Micro + Soft - The Split Of An Empire Essays - Competition Law

Micro + Soft - The Split Of An Empire Micro + Soft - The Split of an Empire Kendra Phelps BUS 415.3 / Business Law Rob Goodwin July 5, 2000 Table of Contents I. Introduction: The Allegations and the Laws 3 II. Introduction: The Proof 4 III. Trial 5 Table 1 6 IV. The Proposal 8 V. Microsoft's Response 9 VI. The Foes and Their Thoughts 11 VII. Current Status and Discussion 12 VIII. Recommendations 15 References 18 Micro + Soft - The Split of an Empire Could the megalosaurus business that was conceived in 1975 really be split in two - or three? This is what U.S. District Court Judge Thomas Penfield Jackson has decreed in order to put a stop to the monopolistic shenanigans that Microsoft calls business as usual. The Department of Justice (DOJ) and 20 states are suing Microsoft Corporation in one of the largest antitrust lawsuits brought about since the investigation and ensuing breakup of AT&T in 1984. If Judge Jackson gets his way, Microsoft (MS) could very well be two different companies sparring with each other. I. Introduction: The Allegations and the Laws Essentially, the plaintiffs are charging Microsoft with the following three violations: 1) Microsoft has waged an criminal campaign in defense of its monopoly position in the market for operating systems designed to run on Intel-compatible personal computers (PCs). More specifically, the plaintiffs contend that Microsoft violated Section 2 of the Sherman Act by engaging in a series of exclusionary, anticompetitive, and pillaging acts to maintain its monopoly power. They also assert that Microsoft attempted, although unsuccessfully to date, to monopolize the Web browser market, which is also in violation of Section 2 of the Sherman Act. Finally, they claim that some specific measures taken by Microsoft as part of its campaign to protect its monopoly power, specifically, tying its browser to its operating system and entering into exclusive dealing arrangements, are also a violation of the Sherman Act, Section 1 . II. Introduction: The Proof The plaintiffs have already shown at trial that MS possesses an extremely dominant, persistent, and increasing share of the relevant market. Microsoft's share of the worldwide market for Intel-compatible PC operating systems currently exceeds 95 percent, and the company's share would rest well above 80 percent even if the Mac OS were included in the figures. The plaintiffs also proved that the applications barrier to entry protects Microsoft's dominant market share. This barrier ensures that no Intel-compatible PC operating system other than Windows can attract significant consumer demand, and the barrier would operate to the same effect even if Microsoft held its prices substantially above the competitive level for a protracted period of time. Together, the proof of dominant market share and the existence of a substantial barrier to effective entry create the presumption that Microsoft enjoys monopoly power. Microsoft did not create the barrier to entry all by itself, the consumers' preferences helped this along, however, Microsoft took specific predatory measures to make sure that its product attracted the market and ultimately trapped the market. Section 2 of the Sherman Act prohibits the act of monopolization. This means that the act itself is unlawful, not monopolies. It states that Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or person, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony. Here is the law - the plaintiffs found the proof. They found it in many of MS's actions and in their contracts with distributors and they have written testimony, records, and even admissions by MS of their many actions. Yet, MS still maintains that it is not a monopoly. Unfortunately for MS, there are only two defenses to the allegation of monopolizing that have been acknowledged. One is the defense of innocent acquisition, meaning that they somehow gained acquisition (or purchased) because of superior skills or foresight and that it wasn't calculated or targeted. The second defense for monopolizing that is recognized is a natural monopoly. This means that there would be a very modest market that could only support one competitor, such as a small town coffee shop, newspaper, or video store. Obviously, Microsoft doesn't fit into either category, and if it did fit into one of