Microsoft was founded in 1975 by Bill Gates. Since then it has grown to become a major software vendor in the computer industry. Microsoft’s products include the Windows Operating Systems, (OS) and some other application software.
Since 1990, The Federal Trade Commission was investigating Microsoft as being in collusion with IBM. (Butts, 2001) According to Butt (2001) The Department of Justice waded into the investigation and by 1994 an agreement was reached by the signing of the consent decree. This agreement forbade Microsoft from using its operating system dominance to stifle competition.
Some of the allegations leveled against Microsoft include the illegal monopoly of the market for Operating Systems for Personal Computers.
That Microsoft illegally attempted to monopolize the market for internet browsers by anti competitively bundling its internet browser- Internet Explorer into its Windows Operating System.
By so doing, it was alleged, Microsoft had prevented other software developers, notably Netscape from interfacing onto the Windows platform.
Antitrust activities and monopolies affect consumers, by charging high prices, indirectly limiting choices of variety and quality, and stifling innovation.
Microsoft had a myriad of lawsuits against it.
In 1998 the Court of Appeals ruled that Microsoft can legally add new features and functionality to it‘s operating system. (Economides, 2001). This was the outcome of a judgment in her favor.
Microsoft did not enjoy monopoly in the software market because there were other competitors like Apple, and Linux. Competition was intense and leadership could swing to any competitor. To be able to compete on the basis of cost Microsoft sold its software to Original Equipment Manufacturers (OEM) at very low prices.
In competing by differentiating its products, Microsoft created in the operating system a variety of functionalities that enabled independent software vendors to create applications that can run on Windows.
By so doing Windows OS has accommodated more software applications than any other OS. This has a rippling effect: more application capability, the greater the attraction to consumers.
Microsoft did not therefore achieve market leadership through anticompetitive means.
Department of Justice claimed that Microsoft action to marginalize Netscape was an act of monopoly. Whereas Microsoft used low pricing and other strategies, to competitive advantage there was never a consistent effort by Netscape to make her application accessible to other independent software developers like Microsoft had done. By this Microsoft used good managerial practices to increase market share.
Netscape which is Application Software has to necessarily interface with an OS. It is difficult for Windows to accommodate perfectly its competitor.
Microsoft realized the internet was taking off, and so decided to play a dominant position by creating her own browser- Internet Explorer, and giving it a prime position in its OS. This is competition.
On the allegation of tying the Internet Explorer to the OS, Microsoft argued that it was giving crucial functionality to its operating system and has every right to include it under the 1995 consent decree.
Before the entry of Microsoft into the browser market, Netscape was the dominant player. By freely distributing her own browser, Microsoft had the mindset of popularizing her Windows OS.
In conclusion, antitrust activities were harmful to individuals and the public. They result in the charging of high prices, curtailment of choice in terms of variety and quality, and stifling innovation.
Microsoft’s activities have engendered price competitiveness, innovation and choice. The antitrust charges against Microsoft are not valid; rather Microsoft is behaving as a typical capitalist competitor.