Microsoft Antitrust Case
Q. Do you think the US government was right in proceeding with the anti-trust case against Microsoft? Explain. What are the disadvantages to customers when one company dominates an industry? Why should competition be encouraged?
As per as my views are concerned US government was right in proceeding with the anti-trust case against Microsoft. One of the main charges against Microsoft was that it was distributing its Internet browser software, Internet Explorer free of cost along with its Windows Operating System. Microsoft succeeded in PC software industry by using this aggressive marketing. Microsoft’s share of the market for operating system was extremely large and stable. In late 1990s, Microsoft’s MS Office applications suit had a market share of nearly 90%. Its market share in the Internet Browser market was 44% and in server operating systems was 36%. A high entry barrier protected Microsoft’s dominant market share and because of high entry barrier, Microsoft’s customers lacked commercially viable alternative to Windows. So Microsoft had monopoly.
Another charge against Microsoft was that it attempted to undermine the Java language by creating its own version of Java that could run comfortably on Windows.
It is generally understood that a firm has monopoly power when it has the sustained ability to control price or exclude competitors. The existence of significant barriers to entry and the very high market share of Microsoft in the operating systems market gave indications that Microsoft had monopoly power. But there was also a very strong indication to the contrary. Microsoft priced its operating system to Original Equipment Manufacturers at an average price of $40-60, a ridiculously low price compared to the static monopoly price. Microsoft’s economic witness showed that the static monopoly price was about $1,800, a large multiple of Microsoft’s actual price. At first glance, it seems that Microsoft could not...