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The Microsoft Case: Antitrust, High Technology, and Consumer Welfare
Analyzing cases of monopolization, the first company that comes to mind is Microsoft. The Microsoft case is unique in several aspects, the most important of which is making a precedent in issues of the high technology market. The book The Microsoft case: antitrust, high technology, and consumer welfare by William Page and John Lopatka, presents detailed analysis on the case, including decisions, possible solutions, background, and influence.
The main purpose of the book is to show that despite monopolizing actions from Microsoft, government reaction was not in favor of the consumer, who is the most important element in the business relations, where the government mostly lacked a theoretical background in such cases. Moreover, the lawsuit that started over the web browsers ignored other practices, which should have been paid more attention to.
The book provided an extensive historical background over the history of monopolization in the United States, where the book, in cases of the trusts that emerged after the Civil War, argued that, Congress evidently saw the trusts as a problem, but understood the problem poorly and had no clear idea how to solve it. (Page and Lopatka 2)
The Sherman Act was supposed to solve some of these issues where it allowed enforcement in federal courts against trusts in favor of private litigants. In that sense, an important notion made in the book is the controversy in the monopolization cases, or as Robert Bork famously called it antitrust paradox . The opinion of scholars was divided regarding the antitrust law, where some argued that the law acted to protect inefficient firms, while others pointed to the possible output which is the decline of prices.
Nevertheless, the visions on the public antitrust enforcements varied, where many early cases were considered precedents each time stating different arguments.
An interesting point in the book is the way Microsoft Windows evolved from an intermediary shell, middleware as it was called later, into an independent operating system. This path of development, as well as the inclusion of separate programs in the package, but the first steps in antitrust law suits, until the introduction of Internet Explorer.
These facts allowed Microsoft to stay ahead of its competitors, where the contracts with IBM allowed Microsoft to take advantage. From the very beginning, antitrust regulations included elements of interventions, as well as the liberal concept of the interrelation of the state and the economy.
Representatives of different approaches struggled for control over the development of antitrust law for more than a century. The Microsoft case gives the most evident arena for this struggle during this epoch. The case raises important problems within the limits of antimonopoly doctrines of the Supreme Court concerning connecting and excluding contracts. According to the working standards, to reveal a prohibited monopolization falling under the Sherman Act, the antitrust committee should prove not only a monopoly position but also a deliberate concentration or application of this power, distinct from the development as a result of a unique product, business ingenuity or historical accident. Microsoft was accused of both elements.
Antitrust officials asserted that Microsoft, obviously, had the exclusive power in the market of operational systems, considering the share Windows occupy in the market, and the role they play in network systems blocking of new input. Representatives of Microsoft argued that, despite the high share in the market, they experienced insufficient exclusive power, because in the electronic market even the leading firm should introduce constantly innovations to avoid liquidation. Their actions are simply vigorous competition, dictated by the nature of the computer market. The combination of the browser (Internet Explorer) and the operational system Windows makes an effective innovation, and contracts with other firms are a normal and ordinary business.
As a whole, the decision of these problems has demanded new researches on the meaning of a dominating share in the market and other characteristics of the market for the proof of the monopolization. The legislation supposes that the monopolist in a competition can resort to ways that harm competitors and deprive them, at least, a share in the market. The behavior of a monopolist is forbidden only in case it excludes competitors on any other base, except efficiency and bringing benefit to consumers.
The book provided several actions by Microsoft, which could be considered as monopolistic, where the main issue in the case was the integration of Internet Explorer and Windows. In that matter, the authors dedicated analysis of the legality of such integration. The most important issue in analyzing unlawful action in monopoly was summarized as Distinguishing attacks on rivals that harm consumers from those that benefit consumers is the greatest challenge in antitrust. (Page and Lopatka 118)
Most ordinary consumers do not know the issue of integration as it was presented in court. In that sense, presenting the levels of integration that were used by Microsoft as well as showing the courts decision in each of the cases is very educational. Assessing the liability of many integrated products could obtain a different perspective knowing that, the concept of integration should exclude a case where the manufacturer has done nothing more than to metaphorically bolt two products together, as would be true if Windows 95 were artificially rigged to crash if IEXPLORER.EXE were deleted. (Page and Lopatka 120)
In reaching the settlement, the book showed many outlines that could be made in regard to this case. One is that enforcers should use special caution in basing enforcement actions on novel theories of liability. (Page and Lopatka 245) It also can be agreed that the market of operational systems is characterized by network effects. Network effects occur when the user of a product receives not only the benefit from the product but also a network benefit which increases with an increase in the number of other users of the same product.
Such a process, as a result, can lead to overturning the market in favor of one manufacturer, or one standard, or a type of product. Many believe that the operational systems of Microsoft began to prevail owing to direct and indirect network effects. The software is written for a given operational system usually cannot be carried out in another.
This fact causes direct network effects because a common operating system facilitates the interrelation of users. Secondly, that is more important, the market of operational systems shows indirect network effects. Independent program sellers tend to create applied programs for the most popular operational system. The big availability of applied programs, in turn, stimulates new users to choose this operational system.
The market, thus, declines in the advantage of only one standard on which manufacture is locked. Microsoft, probably, became dominating, at least partially, because of such economic events. Microsoft has got the advantage of being the leader thanks to the convenient license agreement with IBM and spent various strategies for strengthening this advantage and establishing an industry standard. The last case has changed essentially during the period between the claim and its analysis in court, substantially because the decision of the appeal court interfering with the case under the consent Decree brings doubt in viability of requirements of the complaint to recognize the linkage between Windows and Internet Explorer being illegal.
The most important contribution of the book is showing the ins and outs of antitrust cases. The book showed the progress in a case that possibly will become a precedent in future cases. The novelty of the issues made following the different aspects of the case educational. This book could be recommended to anyone who is interested in observing the legal system at work. The greatest value and at the same time the disadvantage of the book is its narration style. As most of the case is facts, there is little left for comments and authors opinions regarding the presented issue. The book is worth reading at least for the fact that most of the people are users of Microsofts products, and they do not have any idea on why for example including a program within their operating system can put a threat to their rights to choose.
Works Cited
Page, William H., and John E. Lopatka. The Microsoft Case: Antitrust, High Technology, and Consumer Welfare. Chicago: University of Chicago Press, 2007.
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