Microsoft: Monopoly or Great Bussinessmen?

Allen

Since 1990, a battle has raged in United States courts between the United States government and the Microsoft Corporation 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. The only thing Microsoft is guilty of is taking advantage of free enterprise.


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. 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 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 operating systems that the retailer had to buy, 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 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 (GUIs), to gain leverage in another market, such as operating systems, where they may have competition. (Maldoom 2) In that 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 other criminal punishments.


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 monopolistic 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 (OS) and of the entire software market.


Jesse Berst, editorial director of Windows Watcher newsletter out of Redmond,