Antitrust Laws: Microsoft's Friend Or Foe?

In the 1990s, the U.S. government sued Microsoft for trying to monopolize the personal computer market. The case was a landmark American antitrust law case at the United States Court of Appeals for the District of Columbia Circuit. The U.S. government accused Microsoft of illegally monopolizing the web browser market for Windows, primarily through the legal and technical restrictions it put on the abilities of PC manufacturers and users to uninstall Internet Explorer and use other programs such as Netscape and Java.

The presiding judge, Thomas Penfield Jackson, ruled that the company violated multiple sections of the Sherman Antitrust Act. The Appeals Court later overturned this ruling, however, due to Jackson's improper discussion of the case with the news media while it was still in progress.

Microsoft's monopoly power in the market for Intel-compatible PC operating systems

Microsoft has been accused of having a monopoly in the market for Intel-compatible PC operating systems. In 1999, Judge Thomas Penfield Jackson ruled that Microsoft had monopoly power in the computer operating system market. He also found that Microsoft had harmed competitors and consumers with its business practices.

Microsoft's share of the market for Intel-compatible PC operating systems is large and stable, and its dominant market share is protected by a high barrier to entry. This means that Microsoft's customers lack a commercially viable alternative to Windows. Microsoft's monopoly power is further protected by the applications barrier to entry, which exists because applications written for Windows will not run on other operating systems.

Microsoft has been accused of engaging in a broad pattern of unlawful conduct to thwart emerging threats to its operating system monopoly. This includes Netscape's Navigator, Sun's Java, Intel's Native Signal Processing, and Apple's QuickTime. Microsoft's predatory campaign worked, preserving its monopoly power and preventing the development of alternative platforms that could have given consumers greater choice.

Microsoft has also been accused of tying its Internet Explorer browser to its Windows operating systems, requiring OEMs and PC users to take Internet Explorer as a condition of obtaining the operating system. This was despite recognizing that users' demand for browsers was separate from their demand for operating systems.

Microsoft's actions have caused significant anticompetitive effects, injured consumers, and threaten to cause greater harm in the future. Microsoft's conduct has succeeded in impeding cross-platform middleware threats and maintaining its operating system monopoly.

Microsoft's anticompetitive practices to eliminate competitors' browsers

Microsoft has been accused of engaging in anticompetitive practices to eliminate competitors' browsers. In the 1990s, Microsoft was the world's leading manufacturer of operating systems and had a monopoly over operating systems for Intel-compatible personal computers (PCs).

In the mid-1990s, Microsoft identified a potential threat to its monopoly: platform-level middleware such as Netscape's Navigator browser. Internet browsers run "on top" of operating systems and contain interfaces ("APIs") to which other application programs can be written. Because Internet browsers and other middleware can run on multiple operating systems, they can enable application developers, by writing programs to the APIs on the middleware, to develop programs that are platform neutral. By potentially "commoditizing" the underlying operating system, browsers thus offer the potential to erode the applications barrier to entry and, ultimately, Microsoft's operating system monopoly.

In 1995, Microsoft tried to eliminate the browser threat by proposing a market-division agreement to Netscape, in which Microsoft would become the sole supplier of browsers for Windows 95 and successor operating systems, and Netscape would become the sole supplier of browsers for operating systems other than Windows 95 or its successors. Netscape refused to participate in Microsoft's illegal scheme.

Microsoft then embarked on a predatory campaign to crush the browser threat to its operating system monopoly. It tied its Internet Explorer browser to Windows 95 and Windows 98 in order to impede browser rivals such as Netscape, and for no legitimate purpose. It imposed a variety of other anticompetitive restraints on the OEM channel in order to impede rivals such as Netscape. It imposed exclusionary restrictions on OEMs' ability to modify the Windows desktop and start-up sequence. It used its monopoly power to force OEMs into taking actions to hinder products or industry developments that threatened its operating system monopoly. It entered into anticompetitive and exclusionary agreements with OLSs and ISPs. It entered into anticompetitive, exclusionary agreements with Internet Content Providers. It entered into exclusionary agreements with other firms that restricted their ability to promote, support, and distribute non-Microsoft browsers. It set a predatory price for Internet Explorer.

Microsoft also used predatory and anticompetitive conduct to impede other platform threats, further entrenching its operating system monopoly. It responded to the threat that Java posed by engaging in predatory and anticompetitive conduct. It engaged in predatory, anticompetitive conduct to induce Intel to abandon or restrict platform-level software. Through its predatory and anticompetitive conduct, Microsoft has maintained its operating system monopoly, dangerously threatened monopolization of the browser market, and inflicted substantial and far-reaching consumer harm.

Microsoft's attempts to restrict the access of its browser competitors to significant distribution channels

Microsoft has been accused of attempting to restrict the access of its browser competitors to significant distribution channels. In the United States v. Microsoft Corp. case, the U.S. government accused Microsoft of illegally monopolizing the web browser market for Windows. The central issue was whether Microsoft was allowed to bundle its Internet Explorer web browser software with its Windows operating system.

Microsoft argued that the merging of Windows and Internet Explorer was the result of innovation and competition, and that consumers were receiving the benefits of Internet Explorer for free. Opponents countered that Internet Explorer was still a separate product that did not need to be tied to Windows, as a separate version of Internet Explorer was available for Mac OS. They also asserted that Internet Explorer was not really free because its development and marketing costs may have inflated the price of Windows.

The government alleged that Microsoft had abused its monopoly power on Intel-based personal computers by bundling its web browser software with its Windows operating system. This restricted the market for competing web browsers, such as Netscape Navigator or Opera, as it typically took extra time and effort to buy and install the competing browsers.

Microsoft also entered into anticompetitive agreements with Internet Service Providers (ISPs) and Internet Content Providers (ICPs). These agreements required ISPs and ICPs to distribute and promote Internet Explorer to their subscribers, and not to promote or even mention the existence of competing browsers. These agreements substantially foreclosed competing browsers from major channels of distribution.

In addition, Microsoft imposed contractual restrictions on Original Equipment Manufacturers (OEMs), preventing them from modifying the Windows boot-up sequence and screens, which included the removal of Internet Explorer. This further limited the ability of OEMs to offer competing browsers to their customers.

Overall, Microsoft's actions were seen as attempts to restrict the access of its browser competitors, particularly Netscape, to significant distribution channels, thereby unlawfully restraining competition in the browser market.

Microsoft's illegal tying arrangement by using its position with regard to operating systems to induce consumers to use a Microsoft browser

In the late 1990s, the U.S. government accused Microsoft of engaging in an illegal tying arrangement by bundling its Internet Explorer web browser software with its Windows operating system. This was a landmark American antitrust law case, with the government alleging that Microsoft was illegally monopolizing the web browser market for Windows.

Microsoft's Internet Explorer was bundled with Windows, meaning that every Windows user had a copy of IE. This was seen as a key factor in Microsoft's victory in the browser wars of the late 1990s, as it restricted the market for competing web browsers, such as Netscape Navigator and Opera.

The U.S. Department of Justice (DOJ) argued that Microsoft was abusing its monopoly power on Intel-based personal computers by bundling its web browser with its operating system. They also questioned Microsoft's conduct in enforcing restrictive licensing agreements with original equipment manufacturers (OEMs), who were required to include the arrangement.

Microsoft, however, denied that it was a monopoly and argued that the merging of Windows and IE was the result of innovation and competition. They claimed that the two were now the same product and inextricably linked, and that consumers were receiving the benefits of IE for free.

The case went to trial, with the initial ruling finding that Microsoft's actions constituted unlawful monopolization. However, this judgment was partially overturned on appeal, and the two parties eventually reached a settlement in which Microsoft agreed to modify some of its business practices.

Microsoft's anticompetitive conduct

Microsoft has been accused of engaging in anticompetitive conduct by the U.S. government, which filed a lawsuit against the company in 1998. The case, United States v. Microsoft Corp., was heard at the United States Court of Appeals for the District of Columbia Circuit.

The U.S. government accused Microsoft of illegally monopolizing the web browser market for Windows through legal and technical restrictions on PC manufacturers and users. Microsoft was found to have restricted the abilities of PC manufacturers and users to uninstall Internet Explorer and use other programs such as Netscape and Java.

• Agreements tying other Microsoft software products to the Windows operating system.
• Exclusionary agreements preventing companies from distributing, promoting, buying, or using products of Microsoft's software competitors.
• Exclusionary agreements restricting the right of companies to provide services or resources to Microsoft's software competitors.
• Leveraging its Windows operating system to require Online Service Providers to enter into agreements to distribute Internet Explorer to their subscribers.
• Leveraging its Windows operating system to require Internet Content Providers to enter into agreements to distribute Internet Explorer to their subscribers.
• Imposing contractual terms on suppliers that restricted OEMs' ability to alter the Windows boot-up sequence.
• Tying its Internet browser software to its Windows operating system.
• Using its market power to force computer manufacturers to buy one bundle with all of its programs preloaded and bias the screen location, start sequences, and default options.
• Making it difficult for consumers to find, install, or use competing products.
• Creating incompatibilities with competing products.
• Withholding support for competing products.
• Using its market power to force consumers to buy non-Microsoft products in inconvenient ways.
• Charging excessive and superfluous prices for bundled software.
• Leveraging its operating system and browser monopolies to repeatedly prompt consumers to choose Microsoft programs.
• Requiring software developers to "pre-certify" the launch of their software with Microsoft.
• Bundling its identity authentication service, Passport, into Windows XP.
• Using deceptive messages to mislead consumers into thinking that its products are necessary to access the Internet.

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