Microsoft's Vertical Integration

Gary Reback and a team of other attorneys at the Wilson, Sonsini, Goodrich & Rosati law firm published a white paper in February 1995 accusing Microsoft of using its market power from markets in which it dominates to break into other markets in which it is weak. Reback et. al write:

Microsoft pursues a strategy of leverage from product markets in which it is dominant, to markets in which its competitive position is weak. It targets particular markets, establishes marketing and, in particular, technological links to those markets from established monopolies, and then leverages its power to monopolize the target markets.

The white paper identifies several examples of this phenomenon of Microsoft leveraging its control of the crucial operating system level to alter system architecture in ways that favor its own market strategy. One example cited by Reback et al. is Microsoft's introduction of OLE (Object Linking and Embedding) technology for communication between one application and another or an application and the operating system. OLE replaced the older open-standard DDL technology.

Microsoft declared OLE to be an open standard, but critics charge that Microsoft gave its own in-house software developers in the desktop application lines of business access to information about OLE many months before they released comparable information to independent software vendors. This gave Microsoft's applications business units a crucial head start over their competitors, so after Microsoft rebuilt Windows to use OLE, they were able to be first to market with desktop applications that could communicate seamlessly with the operating system.using the new technology.

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