be assimilated through an inevitable, albeit gradual, process. However, this assertion presumes a process of continual modification that provides consumers with desirable products of ever-greater value and ease of use. In any market, gaps necessarily exist between the demand for humane design, the availability of user-centered technology, and the willingness of entrepreneurs to invest in designs to suit people as well as to perform functions. When the market mechanism is inadequate to the task, the law’s role in stimulating anthropocentric design may well be pivotal.
References
Weil, N., & McMillan, R. (2003, May 29). AOL, Microsoft settle Netscape suit. PCWorld. Retrieved from http://www.pcworld.com/news/article/0,aid,110930,00.asp
United States v. Microsoft, (2002, 2006). Retrieved from http://www.usdoj.gov/atr/cases/ms_index.htm
Chan, Sharon Pian. (2011, May 11). Long Antitrust Saga Ends for Microsoft. The Seattle Times. Retrieved from http://seattletimes.nwsource.com/html/microsoft/2015029604_microsoft12.html
Chin, Andrew. (2005, March 31) Decoding Microsoft: A First Principles Approach. Wake Forest Law Review. Volume 40, Number 1, 2005. Retrieved from http://www.unclaw.com/chin/scholarship/decodingmicrosoft.pdf.