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Microsoft Case

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elliott bulling

on 24 January 2013

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Transcript of Microsoft Case

Elliott Bulling
Tommy Walker Microsoft vs. DOJ 1990: FTC investigation – no charges
1994: DOJ investigation
Consent decree to restricted licensing with OEMs
1996: Government sued Microsoft
Violation of consent decree with IE
1997: Federal court ordered separation of IE and OS
1997: Appeals court repealed stating “integration”
1998: DOJ suit against Microsoft
1998-2000: Federal District Court
Sherman Act section I: monopolizing PC operating systems market
Sherman Act section II: Multiple antitrust violations
2001: Appeals Court of District of Columbia decision & settlements
Affirmed monopolization charges
Repealed all others
2002: District Court remedy ruling for 9 other states Time Table & Charges Microsoft was new
in the PC market

Consent decree not to
“tie” its OS license to other
OS products

Begin: Internet boom
Netscape Navigator
NN browser = software platform* that could compete with Windows 95

Microsoft “integrated” IE to Windows Background Many applications written for Windows

New competitors = new business productivity software

Race to the top of “applications barriers-to-entry”

Java became vital Decomposing Computer Jargon Which side do you take?
Microsoft or DOJ Show of hands… Operating System market or internet browser market?

How can we determine the market?

Was Microsoft a monopoly? In which market? Both?

Were judges really prepared for this issue at the time? Market Definition Did Microsoft attain/maintain monopoly power through any of the following means?
Market Allocation
Predatory Pricing
IE for free!
“No revenue product”
Netscape Navigator = 20-50% of total revenue
Bundling & OEM Restriction
Agreements with ISP Attaining Monopoly Power Outcome #1: Settlements
Outcome #2: Remedies
Behavior vs. Structural
Structural: Breaking up the company into 2
Decided on & repealed
Behavioral: Limiting actions
“There is nothing limiting Microsoft from technologically tying non-browser middleware software to the OS…” ***
Which is better for competition? Outcome & Remedies How does the OS/browser market differ today?
Does anybody remember Netscape Navigator??
What does this tell us about Microsoft’s actions?

Did Microsoft slow innovation?

MS feared mobile devices (palm)
Was this warranted? Industry Effects in Hindsight Microsoft & Windows now has a large Mrk Share

Antitrust policy outcomes from this case?

Can the “applications barriers to entry” be overcome today?

Who are Microsoft’s competitors today? Network Effects Today Did Microsoft attain/maintain monopoly power through any of the following means?
Market Allocation
Microsoft = PC browser mkt | Netscape = server mkt
New generation Intel conflicted with Microsoft
IE = Apple’s main browser
Predatory Pricing
Bundling & OEM Restriction
Agreements with ISP Attaining Monopoly Power Did Microsoft attain/maintain monopoly power through any of the following means?

Market Allocation
Predatory Pricing
Bundling & OEM Restriction
IE bundled with Windows … shared extensive code
Demand for OS separate from demand for browsers??
Agreements with ISP Attaining Monopoly Power Did Microsoft attain/maintain monopoly power through any of the following means?

Market Allocation
Predatory Pricing
Bundling & OEM Restriction

Agreements with ISP
ISPs not allowed to distribute to large # of customers
≥ 75% of ISP software shipments included IE
Anti-competitive or simply won the race? Attaining Monopoly Power
Full transcript