Anti-trust action against Microsoft

On November the 6th 2001, The United States of America and Microsoft have reached an agreement in the antitrust lawsuits filed against the Microsoft. Under this settlement, Microsoft agreed to provide more than $1 billion for teacher training, technical support, computers and Microsoft’s software, such as Windows and Office to 12,500 schools in America over the period of five years. Microsoft also agreed to give out its proprietary software codes to competitors. There are also some other things in the settlement that Microsoft must or must not do. In the whole, the agreement did not cause much harm to the company and it was just a moral victory for it is competitor Netscape. But it was not fair to start any antitrust action against Microsoft. Microsoft was not really a monopoly, nor it did anything wrong. The government only punished it because they were a large and successful company, able to earn enormous profits while creating high-quality and low-cost products and able to innovate and create new products.
Microsoft is the universal leader in software, services and Internet technologies for personal and business computing. It was set up as a partnership on April 4, 1975, by two friends from school, William Gates and Paul Allen. The two has worked very hard from the very beginning in developing software for personal computers. They shared the same idea and that was “to develop affordable, accessible software that would help consumers everywhere own a computer” (Gates, 1998). However, Gates and Allen could never guessed that their devotion to giving customers what they want would one day get them into a conflict with the Department of Justice. In May of the year 1998, the Justice Department of United States of America has started a lawsuit against Microsoft, because of breaking the antitrust law. The main point of the lawsuit was that it has in illegal way put together Internet Explorer with the operating system Windows with the intention to harm the competing Netscape. When Microsoft issued Windows 95, it not only did so with a free, new feature, the web browser, but it also signed contracts with personal computer makers like Dell and Compaq to include the browser. The rival Netscape started rapidly loosing market share when Microsoft came out with its own browser.

Just few years ago Netscape got most of its revenues from its Internet browser, but when Microsoft began putting the Internet browser into its Windows software, Netscape’s share has dropped from 73 percent to 58 percent. But instead of improving its product, “Netscape and other rivals ganged up on Microsoft, ran to Washington and got the trust-busters to launch an attack”. (Salsman, n.d.). Microsoft argued that the charges are under substantiated and that the decision to attach the Explorer to the Windows was made before the Netscape was even created. Also, Microsoft argued, there is nothing in its license agreement that stops computer producers from adding Netscape’s browser or other competitors’ software along with the Windows operating system. Manager of Netscape’s corporate public relations, Chris Holton, stated “What Netscape and many other software companies want and what everyone in the world should demand is a level playing field in the software industry so people have a choice.” (Chris Holton, 1997) But the people do have a choice. Compaq’s vice-president John Rose says that Compaq installs on their computers both Internet browsers – that is the Microsoft browser and also the Netscape one, and that it is up to the customer which one they will choose to use. And that is true. The manufacturers put on their computer more than just one software. Thomas Sowell confirms that. “My own computer came with non-Microsoft software, including Netscape, on the Windows 95 screen – and I didn’t even order Netscape” (Sowell, n.d.). Just because people buy their computer with Microsoft installed on it already, it does not mean that they have to use it. They can go and choose any other competing operating system for their computer. They are also able to buy a personal computer that is already running something else than a Microsoft product. They can also keep the computer they already have and get another operating system for it. So there is plenty of choice. And if there is plenty of choice, then Microsoft cannot be a monopoly. Simply because a monopoly is when there is only one company in an industry, providing a certain kind of service. In such a case, people are able to buy that kind of product from only one place. And that is not true about Microsoft. “There are at least NINE operating systems you can use instead of Windows, in the US alone, so anyone can get and use an operating system that is not Microsoft’s…. monopoly means one choice, not then choices” (Vorpal, n.d.). According to Daniel J.

Mitchell, a senior fellow in political economy at the Heritage Foundation, a Washington – based public policy research institute, “monopolies hurt consumers because they lead to higher prices and reduced output.” (Mitchell, 2001) However, this is the opposite of what Microsoft has created. Computer software has become much more available and much less expensive. Today, people have a wide selection of software that they can buy, and they do not even have to spend so much money. The software is really good and the prices are acceptable. Also, monopolies are supposed to stop caring what the consumers think. But the attackers against Microsoft complain that it cares too much what the consumers think. They are apparently willing to cover every demand the consumers want, which is somehow bad and needs to be stopped. But I really do not see, how it is hurting their customers and why is Microsoft monopoly. By being so efficient, they have earned a leading position in the market. Through a combination of innovative products, attractive prices and aggressive marketing, they have become the best out of the best and the proper name they achieved is not monopoly, but market dominance. Chris Holton also said: “Without choice, we would all wear the same shoes, buy the same make of car, and have exactly the same software programs on our computers.” (Holton, 1997) And he is right. But if people should have the freedom of choice, then they should also have the freedom to innovate, create and produce. And with this freedom, such a thing as people wearing the same shoes, buying the same make of car, and having exactly the same software programs on their computers, would never happen. And that is all that Microsoft is doing. They are just innovating and protecting their rights to innovate. “ We’re defending our right to innovate” (Gates, 1998)
The anti-trust law is only putting a threat to this economic freedom. When Bill Gates and his friend have founded the Microsoft, they have worked very hard from the early beginning to develop such a successful company as Microsoft. Now, their operation system is the most popular in the whole world and the competitors with the government just want to restrict them from more innovating. Microsoft’s ads reads: “Every wave of innovation and integration creates another wave of great ides … imagine if someone had tried to stop innovation in automobiles in the 1920s, or TVs in the 1950s … in the same way no one should try to freeze software innovation in 1998.” For example automobiles, when first made, had only a very simple exterior and interior. Later, the windows were added, carpeting, air conditioning, radios and so on. The outcome of that were better and advanced cars.

When Microsoft added its Internet browser into Windows, they did it with the same intention as the car manufacturers, and that was to improve their software and “to give consumers innovative tools and products that will make their lives better.” (Gates, 1998) And that is vigorous economic evolution. But the Justice Department claims that it is unfair competition when Microsoft is offering the Internet Explorer only as part of Windows. However, the makers of carpeting, radios or air conditioning could have charged the carmakers with unfair competition as well. But if that had happened, people would be still driving the same kind of cars as in 1920s. So that is why Microsoft spends so much time and so much money for researching and developing new products and features. Bill Gates says, that “they are working very hard in developing software that will help computers interact with people more naturally – computers that will be able to see, listen and learn.” (Gates, 1998) Those are futuristic features and it will take a long time before they reach people’s desktops. But if the government or somebody else tries to stop the innovation, they might never reach anyone’s desktop, or will be more costly and more complicated to use. Some people are complaining that Microsoft is restricting access to the industry. In real, they are the least restrictive of all businesses in any industry. Microsoft, unlike any other company in any other industry, can do absolutely to keep someone form getting other operating systems. Anyone can go and get a different one. Microsoft can not cut the supply of operating systems in any way. Even if it ever did so, people could simply buy other kinds instead, or even get one that is for free and is the second most popular operating systems, after Windows.
Microsoft was also accused of giving away their browser for free. It sounds like that is bad for the consumers. But in real, it is bad for the company, when they are giving away their product for free. Many other companies are giving away their products absolutely free as well. For example Yahoo. Its search services are for free and nobody seems to be complaining about it. As a matter of fact, Netscape has done the same thing as well. “Netscape started giving away its browser for free in an effort to compete with Microsoft.” (Andrea Orr, 1998) So why did not the trustbusters do anything about it. It is because the government is just trying to protect the “little guy”; in this case it is the company that cannot compete the successful Microsoft. That is really unfair to Microsoft. Netscape ones too had a dominant power in the industry. They once totally controlled the browser company with their product.

But they thought that because they have a dominant share in the market, nobody could compete them. They go lazy, stopped innovating and expected their market position to keep them on top. Then Microsoft came up with something new and better and took their position. But that does not mean that it is going stay like that. A dominant position today can be gone tomorrow because new competitors and companies are always free to enter the field. Already existing competitors can combine to ruin a larger rival. New ideas and technologies replace the old ones. So even strong and successful company like Microsoft has to fight to keep that great position.
On the other hand, Microsoft is not the largest computer company in world. What is happening here is that there is an operating system, that people have the choice not to use, but they choose to use it anyway. And that is not monopoly. The reason why everyone is calling Microsoft a monopoly is simple. It is because it is a perfectly reasonable thing for the competition to say. Not because it is true, but because Microsoft is their competitor and they want to hurt them. Since Microsoft is so huge, every single computer or software company is a competitor of Microsoft. If Microsoft has a huge market share in something, almost every other company in the industry hates it. The ironic part is that they couldn't pick on Microsoft if it was a monopoly, because monopolies don't have competition.
Another possible factor why so many people call Microsoft a monopoly may sound somewhat awkward. They are just jealous. But to me, this version makes far more sense than most of the other ones. There are people who hate wealthy business owners, just because they are jealous. It could also be because they feel, that earning money is a way of measuring what they are worth and they might feel bad because someone is making more money than they are, and therefore he or she is making them look bad or less respect. And who is more famous for being a billionaire, than Bill Gates. What's more, he has made all the money himself. It is not like he inherited the money or won it in the lottery. He has earned all of it. Most of the people are thinking that he is big, powerful and important and that they probably cannot do the same. And then, they might think that it makes them look bad that he is doing so well and they are not. But it does not only happen in the Microsoft case. This kind of jealousy can be seen every time when someone who is making more money happens to mention it around someone who is making less.

The problem is that it is not Bill's fault that some of us feel this way, and so it shouldn't be taken out on him. What if it had been some one else and not he? Maybe that person would have done things differently than he did. But there will always be some people and critics who would think it wasn't done the right way. There is so much hate directed against Bill Gates in the anti-trust case for no real reason and that is really unfair.
Another problem in this case is the anti-trust law itself. According to the Sherman Anti-Trust act, which is the main basis for most of the monopoly laws today. It says that the only thing that is illegal is a company that controls access to the supply of a whole industry to restrict the supply of the whole industry so that it can raise its prices. It means that, since it is impossible for Microsoft to restrict the basically unlimited possible supply of operating software, it cannot be rightfully prosecuted as a monopoly under the Sherman Anti-Trust Act. “The Anti-trust law is such a mess that a company can be convicted of being a monopolist if: It charges more than its competitors; that’s supposed evidence of monopoly
It charges the same; supposed evidence of collusion
It charges too little; supposed evidence of predatory pricing.” (Mitchell, 2001). At the moment, when someone goes into a business, it does not matter what price policy they adopt they violate the anti-trust law. It is full of unclear phrases, concepts and definitions that it cannot really be considered a law “Laws are supposed to tell you in advance what you can and cannot do, not just allow government officials to nail you when hey do not like what you are doing or want you to do it their way.” (Sowell, n.d.) So while the Anti-trust law claims to be protecting the consumers from the monopolies, in real it is protecting all the businesses that are loosing to some better company. The trustbusters target firms that are the biggest, the most distinct, most successful, most profitable, most widely advertised and most frequently patronized. Just like Microsoft.
Microsoft is one of the most successful, common software companies on the earth. There are numerous larger computer companies with much more money, but amazing ninety percent of personal computers either have Microsoft Windows on them, or at least did at some point. All people who use Microsoft could choose from many other operating systems, however they chose Microsoft, because it is the most developed one. They were not forced to use it and they had plenty other options.

So the Microsoft could not be in any way monopoly. The charges brought against it were unfair, because it has done nothing else than created, produced and innovated its product. They only satisfied their customers and did not cause any harm to anyone. It was not their fault, that their rivals were unsuccessful and unable to compete them.