Since 1990, a battle has raged in United States courts between the United Statesgovernment and the Microsoft Corporation out of Redmond, Washington, headed byBill Gates. What is at stake is money. The federal government maintains thatMicrosoft’s monopolistic practices are harmful to United States citizens,creating higher prices and potentially downgrading software quality, and shouldtherefore be stopped, while Microsoft and its supporters claim that they are notbreaking any laws, and are just doing good business. Microsoft’s antitrustproblems began for them in the early months of 1990(Check 1), when the FederalTrade Commission began investigating them for possible violations of the Shermanand Clayton Antitrust Acts,(Maldoom 1) which are designed to stop the formationof monopolies.
The investigation continued on for the next three years withoutresolve, until Novell, maker of DR-DOS, a competitor of Microsoft’s MS-DOS,filed a complaint with the Competition Directorate of the European Commission inJune of 1993. (Maldoom 1) Doing this stalled the investigations even more, untilfinally in August of 1993, (Check 1)the Federal Trade Commission decided to handthe case over to the Department of Justice. The Department of Justice movedquickly, 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, withMicrosoft signing a consent settlement.(Check 1) The settlement focused onMicrosoft’s selling practices with computer manufacturers.
Up until now,Microsoft would sell MS-DOS and Microsoft’s other operating systems tooriginal equipment manufacturers (OEM’s) at a 60% discount if that OEM agreedto 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. Afterthe settlement, Microsoft would be forced to sell their operating systemsaccording to the number of computers shipped with a Microsoft operating systeminstalled, and not for computers that ran other operating systems. (Check 2)Another practice that the Justice Department accused Microsoft of was thatMicrosoft would specify a minimum number of minimum number of operating systemsthat the retailer had to buy, thus eliminating any chance for another operatingsystem vendor to get their system installed until the retailer had installed allof the Microsoft operating systems that it had installed.(Maldoom 2) In additionto 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 timesuch as two or three years.
In order for a new operating system to gainpopularity, it would have to do so quickly, in order to show potential buyersthat it was worth something. With Microsoft signing long term contracts, theyeliminated the chance for a new operating system to gain the popularity needed,quickly.(Maldoom 2) Probably the second most controversial issue, besides theper processor agreement, was Microsoft’s practice of tying. Tying was apractice in which Microsoft would use their leverage in one market area, such asgraphical user interfaces, to gain leverage in another market, such as operatingsystems, where they may have competition.(Maldoom 2) In the preceding example,Microsoft would use their graphical user interface, Windows, to sell theiroperating system, DOS, by offering discounts to manufacturers that purchasedboth MS-DOS and Windows, and threatening to not sell Windows to companies whodid not also purchase DOS. In the end, Microsoft decided to suck it up and signthe settlement agreement.
In signing the agreement, Microsoft did not actuallyhave to admit to any of the alleged charges, but were able to escape any type offormal punishment such as fines and the like. The settlement that Microsoftagreed to prohibits it, for the next six and a half years from: * Charging forits operating system on the basis of computer shipped rather than on copies ofMS-DOS shipped; * Imposing minimum quantity commitments on manufacturers; *Signing contracts for greater than one year; * Tying the sale of MS_DOS to thesale of other Microsoft products;(Maldoom 1) Although these penalties look toput an end to all of Microsoft’s evil practices, some people think that theyare not harsh enough and that Microsoft should have been split up to put a stopto any chance of them forming a true monopoly of the operating system market andof the entire software market. On one side of the issue, there are the peoplewho feel that Microsoft should be left alone, at least for the time being. I amone of these people, feeling that Microsoft does more good than bad, thus notnecessitating their breakup. I feel this way for many reasons, and untilMicrosoft does something terribly wrong or illegal, my opinion will stay thisway.
First and foremost, Microsoft sets standards for the rest of the industryto follow. Jesse Berst, editorial director of Windows Watcher newsletter out ofRedmond, Washington, and the executive director of the Windows SolutionsConference, says it best with this statement: "To use a railroad analogy,Microsoft builds the tracks on which the rest of the industry ships itsproducts." ("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 anoutside organization or committee were to create them. With these standards set,other companies are able to create their applications and other products thatmuch faster, and better, and thus the customers receive that much better of aproduct. Take for instance the current effort to develop the Digital Video Disc(DVD) standard.
DVD’s are compact discs that are capable of storing 4900megabytes of information as apposed to the 650 megabytes that can be stored on aCD-ROM disc now. For this reason, DVD’s have enormous possibilities in boththe computer industry and in the movie industry. For about the last year,companies such as Sony, Mitsubishi, and other prominent electronicsmanufacturers have been trying to decide on a set of standards for the DVDformat. Unfortunately, these standards meetings have gone nowhere, andsubsequently, 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 differentfrom one another.
Consumers will be forced to make a decision on which standardto choose, and if they pick the wrong one, they could be stuck down the roadwith 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 theconfusion that arose, and the consumers could sit back and relax, knowing thatthe DVD format is secure and won’t be changed. Another conclusion that manyanti-Microsoft people and other people around the world jump to is that themoment that we have a company, such as Microsoft, who is very successful, theyimmediately think that there must be something wrong; they have to be doingsomething illegal or immoral to have become this immense. This is not the case.
Contrary to popular belief, Microsoft has not gained its enormous popularitythrough monopolistic and illegal measures, but instead through superiorproducts. I feel that people do have brains, and therefore have the capacity tomake rational decisions based on what they think is right. If people didn’tlike the Microsoft operating systems, there are about a hundred other choicesfor operating systems, all of which have the ability to replace Microsoft if thepeople wanted them. But they don’t, the people for the most part wantMicrosoft operating systems. For this reason, I don’t take the excuse thatMicrosoft has gained their popularity through illegal measures. They simplycreated products that the people liked, and the people bought them.
On the otherside of the issue, are the people who believe that Microsoft is indeed operatingin a monopolistic manner and therefore, the government should intervene andsplit Microsoft up. Those who are under the assumption that Microsoft shouldindeed be split up, believe that they should either be split into two separatecompanies: one dealing with operating systems and the other dealing strictlywith applications. The other group believes that the government should furthersplit Microsoft up into three divisions: one company to create operatingsystems, one company to create office applications, and one company to createapplications for the home. All of these people agree that Microsoft should besplit up, anyway possible. The first thing that proponents of Microsoft beingsplit up argue that although Microsoft has created all kinds of standards forthe computer software industry, in today’s world, we don’t necessarily needstandards. Competing technologies can coexist in today’s society, without theneed for standards set by an external body or by a lone company such asMicrosoft.
A good analogy for this position is given in the paper, "A CaseAgainst Microsoft: Myth Number 4." In this article, the author states thatpeople who think that we need such standards, give the example of the home videocassette industry of the late 1970’s. He says that these people point out thatin the battle between the VHS and Beta video formats, VHS won not because it wasa superior product, but because it was more successfully marketed. He then goesto point out that buying an operating system for a computer is nothing at alllike purchasing a VCR, because the operating system of a computer defines thatcomputer’s personality, whereas a VCR’s only function is to play movies, andboth 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 areall being used at once. VHS-C, S-VHS and 8mm formats all are coexisting togetherin the camcorder market, showing that maybe in our society today, we are not inneed of one standard.
Maybe we can get along just as well with more than onestandard. Along the same lines, there are quite a few other industries that canget along without one standard. Take for instance the automobile industry. Ifyou accepted the idea that one standard was best for everyone involved, then youwould never be tempted to purchase a BMW, Lexus, Infiniti, Saab or Porscheautomobile, due to the fact that these cars all have less than one percentmarket share in the automobile industry and therefore will never be standards.Probably the biggest proponent of government intervention into the Microsoftissue is Netscape Communications, based out of Mountain View, California.
Netscape has filed law suits accusing Microsoft of tyingagain.("Netscape’s Complaint against MicroSoft." 2) This time,Microsoft is bundling their world wide web browser, Internet Explorer 3.0 intotheir operating system, Windows 95. Netscape is the maker of Netscape Navigator,currently the most widely used internet browser on the market, and now, facingsome fierce competition from Microsoft’s Internet Explorer.
Netscape says thatin addition to bundling the browser, Microsoft was offering Windows at adiscount to original equipment manufacturers (OEM’s),("Netscape’sComplaint against MicroSoft." 2) to feature Internet Explorer on thedesktop of the computers that they shipped, thus eliminating any competition forspace on the desktop by rival companies such as Netscape. If the OEM wants togive the consumer a fair and even choice of browsers by placing competitors’browser icons in a comparable place on the desktop, Netscape has been informedthat the OEM must pay $3 more for Windows 95 than an OEM that takes the Windowsbundle as is and agrees to make the competitors’ browsers far less accessibleand useful to customers.("Netscape’s Complaint against MicroSoft."2) Another accusation that Netscape is making against Microsoft is that they aredoing the same type of things with the large internet service providers of thenation.
They are offering the large internet providers of the nation, such asNetcom and AT&T, space on the Windows 95 desktop, in return for the internetprovider’s consent that they will not offer Netscape Navigator, or any othercompeting internet software to their customers.("Netscape’s Complaintagainst MicroSoft." 3) Netscape is becoming ever more concerned withMicrosoft’s practices, because for now, they are going untouched by thegovernment and it looks as if it will stay that way for quite some time now. Theare very much worried, as they watch the numbers of users switching toMicrosoft’s browser, and the number of users using Navigator slipping.
Besidesall 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, withone added plus: it is free and Microsoft says that it always free. So is theirinternet server, Internet Information Server.
Whereas Netscape charges $50 and$1500 for their browser and their web server, respectively.("Netscape’sComplaint against MicroSoft." 3) With all the information that has beenpresented for both sides of the issue, you are probably left in a daze, notknowing what to think. Is Microsoft good? Or is Microsoft bad? Well, the answeris a little bit of both.
Even though the Justice Department found that Microsoftmight be practicing some techniques that are less than ethical, they did notfind that Microsoft was breaking any anti-trust laws, nor did Microsoft actuallyadmit to the accusations when they signed the agreement. If anything, themsigning the agreement was more of a sorry than an full fledged admission ofguilt. Other people might disagree with me, and there might be a lot ofallegations floating around from different companies, but the fact of the matteris plain and simple. Microsoft has not been formerly charged and found guilty ofany illegal practices pertaining to them being a monopoly.
I believe that thegovernment should stay out of the affairs of the economy, rather than gettangled up in a mess, and just end up deadlocked like the FTC did in 1990. Andeven if the government did get involved, due to the extremely fast paced natureof the computer industry, and the extremely slow nature of the government, theremay not be any resolve for quite a while.BibliographyCheck, Dan. "The Case Against Microsoft.
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