"The United States of America, acting under the direction of the Attorney General of the United States, brings this civil action to prevent and restrain the defendant Microsoft Corporation ("Microsoft") from using exclusionary and anticompetitive contracts to market its personal computer operating system software. By these contracts, Microsoft has unlawfully maintained its monopoly of personal computer ("PC") operating systems and has unreasonably restrained trade." - Anne Bingaman, Assistant Attorney General in a complaint filed on July 15, 1994
After 19 years of unparalleled success - after dominating the computer software market and directing the future of the computer industry, the government stepped in and asked if what Microsoft was doing was fair. The government has a reponsibility to ensure that no one company controls an industry to the point where the market is anti-competitive. When a company controls a market so dominantly, it can cease innovation and force people to pay exorbitant prices for its products.
In 1994, the government accused Microsoft of using its 70+% market share in the personal computer operating systems market to prevent competition and unlawfully maintain its monopoly. However, when the government looked more closely at the issues, they realized that Microsoft does not necessarily mantain its dominance through unfair practices. They found that Microsoft dominated the industry because of innovation, solid marketing, and successful products; they only found a few shady practices which they subsequently forced Microsoft to cease. After a small diversion caused by a rogue judge who believed the governments conclusions were wrong, Microsoft was given a slap on the wrist, and told to get back to work.
The accusations were fairly simple. Microsoft's advantage in the market prevented other companies from equally entering the market or getting a foothold with their products. For example, Microsoft required computer manufacturers to pay a per-machine fee for installing DOS and Windows on their machines, whether or not each machine had those operating systems. Because they paid per machine, they paid less than Microsoft would otherwise charge per license. However, because the companies were paying per computer, it was prohibitively expensive to put another operating system on their machines because then they would be paying double for operating system licenses. The Federal Trade Commission (FTC) also looked into whether Microsoft had improperly used its share of the operating systems to grab a larger share of the applications market.
What the court found, however, was that for the most part, Microsoft had not done anything wrong. Their punishment was, therefore, a mere slap on the wrist. Microsoft was forced to change some licensing packages of its operating system. Microsoft could not force manufacturers to pay for licenses of DOS or Windows on computers where those were not installed, and Microsoft could not corral the manufacterers into multi-year guaranteed contracts for the operating system licenses. Beyond these orders, Microsoft was free to continue its methods of operating system and application development and marketing.
Judge Stanley Sporkin comes into the scene in February of 1995, rejecting the government's agreement with Microsoft. He said, "This pact is not in the public interest and does not constitute an effective antitrust remedy." (LA Times, 11/15/95) Sporkin dismissed the findings of the original case because of a brief filed by Gary Reback accusing Microsoft of using operating systems to dominate the entire software industry. "Hard Drive," a book about Microsoft's hard-edged business practices, also influenced Sporkin's decision. Sporkin claimed that because Microsoft had a monopolistic position, the minor restitutions Microsoft made from the original suit did nothing to solve the problem. He claimed that Microsoft is a "young company...which may not have matured to the position where it understands how it should act with respect to the public interest and the ethics of the marketplace." (Computer Weekly, 3/9/95) He tried to force the Department of Justice and the FTC to retry Microsoft and look closer at its practices to see if there was a monopoly going on.
In June of1995, the federal court rejected Sporkin's appeal and stated that his actions violated the nature of the antitrust agreement with Microsoft. While slightly embarrassed, Sporkin was pleased with his action, still believing that he was right.
The government is responsible to make sure a company does not use its dominance to control the competition. It must ensure that companies have the freedom to enter the market and sell their products. The government looked at Microsoft's practices and found several minor infractions that were monopolistic. However, Sporkin was displeased and wanted the government to control most of Microsoft's business practices since he felt Microsoft had a monopoly. But as the final result showed, the government will control a company, not because it is dominant, but because it is acting unfairly.
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