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Anti Trust Policy In The Modern Economy: Microsoft Anti Trust Case

2315 words - 10 pages

Anti-trust Policy in the Modern Economy
Microsoft's Anti-trust Case

Mark Hinman

Baud 5590

Anti-trust Policy in the Modern Economy
Microsoft's Anti-trust Case

This paper's intention is to discuss the role of anti-trust legislation in the modern economy. To accomplish this, we will be reviewing the United States Government's anti-trust case against Microsoft that began nearly twenty-two years ago. To begin we will look at the history leading up to the filing, the government's argument, Microsoft's argument, and the outcome of the case. We will also look at the intent of the Sherman Anti-Trust Act. Specifically, how does the Sherman Anti-Trust Act protect ...view middle of the document...

[iv] 3. Microsoft illegally attempted to monopolize the market for Internet browsers (but failed to succeed), an act that is illegal under paragraph 2 of the Sherman Anti-Trust Act.[v] 4. Microsoft bundled anti-competitively its Internet browser, IE, the Microsoft Internet browser, with its Windows operating systems; that this is illegal under paragraph 1 of the Sherman Anti-Trust Act.[vi]
Microsoft defended its position with the following arguments: First, Microsoft argued that the law was on its side since the Court of Appeals had ruled on June 23, 1998 that Microsoft could legally add new features and functions to Windows. Therefore, Microsoft argued that it was legal to add IE’s functionality to Windows, and it had done nothing wrong by integrating IE in Windows.[vii] Second, Microsoft argued that it was just competing hard against Netscape, that such competition was welfare enhancing, and that it did not commit any anti-competitive acts.[viii] Third, Microsoft argued that it did not have monopoly power in the operating systems market.[ix] Fourth, Microsoft argued that competition in the software sector was intense and that a new competitor or entrant could replace its leadership position at any time.[x] Although this seems to have been a deeply held belief of Microsoft’s management (as revealed by the internal e-mails), its economics expert witness failed to convincingly articulate this Schumpeterian view in the context of an anti-trust defense.[xi] Fifth, Microsoft argued that it is a leader in software innovation and that it has enhanced rather than hobbled the innovation process.[xii] Sixth, Microsoft argued that consumers have benefited from its actions rather than been harmed by them. Microsoft claimed direct consumer benefits from its low pricing of the operating system, the zero pricing of its Internet browser, and from its enhancement and acceleration of the innovation process.[xiii] Microsoft also argued (rather ineffectively) that consumers benefit from the de facto standardization that its large market share brought to the operating systems market.[xiv]
The fate of Microsoft was decided on June 7, 2000, as district court of Judge Jackson orders the breakup of Microsoft into two companies, one limited to operating systems and one limited to applications.[xv] A variety of conduct orders were also a part of the judgment. However, the district court’s order was reversed on June 28, 2001 by a federal appeals court.[xvi] The court reverses the breakup order largely due to procedural failures, lack of explanation of how the order would restore competition, and the need to reconsider remedies in light of the reversal of some of the liability holdings.[xvii] By November of 2001, the Justice Department and Microsoft reached a settlement.[xviii] The agreement included conduct-based remedies directed to the practices held unlawful by the appeals court and limited Microsoft’s ability to counter rivals’ competing...

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