The government’s position in 1998 alleged that The Microsoft Corporation is a monopoly that used its power to punish its competitors and keep innovative products from reaching the market. Specifically, Microsoft had engaged in multiple anticompetitive marketing practices directed at PC manufacturers who preinstall operating system software on the PCs they produce for retail sale (http://www.isc.meiji.ac.jp/~sumwel_h/doc/cases/Microsoft_1997_SD_DC.htm).
Microsoft also implemented licensing agreements which prohibited OEMs from disassembling the package; IE must remain as a component of the PCs' operating system software when they are shipped for retail sale, whether or not OEMs or their customers would prefer another brand of Internet browser, or none at all (http://www.isc.meiji.ac.jp/~sumwel_h/doc/cases/Microsoft_1997_SD_DC.htm).
This could hinder innovation in the computer industry. Microsoft only allows the innovation it finds useful for its own business interest. Personal computers are going to be important for a long time, but there are a whole new set of devices that are coming into people's homes, set-top boxes for digital television, hand-held computers, even new toys that use operating systems -- the Sony Play Station toy, for example -- use operating systems. We have no way to know what direction the information age is going to take us, and whether one company is going to be allowed to dominate not only the PC industry but all these other new devices that are going to come into our lives in the years ahead (http://www.pbs.org/newshour/bb/law/jan-june99/microsoft_6-25.html).
Furthermore, competitors’ worldwide viewed this tactic as monopolistic in that consumers who purchase PC Desktop Operating Systems will be forced to use the browsers, media players, and other code compatible programs specifically designed for Microsoft PCs. If internet explorer is removed from the operating system, windows will not be able run properly.
On the other hand, Microsoft presented a strong defense. It has not raised the prices in accordance to the improvements it has made on its systems, and so has not utilized the monopolistic benefit of driving up prices. Bernard Reddy, David S. Evans, and Albert L. Nichols of the National Economic Research Associates, Inc. in defense of Microsoft, mocked the lawsuit that accused Microsoft of having monopolistic powers, by stating that “This conclusion is apparently news to Microsoft which, despite the fact that it and its founder have well-known skills for making money, hasn't followed the government's advice that it could increase its profits by charging consumers more.” (http://www.microsoft.com/presspass/legal/10-16econ-b.mspx)
Microsoft primary goals or missions are to provide security, privacy, combat spam and have intellectual programs. With this in mind they have set up a number of various tools to accomplish this effectively. Microsoft’s company policies promote honesty, integrity, personal excellence and are committed in providing a service for consumers and business (http://www.microsoft.com/about/default.mspx).
In a perfect world, the best technology wins. Even though, there are other ways to define “best”, software is software that is written in the most efficient way possible. “Best” to a consumer means: the most readily available product, the most cost effective product, and the most user friendly product to get the job done. For example, the VHS vs. Betamax wars case. VHS won even though the Beta standard was a much smaller tape with higher quality. VHS won because it was just plain good enough for most people, available, and cost effective for the consumer. We do not feel Microsoft received fair trial in the anti-trust case against the United States. Microsoft’s ability to innovate provided a better more efficient way to accommodate business and consumers.
The economic question to consider, Should Microsoft become a legalize monopoly? A full-page ad that ran in The Washington Post and the New York Times on June 2, 1999 by The Independent Institute (which is funded by Microsoft) delivered "An Open Letter to President Clinton from 240 Economists on Antitrust Protectionism." It said, in part, "Consumers did not ask for these antitrust actions - rival business firms did. Consumers of high technology have enjoyed falling prices, expanding outputs, and a breathtaking array of new products and innovations. Increasingly, however, some firms have sought to handicap their rivals' races by turning to government for protection. ... Many of these cases are based on speculation about some vaguely specified consumer harm in some unspecified future, and many of the proposed interventions will weaken successful U.S. firms and impede their competitiveness abroad" (http://www.independent.org/issues/article.asp?id=483).
Microsoft’s innovation will continue to be the topic of discussion for its competition. The trial and tribulations Microsoft endured during the trial will be a case to remember as new enter the market. Since consumers demand the most reliable and economical products and services today, smaller and competing firms will scrutinize larger to ensure they earn small slices of revenue in a multi-million dollar industry. Innovating to satisfy consumers’ demand will be an issue for major Corporations.
References
Brinkley, J. (1999) Online News Hour. Retrieved September 2, 2006 from http://www.pbs.org/newshour/bb/law/jan-june99/microsoft_6-25.html
Microsoft (2006) About Microsoft. Retrieved September 5, 2006 from http://www.microsoft.com/about/default.mspx
O’Sullivan, A. & Sheffrin, S. (2006) Economics: Principles & Tools- Fourth Edition. Pearson Prentice Hall, Upper Saddle River, N.J.
Theroux, D. (1999) Open Letter on Antitrust Protectionism. Retrieved September 5, 2006 from http://www.independent.org/issues/article.asp?id=483
U.S. District Court (1997) United States vs. Microsoft Corporation Retrieved September 5, 2006 from http://www.isc.meiji.ac.jp/~sumwel_h/doc/cases/Microsoft_1997_SD_DC.htm