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Running Head: ANTITRUST VIOLATIONS

Antitrust Violations of Microsoft Ashford University BUS 670 Legal Environment Ms. Rachael Lenzmeier Jencks April 8, 2012

Running Head: ANTITRUST VIOLATIONS

In January, 2002, AOL Time Warner filed a private antitrust lawsuit against Microsoft Corporation. Prior to that, in 1998, the United States of America had also filed suits against Microsoft for violation of antitrust laws. The basis for the filings was that Microsoft had not obtained or maintained their monopoly by competitive advantages, but by illegally developing entry barriers for other companies (Anonymous, 2003). The lawsuit by the United States alleged that Microsoft had prevented competitors from developing and selling operating systems by exclusionary conduct (United States v. Microsoft Corporation, 1998). Specifically, Microsoft built-in Internet Explorer in a way that it could not be removed by the user, and prevented the use of Netscape Navigator on its operating system. They also attempted to mislead and threaten software developers to prevent competition (United States v. Microsoft Corporation, 1998). The private lawsuit by AOL Time Warner was along the same lines, because Microsoft prevented the use of this companys web browser, the company was unable to compete in a very large market. The courts first task was to determine if Microsoft did indeed hold a monopoly of the market. According to an article in Strategic Direction, Microsoft controlled over 90 percent of sales over the previous seven years and is the sole leader setting prices for other competitors in the market (Anonymous, 2003). Microsoft lost the lawsuit brought on by the United States. The court battle between the U.S. and Microsoft went all the way to the Supreme Court and Microsoft still lost the battle after all appeals were exhausted. The final judgment was entered in 2002 and modified in 2006. The final judgment is very lengthy, but in short, Microsoft was prevented from future endeavors that may violate any antitrust laws. This included prevention of competitors from developing software or middleware that may work with the Windows operating system, and also ordered that Microsoft cannot join in exclusive contracts with other companies that requires that

Running Head: ANTITRUST VIOLATIONS company to develop software that works solely with Windows. According to the final judgment document, Microsoft was not ordered to pay damages in this lawsuit (United States v. Microsoft Corporation, 1998). The private civil suit filed by AOL Time Warner was settled by both parties. The settlement agreement was for Microsoft to pay AOL Time Warner $750 million, as well as work in agreement with them to develop programs that would allow AOL customers the ability to utilize Microsoft products as well (Weil & McMillan, 2003). This settlement provided AOL with the ability to build and maintain their current customer base, and Microsoft lost very little in the suit as the amount paid was likely a drop in the bucket compared to what the company is really worth. From the information provided, I believe that Microsoft did act illegally and unethically toward Netscape Navigator as well as other competitors. Their prevention of others from entering the market is against the antitrust laws and they did this knowing that their practices were in direct violation of the antitrust laws. What I find most interesting about the entire case, is that Microsoft was not apparently hindered by either of these lawsuits. They lost $750 million to AOL Time Warner, but were not ordered to pay damages to anyone else. And, as stated by Weil and McMillan (2003), this amount is nothing for a company like Microsoft. On top of that, these suits were both settled nearly a decade ago and Microsoft still appears to have a monopoly on the market. According to an article from Techspot, AOL had 35 million users in 2002 and only 4 million in 2010 (Protalinski, 2011). Based on these numbers since the settlement, AOL has more problems that just Microsoft preventing the use of Netscape Navigator. There are, however, many options for internet access via Windows since the settlement. As for other competitors of Microsoft operating systems, Apple has made a huge comeback in recent years since the iPhone and iPad were developed, but it doesnt appear to be slowing down Microsoft in the least.

Running Head: ANTITRUST VIOLATIONS

References Anonymous (2003). Microsoft Anti-Trust Tryst: Ethical Implications. Strategic Direction, 19 (6) 21-24. Protalinski, E. (2010). 60% of AOLs Profits Come From Misinformed Customers. Techspot. Retrieved from www.techspot.com. United States v. Microsoft Corporation, (1998). Weil, N. & McMillan, R. (2003). AOL, Microsoft Settle Netscape Suit. PC World Magazine. Retrieved from http://www.pcworld.com

Grading Criteria Antitrust Claims

7 percent Grade Content Criteria Details the antitrust claims faced by the Microsoft corporation. Provides an analysis of the charges levied against Microsoft, including whether or not they were valid. Writing Skills The content is well organized and presented in a clear manner. Sentences are complete, clear and concise. Style Criteria The assignment is 2-3 pages, double-spaced and in APA format. The assignment includes a cover page that includes: Title of paper Students name Course name and number
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Running Head: ANTITRUST VIOLATIONS

Instructors name Date submitted The assignment includes, on the final page, a list of references that is completed according to APA style as outlined in the approved style guide.
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