The Anti-Trust Case Against Microsoft


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 prices and potentially downgrading software quality,
and should therefore be stopped, while Microsoft and its supporters claim 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(Check
1), when the Federal Trade Commission began investigating them for possible
violations of the Sherman and Clayton Antitrust Acts,(Maldoom 1) 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.

(Maldoom 1) Doing this stalled the investigations even more, until finally in
August of 1993, (Check 1)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 of the DOJ, leading the way.(Check 1)
The case was finally ended on July 15, 1994, with Microsoft signing a consent
settlement.(Check 1)

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
if that OEM agreed to pay a royalty to Microsoft for every single computer that
they sold (Check 2) regardless if it had a Microsoft operating system installed
on it or not. After the settlement, Microsoft would be forced to sell their
operating systems according to the number of computers shipped with a Microsoft
operating system installed, and not for computers that ran other operating
systems. (Check 2)

Another practice that the Justice Department accused Microsoft of was that
Microsoft would specify a minimum number of minimum number of operating systems
that the retailer had to buy, thus eliminating 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.(Maldoom 2)

In addition to specifying a minimum number of operating systems that a vendor
had to buy, Microsoft also would sign 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.(Maldoom 2)

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, such as operating systems,
where they may have competition.(Maldoom 2) In the preceding example, Microsoft
would use their graphical user interface, Windows, to sell their operating
system, DOS, 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 and the like.

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;(Maldoom 1)

Although these penalties look to put an end to all of Microsoft’s evil
practices, some people think that they are not harsh enough and that Microsoft
should have been split up to put a stop to any chance of them forming a true
monopoly of the operating system market and of the entire software market.

On one side of the issue, there are the people who feel that Microsoft should
be left alone, at least for the time being. I am one of these people, feeling
that Microsoft does more good than bad, thus not necessitating their