Microsoft Antitrust

1
Microsoft Anti-trust

• Mike Krutt
• Remy Dupuy

2
Defining a Monopoly

• Monopoly industry with a single firm in which
  the entry of new firms is blocked
• Anti-trust legislation designed to prevent
  businesses from price-setting or other secret
  collaboration which circumvents the natural
  forces of a free market economy and gives those
  engaging in the anti-trust conduct, a covert
  competitive edge. Also known as "anti-combines"
  or "competition" legislation.
• Examples
• Public utilities electric companies
• Microsoft ?

3
The Sherman Act

• Developed in 1890 to prevent monopolies and
  unfair trade restraints.
• Flaws
• Rule of Reason

4
Anti-trust Law Enforcing Bodies

• Department of Justice (DOJ)
• Anti-trust division
• Federal Trade Commission (FTC)

5
The Battle Begins

• When did it start?
• Background on the case
• Focus Points
• Market Share
• Judgment
• EU joins the briggade

6
The Beginning

• May 18, 1998
• DOJ 20 states file suit against Microsoft
• October 20, 1998
• Trial commences against Microsoft

7
Background

• Four basic claims
• MS illegally maintained a monopoly in OSs
• MS leveraged that monopoly into the browser
  market
• MS dictated boot-up restrictions to PC makers
• MS entered into prohibitive and exclusive
  agreements with ISPs

8
Focus Points

• OS monopoly
• Barrier to entry
• Price discrimination
• Browser Market
• Bundling
• Strong-arm tactics

9
Bill Gates Quote

• The current popularity of Windows does not mean
  that its market position is unassailable. The
  potential financial reward for building the "next
  Windows" is so great that there will never be a
  shortage of new technologies seeking to
  challenge it. Powerful competitors such as IBM,
  Sun Microsystems and Oracle are spending hundreds
  of millions of dollars annually to develop new
  software aimed squarely at replacing Windows.
  That is one reason why we price Windows so low.
  If we increased prices, failed to innovate, or
  stopped incorporating the features consumers want
  (such as support for the Internet), we would
  rapidly lose market share.
• Bill Gates, The Economist, 6/13/98

10
Market Share

• Before IE

11
Market Share

• After IE

12
OS Market

• MS OS Market Share

13
The Ending of a Era?

• June 7, 2000
• Split MS into two firms
• June 28, 2001
• DC court of appeals vacates decision to MS split
• November 2, 2001
• Federal govt requires MS to release parts of
  source code to competitors

14
European Union

• January 2000 EU joins charge on MS
• Media Player
• Servers
• March 24, 2004 EU issues ruling
• Fined
• Network interoperability
• Media Player
• Current Standing
• Future Ramifications

15
Does a Monopoly Slow Progress?

• Pros
• Standardization
• Interoperability
• Reduces learning curve
• Cons
• Less Tech Progress
• Inhibits competition
• Higher prices