Microsoft Antitrust

Microsoft Antitrust Is Microsoft a fetching business model to be emulated or the most destructive force in the software industry? Should the government apply the antitrust laws to the software industry or sit back and wait for dynamic market forces to solve anti-competitive problems? Discussions about Microsoft represent a larger-than-life dispute that speaks not only to the computer giant’s impressive efforts to monopolize key elements of the software and electronic commerce markets, but to the larger issues of a high-tech society. Many partisans in debates over Microsoft are speaking to the broader issues and defending ideological views that will be tested as the debate over Microsoft’s anti-competitive practices plays out. From my view point, there are some aspects of the dispute that seem clear and others that are anything but clear. First, it is clear that Microsoft has achieved its current market dominance through a combination of factors that include hard work, good luck, popular products, and an impressive array of anti-competitive or simply ruthless business tactics. It is equally apparent that some sectors of the computer industry undoubtedly benefit from this dominance — not everyone sells products or services that directly compete against Microsoft in strategic markets, and the existence of a private monopoly for the desktop operating system (OS) simplifies life for some developers. And in the increasingly broad areas where Microsoft has targeted a sector for dominance, the results have been a demoralized software industry, a paucity of venture capital and stifled innovation.

What is less than clear is what the government or the public should or can do about Microsoft’s often brutal efforts to monopolize software markets. The Justice Department is now focusing on important but relatively narrow issues concerning Microsoft’s 1995 antitrust consent agreement, whereby Microsoft agreed not to license Windows 95 on a per-machine basis (forcing computer manufactures to pay twice if they installed competitors’ OS) and not to tie the purchase of the OS to the purchase of other Microsoft products. Justice is focusing on contractual agreements between Microsoft and computer manufacturers that require firms that distribute Windows 95 also to distribute Internet Explorer, a product Microsoft wants to replace Netscape as the most-used Internet browser. Microsoft’s principle defense against the suit is to argue that Internet Explorer 4.0, a program that takes as much as 66 megabytes on a hard disk, is not an application at all but simply a part of the OS. Because more than 90% of PCs worldwide ship with Microsoft’s OS, the issue of what constitutes the OS is an important dispute, given the Microsoft agreement regarding product tie-ins.

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