FEATURED ESSAYS 1. Us Vs. Microsoft 2. Microsoft Vs. U.S. Government 3. Microsoft The Company 4. Microsoft The Company 5. The Arrival Of Email 6. Microsoft: A Monopoly 7. Bill Gates 8. Monopolies In A Capitalist Eco 9. The Anti-Trust Case Against Micro... 10. Bill Gates 11. Bill Gates 12. Monopoly And Microsoft 13. MS Vs DOJ 14. The Anti-Trust Case Against Micro...

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 breakup. I feel this way for many reasons, and until Microsoft does
something terribly wrong or illegal, my opinion will stay this way.

First and foremost, Microsoft sets standards for the rest of the industry
to follow.

Jesse Berst, editorial director of Windows Watcher newsletter out of
Redmond, Washington, and the executive director of the Windows Solutions
Conference, says it best with this statement: "To use a railroad analogy,
Microsoft builds the tracks on which the rest of the industry ships its
products." ("Why Microsoft (Mostly) Shouldn’t Be Stopped."

4) With Microsoft creating the standards for the rest of the computer
industry, they are able to create better standards and build them much
faster than if an outside organization or committee were to create them.
With these standards set, other companies are able to create their
applications and other products that much faster, and better, and thus the
customers receive that much better of a product.

Take for instance the current effort to develop the Digital Video Disc
(DVD) standard. DVD’s are compact discs that are capable of storing 4900
megabytes of information as apposed to the 650 megabytes that can be stored
on a CD-ROM disc now.

For this reason, DVD’s have enormous possibilities in both the computer
industry and in the movie industry. For about the last year, companies such
as Sony, Mitsubishi, and other prominent electronics manufacturers have
been trying to decide on a set of standards for the DVD format.
Unfortunately, these standards meetings have gone nowhere, and subsequently,
many of the companies have broken off in different directions, trying to
develop their own standards. In the end, there won’t be one, definite
standard, but instead, many standards, all of which are very different from
one another.  Consumers will be forced to make a decision on which standard
to choose, and if they pick the wrong one, they could be stuck down the
road with a DVD player that is worthless. Had only one company set the
standards, much like Microsoft has in the software business, there wouldn’t
be the confusion that arose, and the consumers could sit back and relax,
knowing that the DVD format is secure and won’t be changed.

Another conclusion that many anti-Microsoft people and other people around
the world jump to is that the moment that we have a company, such as
Microsoft, who is very successful, they immediately think that there must
be something wrong; they have to be doing something illegal or immoral to
have become this immense. This is not the case.

Contrary to popular belief, Microsoft has not gained its enormous
popularity through monopolistic and illegal measures, but instead through
superior products.  I feel that people do have brains, and therefore have
the capacity to make rational decisions based on what they think is right.
If people didn’t like the Microsoft operating systems, there are about a
hundred other choices for operating systems, all of which have the ability
to replace Microsoft if the people wanted them. But they don’t, the people
for the most part want Microsoft operating systems. For this reason, I don’
t take the excuse that Microsoft has gained their popularity through
illegal measures. They simply created products that the people liked, and
the people bought them.

On the other side of the issue, are the people who believe that Microsoft
is indeed operating in a monopolistic manner and therefore, the government
should intervene and split Microsoft up. Those who are under the assumption
that Microsoft should indeed be split up, believe that they should either
be split into two separate companies: one dealing with operating systems
and the other dealing strictly with applications.  The other group believes
that the government should further split Microsoft up into three divisions:
one company to create operating systems, one company to create office
applications, and one company to create applications for the home. All of
these people agree that Microsoft should be split up, anyway possible.

The first thing that proponents of Microsoft being split up argue that
although Microsoft has created all kinds of standards for the computer
software industry, in today’s world, we don’t necessarily need standards.
Competing technologies can coexist in today’s society, without the need for
standards set by an external body or by a lone company such as Microsoft. A
good analogy for this position is given in the paper, "A Case Against
Microsoft: Myth Number 4." In this article, the author states that people
who think that we need such standards, give the example of the home video
cassette industry of the late 1970’s. He says that these people point out
that in the battle between the VHS and Beta video formats, VHS won not
because it was a superior product, but because it was more successfully
marketed. He then goes to point out that buying an operating system for a
computer is nothing at all like purchasing a VCR, because the operating
system of a computer defines that computer’s personality, whereas a VCR’s
only function is to play movies, and both VHS and Beta do the job equally.

Also,  with the development of camcorders, there have been the introduction
of many new formats for video tapes that are all being used at once. VHS-C,
S-VHS and 8mm formats all are coexisting together in the camcorder market,
showing that maybe in our society today, we are not in need of one standard.
Maybe we can get along just as well with more than one standard. Along the
same lines, there are quite a few other industries that can get along
without one standard. Take for instance the automobile industry. If you
accepted the idea that one standard was best for everyone involved, then
you would never be tempted to purchase a BMW, Lexus, Infiniti, Saab or
Porsche automobile, due to the fact that these cars all have less than one
percent market share in the automobile industry and therefore will never be
standards.

Probably the biggest proponent of government intervention into the
Microsoft issue is Netscape Communications, based out of Mountain View,
California. Netscape has filed law suits accusing Microsoft of tying
again.("Netscape’s Complaint against MicroSoft." 2) This time, Microsoft is
bundling their world wide web browser, Internet Explorer 3.0 into their
operating system, Windows 95. Netscape is the maker of Netscape Navigator,
currently the most widely used internet browser on the market, and now,
facing some fierce competition from Microsoft’s Internet Explorer. 
Netscape says that in addition to bundling the browser, Microsoft was
offering Windows at a discount to original equipment manufacturers (OEM’
s),("Netscape’s Complaint against MicroSoft." 2) to feature Internet
Explorer on the desktop of the computers that they shipped, thus
eliminating any competition for space on the desktop by rival companies
such as Netscape.

If the OEM wants to give the consumer a fair and even choice of browsers by
placing competitors’ browser icons in a comparable place on the desktop,
Netscape has been informed that the OEM must pay $3 more for Windows 95
than an OEM that takes the Windows bundle as is and agrees to make the
competitors’ browsers far less accessible and useful to
customers.("Netscape’s Complaint against MicroSoft." 2)  Another accusation
that Netscape is making against Microsoft is that they are doing the same
type of things with the large internet service providers of the nation.
They are offering the large internet providers of the nation, such as
Netcom and AT&T, space on the Windows 95 desktop, in return for the
internet provider’s consent that they will not offer Netscape Navigator, or
any other competing internet software to their customers.("Netscape’s
Complaint against MicroSoft." 3)

Netscape is becoming ever more concerned with Microsoft’s practices,
because for now, they are going untouched by the government and it looks as
if it will stay that way for quite some time now. The are very much worried,
as they watch the numbers of users switching to Microsoft’s browser, and
the number of users using Navigator slipping.

Besides all of the accusations of monopolistic actions Netscape lay down on
them, Microsoft does seem to have one advantage when it comes to the
browser wars. Their new browser, version 3.0, matches Netscape’s feature
for feature, with one added plus: it is free and Microsoft says that it
always free. So is their internet server, Internet Information Server.
Whereas Netscape charges $50 and $1500 for their browser and their web
server, respectively.("Netscape’s Complaint against MicroSoft." 3)

With all the information that has been presented for both sides of the
issue, you are probably left in a daze, not knowing what to think. Is
Microsoft good? Or is Microsoft bad? Well, the answer is a little bit of
both. Even though the Justice Department found that Microsoft might be
practicing some techniques that are less than ethical, they did not find
that Microsoft was breaking any anti-trust laws, nor did Microsoft actually
admit to the accusations when they signed the agreement. If anything, them
signing the agreement was more of a sorry than an full fledged admission of
guilt. Other people might disagree with me, and there might be a lot of
allegations floating around from different companies, but the fact of the
matter is plain and simple. Microsoft has not been formerly charged and
found guilty of any illegal practices pertaining to them being a monopoly.

I believe that the government should stay out of the affairs of the economy,
rather than get tangled up in a mess, and just end up deadlocked like the
FTC did in 1990. And even if the government did get involved,  due to the
extremely fast paced nature of the computer industry, and the extremely
slow nature of the government, there may not be any resolve for quite a
while.

Works Cited

Check, Dan. "The Case Against Microsoft." World Wide Web.

http://ourworld.compuserve.com/homepages/spazz/mspaper.htm. 1-5.

Maldoom, Daniel. "The Microsoft Antitrust Case." World Wide Web.

http://www.londecon.co.uk/pubs/comp/microsft.htm. 1-5.

Maney, Kevin. Megamedia Shakeout. New York: John Wiley & Sons, Inc., 1995.

"Monopolies in Cyberspace." The Economist. World Wide Web.

http://www.economist.com/issue/07-09-96/ld2.html. 1-2.

"Myth of Standards." Boycott Microsoft. World Wide Web.

http://www.vcnet.com/bms/page3d.html. 1-3.

"Netscape’s Complaint against MicroSoft." World Wide Web.

http://torrent.sj.ca.us/Commentary/Netscapes_complaint.html. 1-2.

Poole, Robert W., Jr. Unnatural Monopolies. Lexington, Massachusetts: D.C.
Heath and Company, 1985.

Rosenoer, Jonathan. "Cyberlaw: Withholding Consent." Cyberlaw. World Wide
Web.

http://www.cyberlaw.com/cylw0295.html. 1-3.

Schmidt, Eric. "The Struggle for Bill Gates’s Soul." US News and World

Report. Nov. 25, 1996: 69-71.

Stross, Randall. "Heaven’s Gates." US News and World Report. Nov. 25, 1996:
58-68.

"Why Microsoft (Mostly) Shouldn’t Be Stopped." Antitrust.org. World Wide
Web.

http://www.antitrust.org/cases/microsoft/control.html. 1-19.