Introduction—Google, Microsoft, and Monopoly Microsoft a Monopolist? Is Microsoft an outsized, predatory lawbreaker, an amazing force for technological progress, or both? The U.S. Justice Department, 18 states, and the District of Columbia went to trial against Microsoft in 1998, claiming not that the software giant was too big, but that it had violated various antitrust laws in gaining and maintaining its market dominance. An epic legal struggle followed with major elements of the American justice system challenging one of the world’s richest men, Bill Gates. A federal district court in 2000 and later a federal court of appeals ruled that Microsoft had violated federal antitrust laws by maintaining its 95 percent share of the Intel-compatible PC operating systems market through anticompetitive means (basically using its monopoly power to coerce customers to buy other Microsoft products such as its browser, Internet Explorer). 1 The district court judge ordered Microsoft split into two companies as a remedy for its antitrust wrongs, but the court of appeals threw out that order. Thereafter, the case was settled out of court with Microsoft agreeing, among other things, to not retaliate unfairly against other software and computer makers, to disclose some software code, and to be temporarily monitored by a federal judge. The settlement, though somewhat of a victory for Microsoft, might also be regarded as a victory for common sense in allowing Microsoft to go forward with its remarkable work. The decision places considerable faith in the market, as it probably should in America; but the case also represents a powerful affirmation of the government’s authority to attack monopoly behavior no matter how prominent the wrongdoer. Settlements As it turns out, the federal antitrust charges were only the beginning of Microsoft’s battles. Settlements with Novell, Sun Microsystems, AOL, RealNetworks, and others cost Microsoft billions. European Union antitrust enforcers pursued Microsoft for a decade before settling their claims in 2009. The EU argument, much like the concerns in the United States, was that Microsoft’s market dominance allowed it to effectively force its Windows operating system users to also use its Internet Explorer browser. The settlement required Microsoft to provide a pop-up screen that would allow European customers to choose among several browsers other than Explorer, thus likely building the market share of rival browsers. Just as the 2009 settlement appeared to have resolved Microsoft’s European problems, the European Commission announced in 2013 that it had fined Microsoft over $730 million for breaking the terms of that settlement. Microsoft apologized for what it said was a technical problem that had temporarily denied about 15 million users the promised choice of browsers. The Microsoft struggles underline the aggressive stance of EU antitrust regulators. Since 25 percent of the global market for many products resides in the European Union, all big companies must now think more carefully about how their practices will be received by EU regulators even if those practices are not of concern to United States regulators. The Microsoft saga serves as a reminder of an important truth: Capitalists, for the most part, don’t care much for capitalism. Their goal is to make money. And if they can do it without messy competition, so much the better. As long as it keeps its monopoly, Microsoft can afford to share the wealth with its onetime rivals. For Microsoft, those fines and payments add up to less than a year’s profit from the operating system. For the others, it’s easier to take Microsoft’s money than fight. 2 The Microsoft battle was about whether a giant bullied its rivals, but it was also about the very nature of capitalism—that is, the role of managerial ethics, the market, and government in American life. The case obliges us to think about what we want America to be and what role the law should play in securing that ideal. Most crucially, we should ask ourselves whether the market and ethics are sufficient to preserve genuine democracy and social justice, or whether we must employ antitrust law to attack those great concentrations of power that sometimes threaten our core values. Questions 1. a. Do you see increasing concentrations of wealth and power as threats to America’s long-term welfare? Explain. b. If that concentration is a concern, is antitrust law the best remedy? 2. Does the Microsoft case stand simply for the view that bigness is bad? Explain. 3. Critics have argued that technology is eliminating the imperfections of the market, making antitrust law enforcement obsolete in this high-tech era. a. Explain that argument. b. Now build the argument that high-tech industries may actually be especially susceptible to antitrust problems because of the need to maintain equipment compatibility.
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