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Microsoft Antitrust Case Microsoft is a large diversified computer software manufacturer. Microsoft produces the Windows family of operating systems

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Introduction

Microsoft Antitrust Case Microsoft is a large diversified computer software manufacturer. Microsoft produces the Windows family of operating systems for personal computers and servers. It also produces applications software that run on the Windows family of operating systems, most notably the very successful MS-Office Suite consisting of Word, Excel, PowerPoint, Outlook and Access. Almost all Microsoft products are complementary to a member of the Windows family of operating systems for personal computers and servers. During the last few years, the Federal Trade Commission and the Department of Justice of the United States have investigated Microsoft on various antitrust allegations. The 1991-1993 and 1993-1994 investigations by the Federal Trade Commission ended with no lawsuits. The 1994 investigation by the United States Department of Justice was terminated with a consent decree in 1995. The provisions of the 1995 consent decree were: 1. Microsoft agreed to end per-processor (zero marginal prices) contracts with computer manufacturers but it was allowed to use unrestricted quantity discounts. 2. Microsoft shall not enter into any License Agreement in which the terms of that agreement are expressly or implied conditioned upon the licensing of any other covered product, operating system software product or other product (provided, however, that this provision in and of itself shall not be construed to prohibit Microsoft from developing integrated products): or the original equipment manufacturers not licensing, purchasing, using or distributing and non-Microsoft product."1 This 1995 consent decree imposes two restrictions, one horizontal, and one vertical. The horizontal restriction stops Microsoft from using zero marginal cost pricing. However, it allows for quantity discounts, disregarding the fact that zero marginal cost pricing is a special case of a quantity discount contract. The vertical restriction of the decree prohibits product bundling created by contract, but allows Microsoft to keep expanding the number and type of functions of its products, including Windows. In this decree contractual bundling was not allowed, but technological bundling was allowed. ...read more.

Middle

The officials from these states communicated to Judge Posner that they would not sign such a deal. The judge was forced to declare the negotiations a failure. Given the proposals that the Government offered in the negotiations, there were expectations that the Department of Justice would demand more or less the same terms in the remedies phase. Instead, the Department of Justice asked for a much more radical step, the breakup of Microsoft. The judge adopted a remedy proposal that imposed the breakup of Microsoft into two "Baby Bills." There would be an operating systems company, which would inherit all the operating systems software, and an applications company with all the remaining software assets. The cash and security holds of other companies held by Microsoft would be split between the two entities. Bill Gates and other officers, shareholders of the company would not be allowed to hold executive and ownership positions in both of the companies. The District Court ruling also imposed interim conduct restrictions on Microsoft. The restrictions were to last three years, from the time of the breakup. The restrictions are as follows: 1. Microsoft would create a pricing schedule that would apply to all buyers so that price would not be conditioned on the sale of other Microsoft products. 2. Microsoft would not be allowed to have exclusive contracts that do not allow the other party to use, display, or feature it opponents' products. 3. APIs and other technical information of Windows should be shared with outsiders as it is shared within Microsoft. 4. Microsoft is not allowed to take actions against manufacturers who feature competitors' software. 5. Microsoft will allow OEMs to alter Windows in significant ways. 6. Microsoft is not allowed to design Windows to disable or compromise rivals' products. The above conditions were similar but more restrictive than the ones proposed by the government in the settlement talks at the end of March 2000. ...read more.

Conclusion

Is Microsoft good? Or is Microsoft bad? Well, the answer is a little bit of both. Even though the Justice Department found that Microsoft might be practicing some techniques that are less than ethical, they did not find that Microsoft was breaking any anti-trust laws, nor did Microsoft actually admit to the accusations when they signed the agreement. If anything, them signing the agreement was more of a sorry than a full-fledged admission of guilt. Other people might disagree with me, and there might be a lot of allegations floating around from different companies, but the fact of the matter is plain and simple. Microsoft has not been formerly charged and found guilty of an illegal practices pertaining to them being a monopoly. When considering whether a monopoly should persist or not the factors must be examined closely. Whether or not the consumers are being exploited is something that is essential when contemplating the breakup of a monopolistic firm. Often times, and in the case of Microsoft, the consumers benefit from the monopoly. After more than three years of litigation, repeated courtroom setbacks and failed settlement talks, Microsoft emerged largely successful from its long antitrust battle. Microsoft's agreement with the Justice Department does not require it to alter the design or development of its products and will not change Microsoft's strategy of aggressively moving into new markets. While Microsoft may be limiting its competition, it is aiding the consumer. For it is able to charge a lower price and produce more efficiently because of smaller costs that if it existed in a purely competitive industry. Microsoft is not the stereotypical monopoly, in that it continues to innovate, which explains the upgrades to its present software. It would not be right to break-up this firm, for its existence is beneficial to the public. Regulatory action may be needed though in order to provide competitors with more of a fighting chance. Competition still exists though and in the unpredictable industry of technology a firm can plummet and rise swiftly. ...read more.

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