Microsoft Ruled a Monopoly - Assignment Example

of the of the Concerned 2 January 2009 Business and Government Monopoly refers to a term in economics that signifies peculiar market situations. A company is said to be enjoying a monopoly pertaining to a particular product or service if deliberately or per chance it becomes the sole supplier of a specific product or service in the market. Monopolies do give way to unhealthy market scenarios. As a firm enjoying a monopoly pertaining to a particular product has a definite control over its supply and distribution. It commands the power to manipulate the market for that product and to charge whatever it feels like for that product or commodity. This corrodes and undermines the spirit of healthy competition in the free markets. Companies end up monopolizing the markets owing to a variety of reasons. It may happen because a company may be the individual and sole inventor of a particular product that commands a high and persistent demand in the market. Monopolies may also be brought about by the consolidation of the corporations that manufacture a particular product. Economists do have an ambiguous and mixed response towards the monopolies. Some experts say that governments should not try to alter or break the monopolistic situations in the free markets as they signify the ultimate will and desire of a free market. There exists on e other school of thought that though resents the government interference in the free markets, do believes that some sort of antitrust action or statutory rulings should be initiated by the state to tackle the situation of absolute monopoly in the free markets. Though it has been commonly seen that the accusations of monopoly are often levelled against the companies who enjoy a competitive edge in the markets pertaining to the manufacturing and the supply of specific products or services, on do genuinely comes across situations where some companies deliberately resort to anticompetitive practices to command a position of monopoly. A highly pertinent and relevant example of monopoly that has shot up in the last two decades is that of Microsoft. Microsoft does have a monopoly power in the markets for personal computer operating systems. Though the monopoly of Microsoft over operating systems and web browsers has been significantly diluted by Firefox, open source and Linux operating systems, still Microsoft has been the target of hotly contested legal proceedings in the recent years owing to pertinent accusations of monopoly (wise GEEK, 2009). As the accusations of monopoly against Microsoft have entered the legal arena, it will be highly relevant to analyse such accusations in the light of the legal provisions pertaining to the monopolistic situations in the US, the UK and the European Union. To prove the accusations of monopoly in a court of law, it is imperative to show that a situation of monopoly exists. It is relatively easier to identify a situation of monopoly as per the UK law, as it defines the concept of monopoly in strictly structural terms (George et al, 2006:412). According to the British law, a firm is considered to be enjoying a position of monopoly pertaining to a specific product or service if it controls more then 25 percent market share of that product or service in the UK markets (George et al, 2006: 412). In that context, Microsoft definitely has a monopoly power over the market for personal computer operating systems, at least in the UK. However, the thing to be kept in mind is that a control over 25 percent of the market share does not automatically qualifies a firm as a monopoly according to the UK law (George et al, 2006: 412). In the US though the monopolies come within the purview of legal provisions, there exists no structural limit pertaining to the legal definition of monopoly in the American law and the categorization of a situation of monopoly solely depends on the legal definition furnished by the courts of law in the US (George et al, 2006: 412). Hence their exist marked differences pertaining to the criteria resorted to in the UK, the US and the European Union about qualifying a firm as a monopoly. In the US, the decisions pertaining to such suits have wavered over the years owing to the ambiguities resulting from a clear absence of the requisite structural provisions. Thus in the US, the classification of a firm as a monopoly does not only calls for a significant share in the market, but also requires an authentic evidence pertaining to the abuse of monopolistic powers by a company by blatantly resorting to anticompetitive practices (George et al, 2006: 413). So the credible labelling of Microsoft as a monopoly in the United States is not merely dependent on the dominant market share enjoyed by it, but also requires evidence regarding the anticompetitive policies pursued by it. In the ensuing discussion the monopolistic powers of the Microsoft will be discussed in the light of the authentically verified anticompetitive practices resorted to by it. As already mentioned, Microsoft conclusively sits on the verge of being qualified as a monopoly if one strictly goes by the structural limits pertaining to the market share enshrined in the UK law. As Microsoft is a US owned company, it will be really interesting to discuss the monopolistic credentials of Microsoft in a strictly US context. In a ruling given by the U.S. District Judge Thomas Penfield Jackson, the court strictly denounced the monopolistic practices adhered to by Microsoft and conclusively established Microsoft to be a monopoly (Brinkley, 1999:1). The Judge Jackson ruled that the monopolistic credentials of Microsoft have "the power to stifle innovation, reduce competition and hurt consumers (Brinkley, 1999: 1)". This court ruling established without doubt that over the years, Microsoft has used its immense market powers to harm the firms that intended to come out with innovative substitutes and alternate technological solutions. All the arguments extended by the Microsoft lawyers in its defence were set aside and ruled out by this court. Attorney General Janet Reno hailed this decision as "a great day for the American consumers (Brinkley, 1999: 2)". The very day this ruling was made public, the stocks of Microsoft at Nasdaq dropped by 18.75 cents (Brinkley, 1999: 3). Judge Jackson ruled that "Microsoft monopoly power is also evidenced by the fact that over the course of several years, Microsoft took actions that only could have been advantageous if they operated to enforce monopoly power (Brinkley, 1999: 3)" and urged the US government and Microsoft to settle the case. Infact Microsoft had to contend with and is still facing a number of antitrust suits filed against it in the courts the world over. The main strategy of the governments in the respective countries has been to prove that Microsoft conclusively abused its monopoly powers over the years. So far as the US is concerned, the structural power enjoyed by Microsoft in the personal computer operating system market is no more a hidden fact. Nearly 90 percent of the personal computers in the world are run by Microsoft's Windows operating system. However, merely being a monopoly is not a crime according to the US law, unless this status is manipulated and abused by the company facing the antitrust suits. Thus the governments are left with the challenge to prove that Microsoft has not only abused its monopoly powers to stifle the competition over the years, but has also left the consumers with little choice, so far as buying the personal computer operating systems is concerned. If the US government succeeds in establishing this fact beyond doubt in the courts of law, this will amount to a clear cut violation of the Sherman Antitrust Act passed in the year 1890 by Microsoft and will make it liable to face the appropriate actions resorted to by the US government (Armstrong, 1998: 1). So far the US federal government and nearly 20 state governments have accused Microsoft of abusing its monopoly status (Armstrong, 1998: 2). On November 19 1998, Frederick R. Warren-Boulton, who was the chief economist in the Regan administration's antitrust division and is currently serving as a principal with the Microeconomic Consulting Research & Associations inc., testified that Microsoft qualified on all the four key definitions of monopoly (Wilson, 1998: 1). The four key reasons that Boulton quoted for establishing that Microsoft was an authentic monopoly are: "Its computer operating systems have had a stable market share of more then 90 percent since the early 1990s, with no change in sight (Wilson, 1998: 2)". "Barriers to the competition are very high; it would be difficult if not impossible for another company to successfully introduce another operating system (Wilson, 1998: 2)". "The pattern of operating system prices- which have gone up over the past 10 years as prices for other parts of a computer have plummeted- together with Microsoft's profit margins and the market value of Microsoft's equity are consistent with a company possessing monopoly power (Wilson, 1998: 2)". "Microsoft has engaged in conduct- such as successfully threatening computer manufacturers with a loss of a windows license if they hide Microsoft's Web browser icon on the desktop- that would not be effective if it did not possess monopoly power (Wilson, 1998: 2)". Boulton also argued that though most of the Web browsers like Microsoft Internet Explorer and Netscape Communications Corp.'s Navigator are inherently separate products by themselves, Microsoft resorted to the unethical practices of tagging its Microsoft Internet Explorer software with the Windows 1998 operating system to bolster its market share and to stifle its rivals (Wilson, 1998: 3). Thus the testimony of a senior, experienced and seasoned economist like Boulton establishes beyond doubt that Microsoft is not only a monopoly, but also unscrupulously resorted to many anticompetitive practices to preserve its monopoly status and its lion's share in the personal computer operating systems. As far back as 1993, the US Justice Department requested to review the business activities of Microsoft Corp. by the rival firms by stating that Microsoft was blatantly exploiting its monopoly status and was resorting to anticompetitive practices. In 2004, EU fined Microsoft EUR 497 million for abusing its monopoly status in the European markets. Also in the year 2004, the Japanese Fair Trade Commission strictly warned Microsoft to abstain from its anticompetitive practices while striking deals with the Japanese personal computer manufacturers. The massive complaints against Microsoft of abusing its monopoly status and of resorting to anticompetitive practices establish beyond doubt the unethical credentials of Microsoft. Time and again the courts, governments and state institutions throughout the developed world have initiated warnings to Microsoft to refrain from its anticompetitive practices. Though the capitalism demands that governments should refrain from interfering with the free markets and must have a little say in the functioning of the private corporations, it is the duty of the governments to see to it that the monopolistic status of any company does not suppress innovation and free competition. Besides the consumer activism rampant in the developed economies also demands that the governments safeguard the rights of the consumers and look to it that the unethical and anticompetitive practices of any company do not restrict the consumer choice and its right to have a variety of options. The conduct of Microsoft over the years has established beyond any doubts that it has not only established itself as a monopoly, but has blatantly resorted to anticompetitive practices to strengthen its market share and to safeguard its monopolistic status. In the contemporary technology driven economies, it is imperative for the governments to ensure that the monopolistic status of any company like Microsoft does not stifle the quest for innovation. Innovation is the bedrock on which stands the future of the information driven economies and the companies like Microsoft who have a big stake in the technology market may not hesitate from suppressing the alternate technological options for safeguarding their vested interests. Monitoring the modern capitalistic economies is definitely a tough job for the governments and the related economic institutions. Total Words: 2, 011 References Armstrong, Douglas 1998, Microsoft legal battle could be a long fight...', The Milwaukee Journal Sentinel, Highbeam Research, viewed 2 Jan. 2009, Brinkley, Joel 1999, 'Microsoft ruled a monopoly. Computer giant harms Consumers, cut competition. U.S. Judge says in antitrust suit', The Milwaukee Journal Sentinel, HighBeam Research, viewed 2 Jan. 2009, Greer, Douglas F. 1992, Business, Government and Society, 3rd Edition, New York, Macmillan Publishing. George, Kenneth Desmond et al 2006, Industrial Organization, Routledge, New York. What is monopoly' wiseGEEK, viewed 2 Jan. 2009, Wilson, David 1998, 'Economist Testifies that Microsoft Actions Constitute Monopoly', Tribune Business News, HighBeam Research, viewed 2 Jan. 2009, Read More