CASE STUDY ON MICROSOFT ANTITRUST CASE A Case Study: In 1998, the United States Department of Justice filed suit against Microsoft, in essence claiming that Microsoft included too much functionality in its operating systems and thus prevented application vendors from competing.

1. CASE STUDY
ON MICROSOFT
ANTITRUST
CASE
SHIVAJI RAO LOKHANDE

2. 01. How & when Microsoft was formed
02. What made Microsoft one of the richest
companies
03. What was the allegation (reason) put up on MS
by Department of Justice?
04. What was the response of MS?
05. Was MS found guilty?
06. If MS found guilty, then what were the
consequences faced by MS?
07. Where there any similar case studies observed
against any other organization/companies?
CONTENTS

3. In 1975 Bill Gates and Paul G. Allen, two boyhood
friends from Seattle, converted BASIC, a popular
mainframe computer programming language, for use
on an early personal computer (PC), the Altair. Shortly
afterward, Gates and Allen founded Microsoft,
deriving the name from the words microcomputer and
software.
Microsoft (the word being a portmanteau of
"microcomputer software") to develop and sell BASIC
interpreters for the Altair 8800. It rose to dominate the
personal computer operating system market with MS-
DOS in the mid-1980s, followed by Microsoft
Windows.
HOW AND WHEN MICROSOFT FORMED ??

4.  The successful Altair deal back in January 1975
inspired Bill Gates and Paul Allen to form Microsoft. ...
As technology advanced and personal computers
become so popular, the bulk of Microsoft's revenue
was generated from sales to consumers. It was the first
software company to reach $1 Billion in revenues.
 Its best known software products are
the Microsoft Windows line of operating systems,
the Microsoft Office suite, and the Internet Explorer
and Edge web browsers. It rose to dominate the
personal computer operating system market with MS-
DOS in the mid-1980s, followed
by Microsoft Windows.
 Microsoft invents lots of technology, but it has a
certain understanding of the nature of the marketplace
that is the source of much innovation at Microsoft, and
which open source will have a hard time matching.
Microsoft invents lots of technology
 Microsoft, through technological innovation, keen
business strategy, aggressive business tactics and
Acquisition on companies. In the process, Gates became
one of the richest men in the world.
WHAT MADE MICROSOFT RICHEST ?

5. • Original federal statute opposing trusts
(1890)
• Named for Senator John Sherman
• Based on Congress’ constitutional power
to regulate interstate commerce
• Regulated by the Antitrust Division of the
Department of Justice (DOJ) and/or the
Federal Trade Commission
• Many states have similar statutes
The
Sherman
Antitrust Act
“if we will not endure a king as a political power, we should
not endure a king over production, transportation and sale of
any of the necessaries of life”
In October 1998, the U.S. Department of Justice
also sued Microsoft for violating a 1994 consent
decree by forcing computer makers to include
its Internet browser as a part of the installation
of Windows software.

6. What are Antitrust Laws?
Antitrust laws are designed by governments in order to
ensure fair competition in the market. The laws prohibit
practices that result in a negative impact on free markets
and create entry barriers. Common examples of such
practices include industry-wide price-fixing, corporate
mergers that are anti-competitive, predatory pricing done
to maintain monopoly power, etc.
The bottom line of antitrust laws is to protect consumers
from the harms of market monopolies. The harms usually
accrue in the form of higher prices of goods and services
for consumers. Many companies try to circumvent legal
liabilities by establishing themselves as industry leaders
and creating monopolies by buying out or knocking out the
competition.
In the U.S., antitrust laws were enshrined by the Sherman
Antitrust Act of 1890. It was unprecedented legislation that
outlawed trusts, cartels, etc.

7. Two Criteria
Monopoly power :
having substantial market share (over the long
run), i.e. enough power to control the market
Exclusionary or predatory practices :
acts which have no legitimate business purpose
other than to stamp out competition
SUMMARY :
• In the 1990s, the US government sued Microsoft
for trying to monopolize the personal computer
market.
• The charges brought against the company
involved sections of the Sherman Antitrust Act,
which included laws designed by governments in
order to ensure fair competition in the market.
• District Court Judge Thomas Penfield Jackson
ruled that the company violated multiple sections
of the Sherman Antitrust Act.

8. The trial didn't necessarily run very smoothly. In fact, the DOJ's case against Microsoft was plagued
with problems. First, there were questions about whether charges should have been brought against
Microsoft in the first place. Microsoft claimed that its competitors were jealous of its success.
Meanwhile, those who supported Microsoft proposed that if the company was to be considered a
monopoly, it was, at best, a noncoercive one. They argued that even with options like Unix, Linux, and
Macintosh, consumers demonstrated a preference for the convenience of Microsoft's Windows product
on their computers. Windows may not have been the superior product, but it could run on a Toshiba
laptop or on a number of clones. The ease of its installation and its other bundled software allowed it to
become the norm.
PROBLEM WITH THE CASE :

9. MICROSOFT’s SIDE :
1. Chairman, Bill Gates
2. President and CEO, Steven Ballmer
3. Lawyer, William Newkom
 The inclusion of IE is a matter of
integration and innovation; it is:
 what the user wants
 what the ISV wants
 consistent with past business practices
(Office is the integration of word
processing, spread sheets, and so on)
QUESTIONS :
1. Does Microsoft have monopoly power?
2. Has it engaged in predatory or exclusionary practices?
DOJ SIDE :
1. Attorney General, Janet Reno
2. Assistant Attorney General, Joel Klein
3. The trial counsel, David Boies (a.k.a. Jaws,
also lawyer for Gore in Florida Supreme
Court)
The inclusion of IE is a
matter of bundling and leveraging
Bundling is offering or supplying related
products or services in a single transaction
at one all-inclusive price
Leveraging is the act of placing a less
popular product in the same “package” as a
very popular product

10. VERDICT :
 Microsoft lost the case against the
government, and the presiding judge,
Thomas Penfield Jackson, ruled that the
company violated multiple sections of
the Sherman Antitrust Act. However, the
trial was not a smooth one.
 The case was riddled with false and
misleading statements, tampering of
evidence, such as executive emails, and
a plethora of courtroom distractions.
 Microsoft was considered one of the
biggest innovators of that era, and CEO
Bill Gates was widely considered a
genius. Moreover, a large group of
economists alleged that antitrust laws
not only stifle innovation, but they also
hurt consumers.
MICROSOFT’s APPEAL :
 Microsoft didn't take the ruling lightly and
appealed the decision. The company took
issue with the judge's position, citing bias
in favor of the prosecution.
 The appeals court overturned Jackson's
decision against Microsoft. Instead of
seeking to break up the company, the
Department of Justice decided to settle
with Microsoft. In its settlement, the DoJ
abandoned the requirement to break up
the company, In return, Microsoft agreed
to share computing interfaces with other
companies.

11.  Despite the creative editing of video, facts, and emails, Microsoft lost the case.
The presiding judge, Thomas Penfield Jackson, ruled that Microsoft violated
parts of the Sherman Antitrust Act, which was established in 1890 to outlaw
monopolies and cartels.
 The government case accused Microsoft of making it difficult for consumers to
install competing software on computers operated by Windows. If Microsoft was
found to have made it unreasonably difficult for consumers to uninstall Internet
Explorer and use a competing browser, the company's practices would be
deemed anti-competitive.
 The case meandered along with accusations of misleading statements and a
variety of courtroom distractions. A group of economists even published a full-
page open letter to President Bill Clinton in major newspapers in support of
Microsoft stating that antitrust laws hurt consumers as well as the success of
domestic firms in global competition. They urged authorities to drop
protectionism fueled by antitrust laws.
Microsoft Corporation violated the nation's antitrust laws :

12. SIMILAR CASE
EU’s investigation of Amazon means for U.S. antitrust
probes:
 U.S. and European antitrust watchdogs have zeroed in on Amazon’s treatment of third-
party sellers, alleging the company engages in anti-competitive conduct.
 Both probes highlight risks around Amazon’s use of third-party seller data and its
control of the buy box, a key sales driver for merchants.
 Antitrust experts say Amazon may face harsher penalties in the EU, where regulators
have taken a more aggressive stance against Big Tech.

13. CONCLUSION :
 Antitrust laws ensure one company doesn't
control the market, deplete consumer choice,
and inflate prices.
 Microsoft was accused of trying to create a
monopoly that led to the collapse of rival
Netscape by giving its browser software for
free.
 Charges were brought n 1998.
 The judge ruled that Microsoft violated parts of
the Sherman Antitrust Act and ordered the
company to break up into two entities.
 Microsoft appealed the decision, which was
overturned.

14. Thank You