Essay/Term paper: The anti-trust case against microsoft

Essay, term paper, research paper:  Technology

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.