Microsoft AntiTrust Issues

1
Microsoft Anti-Trust Issues

• DMEC G200-50
• Global Competition and Market Dominance
• Ran Ish-Shalom
• John Bakke

2
Agenda

• Department of Justice brings suit
• Battle with Netscape (AOL)
• EC Anti-trust actions
• Future concerns (or potential pitfalls)

3
Justice Department Brings SuitJuly 1994

• Accused of using exclusionary and
  anticompetitive contracts to market its
  personal computers.
• DOS is a necessity on nearly all computers.
• Manufacturers must pay royalties to Microsoft
  when they sell a PC with or without DOS.
• Manufacturers pass that cost along to consumers.
• Consumers didnt want the added cost of two
  operating systems.

4
DOJ Suit continued

• With a 90 market share in the PC operating
  system market, software makers write their
  programs to be used on Microsofts operating
  systems.
• Substantial market barriers exist for competition
  to develop, test, and market an alternative
  operating system.
• These two factors feed off one another.

5
The Decision Goes Against MicrosoftJune 2000

• Court ruled that Microsoft should be split into
  two separate and competing companies.
• Make an operating system company and a software
  company
• Microsoft to be forced to comply with a long list
  of restrictions on conduct to last 3 years.
• Microsoft argued the breakup was extreme and
  unwarranted
• Federal judge said the severe remedy was
  necessary because Microsoft has proved
  untrustworthy in the past and didnt appear to
  be taking the previous rulings seriously.
• Convinced of their innocence, Microsoft conducted
  business as usual.
• Assistant AG says the breakup will create two
  strong, vibrant and successful firms.
• Government believes consumers will get a far
  wider range of choice.
• Microsoft vows it will appeal.

6
Ruling Overturned on AppealJune 2001

• Seven judge panel threw out key parts of the
  lower courts decision.
• Microsoft will not be split into two companies.
• Behavioral remedies were also thrown out.
• The allegation that Microsoft had attempted to
  extend its monopoly into the browser market was
  unproved.
• Tying of their web browser to their operating
  system was found to be legal.
• Microsoft was found to be a monopoly and acted
  illegally in an attempt to maintain market
  dominance.
• Microsoft illegally forced independent software
  vendors to write their applications for Windows
  and Explorer.
• Contracts that prevented manufacturers from
  loading rival internet software violated
  antitrust laws.

7
Netscape (AOL) files suitJanuary 2002

• Netscape cites many of the same grounds as those
  in the Department of Justice lawsuit.
• Accused of anti-competitive strategies resulted
  in harm to competition and anti-trust injury to
  Netscape.
• Case strengthened by increase in Explorers
  market share (Microsoft didnt dominate the
  market in 2000).
• Netscapes suit claims Microsoft unnecessarily
  tied Explorer to the operating system.
• Is Explorer and integral part of Windows?
• A pattern of tying or bundling
• By bundling their operating system with their
  browser, Microsoft tried to eliminate Netscape
  from the Browser business

8
Microsoft and AOL settleMay 2003

• Microsoft to pay 750 mil to AOL
• AOLs internet division to receive a royalty-free
  7 year license to use Explorer with AOLs client
  software.
• AOL and Microsoft to work together to make their
  instant messaging systems compatible.
• Long term collaboration announced for
  distributing digital media (with no real
  timeline).
• Microsoft to provide AOL with new worldwide
  distribution channel for software and provide
  technical cooperation to ensure the best
  possible AOL member experience on current and
  future Microsoft operating systems.

9
EC Anti-Trust Actions

• European Commission forced Microsoft to separate
  its Windows Media Player from its operating
  system for antitrust violations
• In one of the key complaints Microsoft had been
  accused by rivals of unfairly using its market
  dominance by bundling media playing software with
  its operating system, leading users of Windows to
  rarely look for competitors media playing
  software.
• Can a modern browser ship without a media player?
• The challenge is whether that integration results
  in fewer third parties creating applications that
  work with RealNetworks' Real Player or QuickTime
  for that matter

10
EC Ruling

• The EC ruled in March that Microsoft had abused
  its monopoly position and should pay a
  record-breaking fine of 497m, provide better
  access to its server protocols and offer a
  version of Windows without Media Player
• Microsoft is to launch its legal appeal

11
Is this the end?

• MSN Messenger
• Microsoft had been planning to bundle instant
  messaging across all its platforms as far back as
  1997 but opted against it out of fears that such
  a move would raise anti-trust concerns.
• The company now plans to bundle MSN Messenger
  with its MSN Mobile Service. Microsoft will also
  provide versions of MSN Messenger for the Windows
  CE operating system, the Microsoft WebTV Network
  and Macintosh platform.

12
Is this the end? (cont.)

• Microsoft soon to unveil its much-hyped server
  software Office Real Time Communications (RTC)
  Server, officially joining the race to give
  office communications their biggest makeover
  since the arrival of e-mail
• move that could shake up the telephony services
  market, Microsoft eventually plans to add support
  for video conferencing, cheap Internet voice
  calls, and complex message-management functions.