Maintenance of Monopoly: U. S. v. Microsoft
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In May 1998, the U.S. Department of Justice (DOJ), twenty individual states, and the District of Columbia filed suit against the Microsoft Corporation claiming that Microsoft had monopolized the market for personal computer (PC) operating systems and had used its monopoly to engage in a wide range of antitrust violations. The case was tried in federal district court from October 19, 1998, through June 24, 1999. The court reached its findings regarding the facts of the case on November 5, 1999, and its legal conclusions on April 3, 2000. Microsoft’s appeal to the Circuit Court of Appeals for the District of Columbia was decided on June 28, 2001, followed by extensive settlement discussions among the various parties – the Department of Justice, the states, and Microsoft. The appellate court affirmed the monopolization claim, reversed other findings by the district court, and remanded the case back to the district court to find an appropriate remedy. Following further settlement discussions among the various parties – DOJ, the states, and Microsoft – DOJ and Microsoft reached a settlement agreement. Nine states opted not to join the settlement, proposing a different remedy. A thirty-two-day trial was held, and, on November 1, 2002, the district court issued a remedy ruling. Eventually, all of the remaining states settled with Microsoft. While its ultimate impact on antitrust jurisprudence remains unclear, there is no doubt that from the public’s perspective U.S. v. Microsoft was the antitrust case of the 1990s, and arguably from a policy perspective one of the most significant antitrust cases of the twentieth century. The investigation, the trial, and its aftermath received wide press coverage throughout. A number of the major actors in the drama became household names, as much the result of the public relations battle among the parties as of the litigation itself. Microsoft’s problems did not end with the resolution of the U.S. Government’s case. Microsoft was sued in class actions brought by attorneys on behalf of customer who were alleged to have paid too much money for their Windows operating systems. Most of these lawsuits have now been settled for very substantial sums of money, running into the hundreds of millions of dollars. To make matters worse from Microsoft’s perspective, the turn of the century coincided roughly with increased enforcement activity by the Directorate General for Competition of the European Union. Rather than focusing on browsers and on PC operating systems, the EU directed its attention to the “player,” which allows users to stream audio and video content from the Web and to servers. Real Networks, which dominated the market with its Real Player, was being threatened by Microsoft’s decision to integrate the Microsoft Player into its operating system. After an extensive investigation, the European Commission concluded in March 2004 that Microsoft’s bundling of its operating system with its player constituted a violation of the EC law that characterized certain anticompetitive monopolizing practices. The EC ordered Microsoft to pay a substantial fine and to put onto the market a second version of its operating system Windows XP without a player. Microsoft’s appeal of the EC’s ruling (to the Court of First Instance, and intermediate appellate court) led to a September 2007 ruling that strongly supported the EC. As of the early autumn 2007, the EC continues to monitor and to question Microsoft’s responsiveness to its required remedies. In sum, there is much in the Microsoft case that is of import to the twenty-first-century competition in high technology. Not only does Microsoft’s behavior continue to be scrutinized, but also courts are now beginning to look at the implications of the Court’s ruling in U.S. v. Microsoft on other high-technology companies such as Intel and Google. At the heart of the Microsoft case was the Government’s claim that Microsoft had engaged in a range of anticompetitive acts that was designed to maintain its operating system (OS) monopoly. The Government did not question the source of Microsoft’s historical success. The Government did, however, claim that consumers were harmed by Microsoft’s conduct, in part because consumers were paying higher prices for their operating system software and in part because Microsoft’s actions had reduced innovation in the software industry. In response, Microsoft argued that it was not a monopoly since it face significant competitive threats in a highly dynamic industry. It further argued that its success should be seen as procompetitive, since consumers had benefited as the result of the distribution of its high-quality, innovative software. If the court were to impose substantial antitrust remedies, Microsoft believed, competitive incentive would be reduced, which would lead to less, rather than more, innovation.
Source Publication
The Antitrust Revolution: Economics, Competition, and Policy
Source Editors/Authors
John E. Kwoka, Jr., Lawrence J. White
Publication Date
2009
Edition
5
Recommended Citation
Rubinfeld, Daniel L., "Maintenance of Monopoly: U. S. v. Microsoft" (2009). Faculty Chapters. 1827.
https://gretchen.law.nyu.edu/fac-chapt/1827
