Microsoft Versus The Department Of Justice Microsoft Versus the Department of Justice In today’s high-tech ultra-fast paced world, there can be no debate as to the importance of personal computers. Personal Computers control virtually every aspect of our daily lives. Businesses, regardless of their size, have local area networks, company Intranets and high-speed wide area networks. Billing, inventory and invoicing would be impossible without help from our Personal Computers. Stocks, bonds and commodities are traded in the markets around the world entirely by computer.
The Banking industry relies enormously on Personal Computers for every transaction. Communicating without email, fax transmissions and other forms of computer aided information transfers would be unimaginable. The media would be unable to produce news and information for the masses in the timely manner we know today. Law enforcement agencies, from local police, to field agents of the F.B.I. depend on computer databases for crucial information. Air traffic controllers rely on their computers to safely land and route thousands of planes into airports around the world everyday.
Even the military depends on computers to defend our very own borders and interests. With the important role that Personal Computers serve in society today, is it really a good idea to have one company exclusively control the technology running virtually every aspect of our lives? (Kaphing 7) Ninety percent of all computers sold worldwide are IBM or IBM compatible clones. Microsoft’s infamous operating system licensing agreements required all personal computer makers to pay Microsoft a royalty on every computer they manufactured, even when no Microsoft product was loaded on the machine.(Kaphing 1) This forced the Personal Computer makers into only using the Microsoft operating system. They could not choose a different Operating System even if they so desired, because at that time all of the Personal Computer clone manufacturers were small start up companies, having very limited capital. They couldn’t afford to pay both Microsoft and another company for a different operating system. In 1994 The United States Justice Department barred Microsoft from engaging in this sort of extortion, but it was already too late, the Operating System monopoly had been realized.(PC Week) After the 1994 decision, Microsoft resorted to a new anti-competitive tactic.
Yet another clause in the operating system licensing agreement between Microsoft and the computer manufacturers requires the first computer screen any user sees on startup to contain whatever message Microsoft pleases, and to also feature the software content of Microsoft’s choosing. This crafty marketing spites the entire concept of competition. It handcuffs the PC hardware manufacturers, who are compelled to submissively promote the Microsoft product line on each and every computer they sell. This is clearly a handicap to third party software vendors like Corel and Adobe. This practice also hurts the consumer by limiting personal choices.
Even though there may be far superior products on the market, the PC manufacturing companies are legally obligated to only include Microsoft products. In 1985 Apple Computer was forced into licensing some of their user interface elements to Microsoft, for incorporation into Windows version 1.0. This license was granted only after Microsoft threatened to discontinue development of Macintosh applications. Microsoft was the leading developer of Mac programs, and without their software, Apple would have been doomed to bankruptcy. Apple had no choice but to give in to Microsoft’s demands.(Los Angeles Times 2) Microsoft also threatened three computer companies over Internet browser contracts.
Compaq, Gateway and Micron computers wanted to replace Microsoft’s Internet Explorer with another World Wide Web browser. Not only did Microsoft say no, but court records filed in Washington D.C. stated that Microsoft threatened manufacturers seeking to remove its Explorer browser with a potentially lethal blow – termination of the license for Windows, the operating system that runs almost all personal computers in the world today. In fact Microsoft began proceedings for just such a penalty against Compaq, the world’s leading computer maker. Compaq eventually canceled plans to remove Internet Explorer from its Presario computers, but only after intense pressure from Microsoft.(Los Angeles Times 1) In 1995 U.S.
Attorney General Janet Reno asked a U.S. District Court in Washington, DC, to place a $1,000,000 dollar a day toll until Microsoft agrees to stop demanding that PC makers license Internet Explorer when they license Windows 95. Reno announced the Department of Justice’s antitrust action, and she cited a 1995 consent decree according to which Microsoft agreed not to engage in this type of licensing practices. Microsoft then announced that its web browser would be fully integrated into the next version of its operating systems product line, which was released in 1998. This scheme for constricting consumer choice was to establish Internet Explorer as the default browser on all new copies of Windows. A competing web browser can be purchased, installed and selected by the user as a substitute default browser, but this exercise in personal preference requires additional expense and a lot of extra trouble.
In any other industry, selling products at a loss for the purpose of driving another company out of business would be instantly disallowed as dumping. Microsoft was amazingly candid about the consumer-defeating designs of its Internet Explorer scheme. Steve Ballmer, Microsoft’s vice president of sales said, We’re giving away a pretty good browser as part of the operating system. How long can they survive selling it?” (Kaphing 6) Throwing in an additional barrier between the customer and their personal preferences, Microsoft also disclosed that a non-Microsoft browser will be affected in such a way that it will function relatively inconveniently. According to this new scheme, in every instance where the computer operator clicks on a built-in system shortcut to visit a website, Windows will automatically send them there via Internet Explorer, no matter what choice the user has selected for the default browser settings. There is not a company that is able to withstand these types of attacks by Microsoft.
They are aware of that fact and use tactics to stifle competition probably more often than we are aware. Lacking any serious competition Microsoft will have no incentive to produce effective applications, with new and innovative features in a punctual fashion. Quality control would be non-existant and customer service will be as well. Unsatisfied consumers will have no recourse for action. It was also known that Microsoft would keep competition out of the arena by buying a new product and simply never introducing it. An inventor would show the new product to Microsoft and they would show interest and purchase the product. At times they would even introduce the product but it would never be sold.
They would simply discard it to keep it out of the marketplace. Who knows what kind of products Microsoft has kept from the consumer? Another tactic would be to make a programmer sign a contract with Microsoft. In the contract they would include that they could not guarantee that they would not steal the product and market it as their own. So the programmer did not have a say if they were included as the developer or not, or even worse not get paid for their invention. With no intervention from the Department of justice, Microsoft would continue unimpeded in its quest for entire market domination.
Microsoft’s misdirection campaign, monopolies go against the cause of free market capitalism. To put restraints on Microsoft the Department of Justice would need to prove that consumers would benefit by constricting Microsoft. The Department of Justice believed that by requiring PC manufacturers that want to license Windows 95 also to license Internet Explorer, Microsoft is unfairly leveraging Windows’ ubiquitousness. Microsoft is unlawfully taking advantage of its Windows monopoly to protect and extend that monopoly, said Reno during a news conference. (Kaphing 5) In reference to Microsoft’s policy, Assistant Attorney General Joel Klein, who heads the Justice Department’s antitrust division, said, “Each of Microsoft’s products should compete on its own merits, and while anyone can give away a browser, no one can force it onto a computer desktop unless you have monopoly power.
When you use that power to snuff out a new entrant, that’s what’s prohibited. Microsoft’s licensing policy is designed to inhibit its main browser competitor, Netscape Communications Corporation, from competing in the market. Web browsers represent a significant software category because they could erode Microsoft’s operating-system monopoly. That sentiment echoes Netscape’s positioning of browser-based clients as computing platforms, not just simple Internet viewers. Netscape CEO Jim Barksdale had approached the Department of Justice earlier this year regarding the browser market and Microsoft’s practices.”(Kaphing 5) U.S.
District Judge Thomas Penfield Jackson ruled that Microsoft used its dominance of the PC software industry to stifle competition, therefor hurting consumers. He states in his ruling that Microsoft enjoys so much power in the market for the PC operating systems that if it wished to exercise this power solely in terms of price, it could charge a price for Windows substantially above that which could be charged in a competitive market. Moreover, it could do so for a significant period of time without losing an unacceptable amount of business to competitors. In other words, Microsoft enjoys monopoly power in the relevant market. Three main facts indicated that Microsoft is a monopoly power.
First, Microsoft’s share of the market for PC operating systems is extremely large and stable. Second, Microsoft’s dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft’s customers lack a commercially viable alternative to Windows. Microsoft possesses a dominant, persistent, and increasing share of the world-wide market PC operating systems. Every year for the last decade, Microsoft’s share of the market for Intel-compatible PC operating systems has stood above ninety percent.
For the last couple of years the figure has been at least ninety-five percent, and analysts project that the share will climb even higher over the next few years. Even if Apple’s Mac Operating System were included in the relevant market, Microsoft’s share would still stand well above eighty percent.(MSNBC) It was proven in court that many of the tactics that Microsoft has employed have also harmed consumers indirectly by unjustifiably distorting competition. The actions that Microsoft took against Navigator hobbled a form of innovation that had shown the potential to depress the applications barrier to entry sufficiently to enable other firms to compete effectively against Microsoft in the market for PC operating systems. That competition would have conduced to consumer choice and nurtured innovation. Economics Essays.