Microsoft and Its Monopolizing Position in The Industry

Introduction

Today, Microsoft is a household name. It is the name of a multi-billion dollar corporation whose software is in the vast majority of computers today. Its operating system, Windows, can be found on nearly all computers that can be bought from a store. One of its founders, Bill Gates, is the richest and one of the most well-known people in the world. However, all this success did not come without controversy and questionable business ethics. There is evidence that supports the claim that Microsoft created a software monopoly through unfair business practices.

Microsoft and Its Monopolizing Position in The Industry

Microsoft has been determined by a court to have violated sections of the Sherman Act, which was created to preserve a competitive marketplace to protect consumers from abuses and prevent actions that could harm competition. Documents from the court case state, “Section 1 governs combinations, and prohibits those that restrain trade. Agreements to fix prices, divide markets, and tie unrelated goods are most likely in violation of section 1” (Cohen, 2001). The fact that Microsoft paired Internet Explorer with their OS seems to have violated this rule. The documents also state that “certain behavior by monopolists, companies that can charge a supracompetitive price in a defined market. Under section 2, monopolists may not intentionally garner their market power, nor may they willfully maintain market power achieved by superior business sense or accident” (Cohen, 2001). Additionally, “Finally, a firm is liable for attempted monopolization if, intending to monopolize, it engages in anticompetitive behavior and has a dangerous probability of success” (Cohen, 2001). Microsoft seems to have violated this rule by pairing Windows OS with nearly all of the computers on the market.

The Case of United States v. Microsoft

There was a case involving Microsoft that aimed to address these issues, United States v. Microsoft. The violations and accusations of monopolization are further detailed in the case. The court had “affirmed the district court's holding that Microsoft had unlawfully maintained a monopoly in Intel-compatible PC operating systems” (Cohen, 2001). This demonstrates that the court agreed with the accusation. However, “Citing Microsoft’s reduced liability, the Court of Appeals vacated the breakup order issued by the district court” (Cohen, 2001). This means that the order to break Microsoft up into multiple companies was canceled. Instead, a negotiation was to be made. This was evident when Cohen wrote, “On remand, the settling states and the DOJ dropped the tying claim and proceeded to negotiate a settlement” (Cohen, 2001). However, will the negotiation plan be enough to limit Microsoft's monopolistic practices?

Unethical Business Practices

A subheader in the paper written by Cohen, “Anti-Retaliation and Uniform Licensing Provisions,” lists the various unethical business practices that Microsoft has engaged in. One instance states that “Microsoft threatened to support the '3DX' technology of AMD, an Intel competitor, if Intel did not stop aiding Sun Microsystems by developing a fast, cross-platform virtual machine using Sun's Java standards” (Cohen, 2001). Another example is that “Microsoft also threatened to stop supporting and developing its Mac Office program, used by ninety percent of Macintosh users running an office suite, if Apple Computer continued to include Netscape as its default browser” (Cohen, 2001). As a result of these actions, the court found that Microsoft was “in violation of section 2 of the Sherman Act” (Cohen, 2001). More violations can be seen in the company's strategic partnerships and software bundling practices.

Conclusion

In conclusion, Microsoft has used unethical practices to secure a monopolizing position in the industry. For example, they have paired Windows OS with Intel computers. This prevents any competitors from being able to install their OS on Intel computers on the market. Additionally, the corporation has paired their internet browser, Internet Explorer, with their operating system. This also creates a monopoly as a result of the inability to remove it and the possibility of confusing end users. Furthermore, Microsoft used threats, such as threatening to stop development of the Mac Office program, to maintain its dominance. Despite being found guilty of several violations, Microsoft remains one of the biggest corporations in the world, continuing to exert significant influence over the software industry.

References

Cohen, J. (2001). Microsoft and Its Monopolizing Position in The Industry. Journal of Business Ethics, 34(2), 123-136.