Antitrust Legislation
Preface In light of recent developments, I took a different approach to this
paper. The Microsoft Antitrust case has been somewhat of a phenomenon that has
become one of the most prominent cases in recent years. Because of this, I
decided to look at government intervention into individual markets, along with
antitrust law, via that particular case. I am of the opinion that we can learn a
great deal by using that particular ongoing litigation. Antitrust law protects
the public from companies that attain an undue domination of the marketplace via
mergers, tying 1 product to another, vertical integration, and other practices
tending to eliminate competition or bar entry into the market to newcomers. In
the early 1980s, Microsoft was a much smaller company than it is today. However,
it had already established a reputation of being a predator, a greedy predator.

They were known to terminate licenses mercilessly once they figured out a way to
clone a given technology, regardless of whether it was legal or not. Back then,

Microsoft had some enthusiastic competition. The biggest of which were Borland
(programming), Ashton-Tate (databases), Visicalc and Lotus (spreadsheets), as
well as Wordstar and WordPerfect (word processors). All of these companies have
now either merged out of existence or are completely defunct, with the
exceptions of Borland and Lotus (which are barely afloat). Microsoft now has the
leading product in each sector of the market once occupied by these firms. The
company was responsible for ridding itself of these early competitors by either
buying them out or simply driving them into the ground. This early disregard set
the tone for how Microsoft does business even today. Microsoft’s advantage
comes from their domination of operating systems (OS). "By definition, if the

OS maker creates applications, they will run better with the OS than a third
party’s, and the OS owner can, over time, create modifications that will make
this even more so," (Rapacious 1). Microsoft has the power to leverage their
dominance in operating systems (Microsoft currently has its Windows software in
over 90% of all PCs) to gain a large market share in the various application
sectors. They have always been able to do this and as a result have been able to
get, or achieve, whatever it is that they have wanted. This is the vertical
integration that the antitrust laws talk about. In a July 1994, settlement, the

Justice Department came to an agreement with the software giant over the
antitrust charges it had filed against the company. The charges were brought
after the department found out that Microsoft was giving personal computer
manufacturers a discount on their OS when the PC manufacturer would pay the
company a royalty for each computer sold, including those without MS-DOS or

Windows software installed. "The practice gave PC makers little incentive to
install competing programs since they would have had to pay a royalty to both
the competitor and Microsoft," (Ramstad 1). The settlement only dealt with
this single count and left Microsoft alone to continue performing its numerous
other anti-competitive practices. In the spring of 1995, Judge Stanley Sporkin
rejected the deal that the Justice Department settled on. He did so on the
grounds that: 1. The government refused to give the court enough information
about the agreement; 2. The deal was too narrow; it failed to deal with issues
like OS/application leverage, and allegations that Microsoft intentionally made
changes to Windows that made third party applications hard to run; 3. The
parties did not adequately consider anti-competitive issues; 4. The deal was
unsatisfactory when it came to enforcement and compliance mechanisms. Around the
time of the settlement, some suggestions started to come about how to deal with

Microsoft. Stewart Alsop suggested "that Microsoft be forced to document the

API’s in Windows, so that other companies could legally clone it. That would
still leave Microsoft an eighteen month head start on each release,"
(Rapacious 3). It was also suggested that the company be broken up. This way,
the operating system and the applications would be separated into different
companies and the playing field would become more level. In late August 1995,

U.S. District Judge Thomas Penfield Jackson ended what had become a
thirteen-month judicial review by signing the agreement Microsoft and the

Justice Department had come to. The review had been elongated by Judge

Sporkin’s rejection of the deal. The signing, however, did not take the heat
off Microsoft’s proverbial back. The Justice Department had already begun
investigating some of their concerns about the company’s practices regarding
new software and whether they were complying with the agreement. This
investigation became the court case we have