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Its time to break up Microsoft Monopoly A couple of years ago, a copier company was found guilty of tying when it required consumers to purchase a maintenance plan along with its copier. Such is the case when on May 18, 1998 attorney generals from 20 states, and the District of Columbia and the US Department of Justice filed historic antitrust lawsuits against Microsoft Corporation. The US Department of Justice and 20 states are claiming Microsoft is conducting business in violation of the Sherman Antitrust Act of 1890. The act is designed to protect consumers and to guard against businesses fixing prices, rigging bids or allocating customers 1. What the case is really about is whether Microsoft has monopoly power in the operating system market and has engaged in anti-competitive activities to protect that monopoly. Monopoly is defined as a market in which the number of sellers is so few that each seller is able to influence the total supply and the price of the good or service.
Pure Monopoly on the other hand is defined as a market in which one firm sells a unique product (one for which there is no close substitute), into which entry is blocked, in which the firms has considerable control over the price at which the product sells, and is which non price competition may or may not be found 11. When Microsoft first entered the software industry, the market was considered to be a monopoly with various companies contributing to the software industry. However, over the years Microsoft chairman and CEO Bill Gates has cleverly used illegal business practices such as undercharging its products with the purpose of driving competitors out of business and turned the software industry of what used to be a monopoly into a pure monopoly. Competition is the greatest motivation for innovation in various high-tech industries. However, Bill Gates does not welcome competition because he thinks that it will ultimately hinder Microsoft's advancement and domination in the software industry. If there was no competition, then Microsoft will be the only company that will dominate the software market.
This will affect both the economy and consumers. Microsoft will be able to influence supply and charge whatever he wants for his software. Consumers might have to pay high prices for software only if they are able to afford them. This will hinder the technological progress in the software industry because not many people will be able to use the software.
The technological improvements in the software industry might then come to a halt because of Microsoft's domination in the market. The background on the antitrust lawsuit against Microsoft should be discussed in order to understand the control Microsoft has over the software market. The US Justice Department claims Microsoft's conduct includes agreements tying other Microsoft software products to Microsoft's Windows operating system-specifically, the bundling of the Internet Explorer Web browser with Windows 7. The US Justice Department says that its illegal to leverage a monopoly position in one product to force companies to agree to distribute another of the monopoly owners products at the expense of a competitor 7. Microsoft's strongest competitor Netscape, was once the leading provider in browser technology. However, Netscape had failed to realize the value of its web site for distributing and testing new products.
Netscape's early success bred arrogance that led to a reputation as a terrible partner. One of the ironies of the merger between Netscape and AOL recently was that Netscape had twice refused Aol's offers of alliance, both at times when Netscape was flying high and AOL had a value of less than 10 % of its potential partner. Today the tables have turned: AOL is worth $ 40 billion, while Netscape is being bought for $ 4 billion 2. With Netscape's failure to realize its potential, it is not mistaken to assume that Microsoft immediately sprang forth to dominant the software industry. However, Microsoft did not reach where it is today with fair play. Just look at the numbers: Microsoft dominates 90 percent of the worlds PC operating system, 87 percent of the office suite market and could dominate up to 90 percent of the browser market 9.
Anyone who is not Microsoft can see Microsoft's dominance in all of these technologies as nothing short of a stranglehold. On November 9 th, 1998, Intel vice president Steven Mcgeady emerged as an eager witness for the US government in its antitrust suit against Microsoft. He testified to a history of strong-arming by Microsoft that he said was intended to keep Intel from competing with Microsoft in software. Microsoft and Intel have worked together so closely over more than two decades to dominate the markets for personal computer microprocessors and operating systems that they are known as Wintel 5. In his testimony, Mcgeady said Microsoft convinced Intel to back off of an especially contentious project by threatening to not make software for a new generation of Intel computer chips. The threat was credible and fairly terrifying, Mcgeady said, since Intel had invested more than $ 500 million in developing its next generation of MMX chips 5.
Mcgeady testified that Microsoft's vice president Paul Marine, said in a November 1995 meeting that Microsoft intended to cut off Netscape's air supply by distributing the Microsoft browser for free. Such business practices conducted by Bill Gates will not benefit the market and the consumers as it not only slows down technology advancement but also eliminates competition, which encourages improvement. With all these charges being filed against Microsoft, what does Microsoft and Bill Gates have to say? Mr. Gates is the person who, except in this lawsuit, is recognized throughout the company and by himself as an intimate, hands-on manager, Justice Department attorney David Books said. Everybody in the company, including himself, talks about what a hands-on manager he is and how great his memory is.
And what you find is this astonishing lack of recall limited to issues of critical relevance to this case 10. Under cross-examination by a Microsoft attorney, economist Frederick Warren-Boulton said Microsoft holds monopoly power because it has the ability to set prices for its products in a way that excludes competitors. The companys actions will be considered illegal only if it is found to have monopoly power. Through his questioning, Microsoft attorney Michael Lacovara tried to paint the company as an aggressive but legal player in a fiercely competitive industry 6. He detailed Microsoft's frequent attempts to improve its operating systems software, from MS-DOS to Windows 98.
The products would not be so popular if they failed to deliver improved quality and value with each new version, he argued. From here, one has to give Microsoft's attorney credit for his lack of intelligence and resource. Microsoft Windows IS the standard for common consumers, the consumers do not have any other choices for operating systems because Microsoft has been driving its competitors out of business. Professionals who have a background in computer programming use the other brands of operating systems, which are not meant for use by common consumers. With Netscape being Microsoft's strongest rivalry in browser technology, Microsoft's strongest rival in operating systems is Sun Microsystems. The examination of internal Microsoft documents revealed how much a threat Microsoft considered Java to be.
Microsoft executives talk about creating a polluted form of Java and Bill Gates wrote at one point that Java scares the hell out of me. The theory behind Java that has not been fully realized in the real world is to have a technology that allows programs to be written once and then be used on any computer regardless of the operating system. Rich Gray, a California antitrust lawyer thinks that Microsoft will try a kind of a reverse spin tactic on James Goslings (a Sun Microsystems engineer) testimony. Microsoft will basically try to paint a picture of Sun as the next evil empire, attempting to show that Suns control over Java is somewhat similar to what theyre being accused of in their control over Windows 6.
All this denial from Microsoft and its accusations towards its competition proves that Microsoft is up to no good and that it hopes to pull its competitors along with its downfall. During the antitrust lawsuit against Microsoft, AOL said it was negotiating to buy Netscape Communications Corp. in a deal that would bring together the worlds largest computer Internet provider and the pioneer company whose software first popularized the Web. There has also been talks between AOL and Sun Microsystems to control Netscape's business-level software if the merger between AOL and Netscape were successful.
The three companies have been negotiating for at least two weeks. If the deal were completed, it would create an alliance that would dramatically change the landscape of the US technology industry. All this is just a distraction that will diversify the public and the US governments attention. By using this merger deal, Microsoft can argue that the software giant faces strong competition in the high-tech industry. Microsoft says that the proposed deal demonstrates a simple truth, that there is vigorous competition in the marketplace and that Microsoft faces resourceful and capable competitors 8. The problem with this is that the Microsoft monopoly is not really over yet, and we can only hope that the merger of the three companies can provide the competition that is needed in this market to drive it forward.
It is important for the consumers and the US government to realize now that only by breaking up Microsoft monopoly will both the economy and consumers benefit. One might likely to argue that Microsoft is checked and balanced by competition and an open marketplace. In its formative years it was. But Microsoft has now achieved such a position of dominance that the regular rules, checks and balances of the marketplace no longer apply.
Moreover, Windows is not merely an essential utility, it is a strategic utility, that is fundamental to the functioning of the economy, society, and government 3. In fact, Windows has a huge impact on the whole world, as Windows is an international operating system that run on virtually every PC in the world. In the end, assuming that AOL, Netscape, and Sun Microsystems do come to an agreement, everybody will win: consumers will get more competition and more choices; AOL will become a leading Internet service provider; Netscape shareholders will get a 100 % premium over their share price; and Microsoft may walk away from a loss in the antitrust case in one piece and ready to enter the fight again. Personally, I believe competition is the greatest motivation for innovation. If Microsoft is so capable, why is it afraid of competition? If Microsoft let the people decide who has the best product on the market instead of using Windows as a method of getting their software to the public, I think Microsoft employees will be more motivated to improve Microsoft products.
Also, Microsoft should make its products universal with all other products on the market. Microsoft can make itself the champion of setting standards in the industry by cooperating with the other companies and insuring that all products are compatible. Microsoft and its competitors would serve the consumers better by trying to solve these problems together. In short, Bill Gates should change his whole aspect towards his competition. He should not think of them as foes to be eliminated but rather as catalysts for making his company stronger. He should not assassinate the competition, but instead, he should outplay them.
Innovate, cooperate, diversify, and standardize rather than using his companys position as a method of total domination. Oh yeah, Bill Gates should also stop being so arrogant and develop some moral ethics. The future of Microsoft lies in the hands of Microsoft itself. Microsoft has made all the money and gained all of the market share any other company of comparable size would be proud to achieve. Continuing to bully (or even APPEAR to bully) the competition and constantly dancing on the line between legal and illegal business practices is what will keep Microsoft in court for the rest of its days. Only by breaking up the monopoly will the whole world benefit, as competition will drive computer technology into the next millenium.
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Research essay sample on Department Of Justice Bill Gates
