Research Paper on Microsoft Antitrust Issues

The contemporary economy is characterized by the increasing role of large corporations which have already overcome national borders and gradually transforms into multinational corporations.

Remarkably, often large corporations tend to monopolization of the market that naturally produce a negative impact on national economies and national states attempt to undertake certain steps in order to prevent such monopolization. However, such anti-trust practices are often criticized not only by large corporations but also by economists who are not engaged in businesses of some companies. The main reason why such a policy of national states is criticized is the belief that often anti-trust issues are hidden attempts of a state to interfere in the economic life of the country and control certain industries or even the economy at large.

In order to find out the extent, to which such criticism of the policy of national states is right, it is necessary to analyze some of the recent anti-trust issues and discuss them from different positions and after that it would be possible to arrive at a definite conclusion as for the effect and the reasons for the interventional measures undertaken by national states.

Regarding this research paper, a few anti-trust issues related to Microsoft initiated by the American government will be discussed since it is probably one of the most essential and apparent clashes of interests of the American state and a large multinational corporation, Microsoft.

  • Main Antitrust Issues
    a. Microsoft Windows XP
    Probably it is better to start with the Microsoft product that is widely spread all over the world, i.e., Microsoft operating system, notably Windows XP, which has become an anti-trust issue in the US. The main problem was that customers bought not only Windows XP, but they also had to buy, willingly or not, some other products, which were uniquely compatible with this operating system. Firstly, I want to start with the causes that led to accusations against Microsoft. Their roots lie in the nature or structure of the business scheme used by the company. Its main principles are based on the idea of struggle for domination and penetration in all spheres of the market making alliances, which may be helpful, even if they are imposed on the partners. Windows operating systems produced by Microsoft are not compatible with the products of other companies that make it practically impossible to use drivers or any peripheral equipment of any other company but Microsoft or, at any rate, it will be very uncomfortable for consumers for it will engender unstable work of their PCs that was used by the government as the main argument in their accusation of Microsoft in monopolization of the market. It is a very significant fact, especially, if we will take into consideration the fact that different modifications of Windows installed on about 90% of all PCs that creates competitive conditions unbearable for Microsoft’s rivals. Primarily, it concerns Windows XP, which had a lot of arguments on the part of the government. The government estimated that this operating system included some elements of software, which were previously separate pieces. For example, multimedia software is installed a priori, and it deteriorates the position of multimedia software producers greatly. Moreover, opponents of Microsoft say that Windows XP threatens to consumers’ privacy because it demands a great amount of personal information during the process of installation of this operating system. For Microsoft’s operating systems are the principal part of their software product that provides its domination the company tends to prevent any interference in this sector of the market. Besides, Microsoft conceals real prices of its products that allow the company to control costs and make them higher. Such situation would be impossible if there were normal competitive relations on the market. Unfortunately, it is not all the facts that harm consumers. Among other negative factors, I can name such as the lack of real choice of operating systems’ elements as well as operating systems themselves because Microsoft occupying a dominant position can easily manipulate the market and provide for consumers only that elements that the company produces or agrees to admit in their software. Moreover, consumers can’t be sure that they receive products of the highest quality, i.e., the lack of competition and the desire of Microsoft to prevent products of other companies to appear on the market do not permit to chose between the best products but, basically, clients had to, or it’s better to say they are forced to buy Microsoft’s operating systems and other software which are very often preinstalled on PCs. Naturally, Microsoft rejected all accusation and stood on the ground that Windows XP is an ordinary product that by no means can lead to the monopolization of the market. Moreover, the software compatible with this operating system, for instance, were treated by the corporation as an integral part of Windows XP but not as free products. As for the problems of security Microsoft traditionally estimated that its licensed products are safe and reliable due to the use of the most sophisticated technologies in their implementation. Finally, one of the most critical and dangerous demerits of Microsoft’s monopoly is to my mind the prevention (unconsciously or not) of innovation growth. The company, in its struggle with rivals, tries to retard an introduction of any new innovative product of its opponents. Microsoft does it in different ways and impeding of innovation is caused not by the lack of ideas or people who generate these new ideas but the leading cause is the lack of information for the public does not have access to it that could help to develop new trends and elements of software. In general, Microsoft and its partners thoroughly conceal that sort of information from the public eye. Thus, the facts mentioned above prove that Microsoft operating systems and accompanying software cannot occupy the dominant position on the market any longer. Rivals and growing demand for progress and changes force governments of different countries to eliminate the monopoly of Microsoft in this domain. Consequently, in all probability, the law was violated, and Microsoft monopolized the market or at least attempted to.
  • b. Microsoft Windows and Internet Explorer
    It is necessary to point out that Microsoft successfully used its positions in the most prospective markets, including the Internet. Precisely, the company provided its customers with the possibility to have access to the Internet with the help of its Internet browser. This fact, at first glance, seems to be quite reasonable but Microsoft Internet Explorer is another anti-trust issue the corporation faced. The problem was that Microsoft was accused of the unfair and monopolistic power of its handling of operating system sales accompanied by Internet browser sales. Typically, according to basic rules of fair business, a company cannot bind a customer to a specific product without his/her will. However, it is practiced correctly what the government accused Microsoft of. In fact, the position of the government was quite simple. It criticized Microsoft because the corporation integrated the Internet browser, i.e., Internet Explorer into its operating system, Windows. As a result, customers bought Windows but also they received Internet Explorer, and they did not need to buy another Internet browser or naturally they could not because another Internet browser could merely be incompatible with Microsoft operating system. In response to accusations in the monopolization, Microsoft argued that the operating system and Internet Explorer we merged naturally and cannot be separated because they were the same reliable product and both, Windows and Internet Explorer, were inextricably linked together. Also, the company underlined that consumers received Internet Explorer for free since it was an integral part of Windows. Finally, to emphasize that Microsoft did not tend to monopolize the market, the corporation estimated that the development of Windows and Internet Explorer as a solid unit was the result of fair competition and use of innovations in the production process. However, such arguments turned to be not very persuasive for the government, which insisted that Internet Explorer was a distinct and separate product and it couldn’t be tied to the operating system. In such different positions, it is tough to define whether the government or Microsoft is right. In fact, it is true that Internet Explorer should not be tied to Microsoft operating system since a separate version of Internet Explorer is available for Mac operating system. At the same time, it is complicated to believe that Internet Explorer is free for customers since its development needed some investments and the formation of the price of Microsoft operating system is normally not transparent for customers, and the estimation Internet Explorer is free cannot be supported by facts. However, the position of Microsoft is also rather high and, frankly speaking, it is even more persuasive because Internet Explorer may be treated as a part of Windows and another Internet browser may be used by customers if the ‘free; product of Microsoft causes some inconveniences. As a result, it is hardly possible to say that the law concerning the monopolization of the market was violated and, in all probability, the roots of the problem may be found in the monopolistic position of Microsoft operating system and the arguments concerning Internet Explorer are instead consequences of this monopoly.
  • c. Microsoft acquisition of Intuit Inc.
    However, Microsoft products are not the only subjects for numerous arguments concerning anti-trust issues initiated by the American government. One of the outstanding anti-trust problems is Microsoft attempt of acquisition of Intuit Inc. In fact, the main problem is that this purchase would permit Microsoft to occupy about 90% of the market of personal finance/checkbook software. According to the rules, such a significant share, if not to say lion share, of the market, is traditionally considered to be monopolistic. In such a situation, the American government opposed to Microsoft acquisition of Intuit Inc. arguing that it was impossible to allow Microsoft to buy Intuit Inc. because it would make the corporation dominant in the market. As a result, Microsoft would be able to control practically all the market and, consequently, it could control prices that could be easily increased. In such a way, Microsoft could amply use its monopolistic position regardless interests of customers. On the other hand, Microsoft argued that this acquisition would improve the quality of the product and services in the market. Furthermore, the corporation underlined that it was a typical process of the enlargement and Microsoft even agreed to transfer some of its Money personal finance software assets to Novell Inc. in order the latter remained competitive. Apparently, the position of Microsoft is not very persuasive and even its agreement to share the market with Novell Inc seems to be a decision of monopolistic corporation which can change the market entirely by its decision to transfer or not its Money personal finance software to its competitor. Moreover, such a significant share of the market is absolutely monopolistic and consequently it is necessary to agree with the government’s arguments since such a position of Microsoft would lead to deterioration of the quality of product and services as well as it would prevent implementation of innovations as in the case of Microsoft operating system because there would be no need in innovations if there were no real competitors. Thus, it is possible to estimate that the law was violated and Microsoft could indeed occupy monopolistic position of it managed to acquire Intuit Inc,

The Ethics of Interventional Economics
The Microsoft anti-trust issues and the critique from the part of the government reveal the fact that there are significant contradictions between a large corporation and national politics. At this respect, a natural question arises: to what extent a government can interfere in economics and regulate the market. Naturally, it is practically impossible to give a definite answer, and in each case, it is necessary to pay attention to particular conditions and causes of such interferences.

Nonetheless, it is evident that a government cannot regulate the market through anti-trust issues or by any other means if the fundamental principles of the open market economy are supposed to be sustained. As a result, the interventional policy of a state cannot be accepted if it becomes a norm of the economic life of a country.

At the same time, it is necessary to remember that the interventional economics may be viewed from two different positions. On the one hand, it may be viewed as an attempt of a government to protect the national economy from monopolization, primarily by large multinational corporations, such as Microsoft that would lead to the deterioration of the general situation in the marketplace, its stagnation and lack of innovations. Naturally, in such a case regular customers will suffer, and government interference in the market is entirely just and reasonable.

On the other hand, if interventional economics becomes a regular practice and a norm of economic life then a new threat appears.

This danger is the increased role of a government in the economy, specific rules and regulations, which limit dramatically open market economy, which would not be an open market if a government regulated the market and not the natural competition. In fact, a high level of interference of a government in economic life may be also interpreted as an attempt of a government to establish control over the market that can be treated as the monopolization of the market since, in such a situation when a government possesses unique opportunities in regulation of the market it cannot be called otherwise than monopoly.

The example of Microsoft anti-trust issues perfectly demonstrated that often the government policy is based on double standards since it can interfere even if a corporation does not indeed violate the law, like in the case of Microsoft Internet Explorer. Such interference instead looks like an attempt by the government to support the competitors which are too weak to use open market tools to compete with Microsoft.

It is why, it is essential to use the government power in the regulation of the situation in the market through anti-trust legislation very carefully, and any anti-trust process should be highly motivated when an attempt to monopolize the market is obvious, and the competitors cannot possibly prevent it without the government’s assistance. Anyway, for the open market economy interventional policy is unacceptable if it is used as a tool of regulation of the market, or an attempt to keep stagnating corporations ‘alive’.

Thus, in the end, it is possible to say that the example of complicated relations between the American government and Microsoft, one of the giant multinational corporations, reveal dangerous trends in the contemporary economy. On the one hand, there are multinational corporations as well as corporations on the national level that try to gain the dominance in the market through the monopolization. On the other hand, there are widespread governments that attempt to prevent the monopoly of local markets and resist to the expansion of large corporations. At the same time, such interventional economics makes the government probably one of the most significant companies that can control the market, regardless the opinion of its leading players that bears another threat, the threat of state monopoly in the economy.

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