Monopoly in the technology sector

The case of Microsoft

The technology sector is considered one of the most important in our current world. Being an essential part of our lifestyle, this sector and its key players have the power to change and determine aspects of the future.

 

Microsoft Corporation is an American technology company specialised in computer software, personal computers, electronics and many related services. Founded by Bill Gates and his friend Paul Allen, the company became famous for its operating system, Microsoft Windows, which was launched in the mid-1980s. In 1988, Microsoft created its own software called Microsoft Office containing, for instance, Microsoft Word and Excel.

The company quickly became the leader of the operating system market. However, Microsoft did not see the rise of the internet coming during the early 1990s and other companies, such as Netscape, arose as new and unexpected challengers. The later became known for its internet browser, Netscape Navigator. In reaction to this growing threat, Microsoft opted for what is called a "fast follow" strategy (i.e. copying an already existing business model) and created in 1995 its own internet browser, Internet Explorer. Microsoft took advantage of its leading position in the operating system to promote its software by making it the default internet browser of computer systems. At that time, this kind of technological product was not free as it is nowadays. When buying computers, clients had to go to a physical shop to purchase the software and then download it on their device. It was restrictive and time-consuming. The problem of Microsoft’s monopoly arose when the company decided to include Internet Explorer with its operating system for free. Due to this action, Microsoft could have killed Netscape and monopolised the browser market, leading to a triple monopoly for the company with its operating system, major applications and browser.

The situation finally reached the US Department of Justice, which decided to sue Microsoft in 1988 for violating the Anti-trust Act also called the Sherman Act. Officially, a monopoly is not forbidden in the US, nevertheless, it is illegal to abuse one company’s domination in anti-competitive strategies and predatory acts that are designed to achieve or maintain a company’s monopoly. Therefore, many practices are prohibited - coercion, collusion or anti-competitive corporate merger for instance. The trial had for aim to determine whether Microsoft’s decision to bundle additional programs into its operating system, Microsoft Windows, was anti-competitive or not. At the time of the trial, Microsoft’s challenger, Netscape, had already collapsed due to the drop in its sales. Besides, Microsoft was also accused of making it difficult for a consumer to install and use another company’s software as well as uninstall Internet Explorer from a computer.

Even though Bill Gates and other Microsoft supporters stated that the success of the company was only the result of innovations and fair competition, Microsoft lost the first round of the trial in 2001. As the opponents’ main argument was that Windows and Internet Explorer were two different and separate products, and thus should not be sold together, the judge decided that Microsoft should be separated into two smaller companies - on one side the operating system sector with Windows, and on the other, all other software launched by the company.

Before the split could be made, Microsoft won before the Appeal Court and the ruling was removed, but some restrictions were established. However, the company was eventually caught up by other competitors and its potential monopoly was destroyed by the “old-fashioned” competition within the market.

What is Microsoft’s position in the current technological world? This sector which used to be dominated by monopolists has shifted to a multipolar environment. Google, Facebook, Apple… all these firms have become the leader in their respective sector, therefore it is nearly impossible for one of them to dominate and influence the others, and yesterday’s anti-competitive strategies are unthinkable in today’s world.  On top of that, even though the current environment has effectively changed, the American anti-trust laws have barely evolved. Furthermore, there are mainly focused on the harm caused to consumers through raising prices, but companies such as Google or Facebook are offering free products, thus very few anti-trust actions have been taken against them despite the control they have gained on our lives. Since 2000, less than 5 monopoly cases have gone to court, which is three times less than before. 

Eva Querin