Microsoft Antitrust

Since 1990, a battle has raged in United States courts between the United States
government and the Microsoft Corporation out of Redmond, Washington, headed by

Bill Gates. What is at stake is money. The federal government maintains that

Microsoft’s monopolistic practices are harmful to United States citizens,
creating higher prices and potentially downgrading software quality, and should
therefore be stopped, while Microsoft and its supporters claim that they are not
breaking any laws, and are just doing good business. Microsoft’s antitrust
problems began for them in the early months of 1990(Check 1), when the Federal

Trade Commission began investigating them for possible violations of the Sherman
and Clayton Antitrust Acts,(Maldoom 1) which are designed to stop the formation
of monopolies. The investigation continued on for the next three years without
resolve, until Novell, maker of DR-DOS, a competitor of Microsoft’s MS-DOS,
filed a complaint with the Competition Directorate of the European Commission in

June of 1993. (Maldoom 1) Doing this stalled the investigations even more, until
finally in August of 1993, (Check 1)the Federal Trade Commission decided to hand
the case over to the Department of Justice. The Department of Justice moved
quickly, 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, with

Microsoft signing a consent settlement.(Check 1) The settlement focused on

Microsoft’s selling practices with computer manufacturers. Up until now,

Microsoft would sell MS-DOS and Microsoft’s other operating systems to
original equipment manufacturers (OEM’s) at a 60% discount if that OEM agreed
to 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. After
the settlement, Microsoft would be forced to sell their operating systems
according to the number of computers shipped with a Microsoft operating system
installed, and not for computers that ran other operating systems. (Check 2)

Another practice that the Justice Department accused Microsoft of was that

Microsoft would specify a minimum number of minimum number of operating systems
that the retailer had to buy, thus eliminating any chance for another operating
system vendor to get their system installed until the retailer had installed all
of the Microsoft operating systems that it had installed.(Maldoom 2) In addition
to 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 time
such as two or three years. In order for a new operating system to gain
popularity, it would have to do so quickly, in order to show potential buyers
that it was worth something. With Microsoft signing long term contracts, they
eliminated the chance for a new operating system to gain the popularity needed,
quickly.(Maldoom 2) Probably the second most controversial issue, besides the
per processor agreement, was Microsoft’s practice of tying. Tying was a
practice in which Microsoft would use their leverage in one market area, such as
graphical user interfaces, to gain leverage in another market, such as operating
systems, where they may have competition.(Maldoom 2) In the preceding example,

Microsoft would use their graphical user interface, Windows, to sell their
operating system, DOS, by offering discounts to manufacturers that purchased
both MS-DOS and Windows, and threatening to not sell Windows to companies who
did not also purchase DOS. In the end, Microsoft decided to suck it up and sign
the settlement agreement. In signing the agreement, Microsoft did not actually
have to admit to any of the alleged charges, but were able to escape any type of
formal punishment such as fines and the like. The settlement that Microsoft
agreed to prohibits it, for the next six and a half years from: * Charging for
its operating system on the basis of computer shipped rather than on copies of

MS-DOS shipped; * Imposing minimum quantity commitments on manufacturers; *

Signing contracts for greater than one year; * Tying the sale of MS_DOS to the
sale of other Microsoft products;(Maldoom 1) Although these penalties look to
put an end to all of Microsoft’s evil practices, some people think that they
are not harsh enough and that Microsoft should have been split up to put a stop
to any chance of them forming a true monopoly of the operating system market and
of the entire software market. On one side of the issue, there are the people
who feel that Microsoft should be left alone, at least for the time being. I am
one of these people, feeling that Microsoft does more good than bad, thus not
necessitating their breakup.