< Company Profiles / Microsoft
04.02.04


Microsoft
A Corporate Profile

By Corporate Watch UK
Completed February 2004


5. Corporate Crime

Monopolizing

Vigorous competition will always be a healthy hallmark of our industry85
- Microsoft

As a successful company, we understand that we have a responsibility to provide leadership in the broader industry86
-
Microsoft

To hear Microsoft tell it, you'd think the Computer Age had changed the rules of commerce. Microsoft Chairman and CEO Bill Gates has argued that the government is trying to structure an industry it knows little about. This is nonsense. What Gates is attempting is as old as the efforts to monopolize the steel, rail, oil, and telephone industries in the robber baron era87.”
- Robert Kuttner, Businessweek

After an intensive investigation of Microsoft's competitive practices that had gone on for much of the 90s, in 1998 the US Department of Justice and a group of 20 state Attorney Generals filed two antitrust cases against Microsoft alleging violations of the Sherman Act. They accused Microsoft of a broad pattern of anticompetetive behaviour by demonstrating an array of claims, including the following: that Microsoft had a monopoly on the market for operating systems; that the company used that monopoly as a means of preventing other companies from selling its competitors' products (most notably Netscape's Internet browser whose share it reduced from 80% plus to nearly nothing88); that it was illegal for Microsoft to bundle its own browser into the operating system Windows 98 as a means of precluding customers from purchasing Netscape's product; that the company sought to divide markets with competitors; that Microsoft sought to subvert the Java programming language, developed by Sun Microsystems, which it viewed as a threat to Windows; and, finally, that Microsoft's business practices were detrimental to consumers89.

On April 3 2000, Federal District Judge Thomas Penfield Jackson ruled that Microsoft violated the law with “predacious” anticompetitive behavior, and the stock market knocked $80 billion off the company’s value. Gates himself reportedly lost $12 billion to $14 billion that day90. Despite this, the newly appointed Bush/Ashcroft Department of Justice declined to apply punishment or effective remedy. Microsoft is thus free to use similar methods to remove more products from the market91. Indeed, Microsoft executives have freely admitted the settlement they negotiated with the Bush/Ashcroft administration hands them greater power than they had before the trial began - not surprising since they wrote it and Bush/Ashcroft just retyped and signed it92. More recently, in August 2003, Microsoft agreed to pay consumers in North and South Dakota up to $18.33 million (provided usefully in vouchers that can be used to buy computer hardware or software) to settle charges that it overcharged users for its software products. Half of any unclaimed vouchers would be used to buy computer equipment or software for schools added Microsoft kindly93.

The settlements, which were announced along with other agreements to settle with three other states and the District of Columbia in October, are part of the its efforts to resolve all of its legal issues stemming from its landmark antitrust agreement with the U.S. government last year.

Earlier in the month, Microsoft announced class action settlements with several U.S. states worth a total of $200 million. The class actions claimed Microsoft used its Windows monopoly to thwart competition and overcharge customers for its software.

Class-action lawsuits are still pending in five states: Arizona, Iowa, Minnesota, New Mexico, and Wisconsin.Over the past year, Microsoft has settled 10 class action lawsuits worth a total of $1.55 billion. Meanwhile, in Europe, the European Commission's preliminary ruling in its anti-trust case stated that the company continues to abuse its dominance in operating systems. The Commission also outlined the remedies it may impose on Microsoft to restore competition in the markets for audio- and video-playing software and software that runs computer servers. The potential measures include forcing the company to disclose software coding to rivals94.

Back in the US Microsoft is back in court again. RealNetworks, Microsoft's longtime rival, recently filed an antitrust complaint claiming that Microsoft illegally tied its Windows Media Player software with copies of the ubiquitous Windows operating system, whether Windows users want Microsoft's player or not. The lawsuit claims this made it harder for RealNetworks's Real One software to compete, "resulting in substantial lost revenue and business for RealNetworks". RealNetworks is seeking more than $1bn (£703m) in damages and unspecified injunctive relief measures95.


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85Microsoft Annual Report 2001, p.8
86Microsoft Annual Report 2001, p. 8
87'The Redmond Tea Party,' Nick Sayer, 30.01.99. See: http://www.vcnet.com/bms/features/teaparty.shtml Viewed: 07.11.03
88'The Microsoft “Road Ahead”,' Andrew Cygus, 23.02.03. See: http://www.aaxnet.com/editor/edit029.html#mspath. Viewed: 18.12.03
89'Microsoft,' Paula Kepos, International Directory of Company History, Vol. 27, 1999, St. James Press.
90'Bill Gates’s Money,' Jean Strouse, 16.04.00, New York Times. See: http://www3.sympatico.ca/truegrowth/gates1.html. Viewed: 10.12.03
91'2003 and beyond,' Andrew Gygus, 23.02.03. See: http://www.aaxnet.com/editor/edit029.html#mspath. Viewed: 11.12.03
92'2003 and beyond,' Andrew Gygus, 23.02.03. See: http://www.aaxnet.com/editor/edit029.html#mspath. Viewed: 11.12.03
93'Microsoft settles North, South Dakota lawsuits,' Reuters, 11.19.03. See: http://www.forbes.com/newswire/2003/11/19/rtr1154140.html. Viewed: 28.11.03
94 'Europe goes on offensive in the case of Microsoft,' 07.08.03. See: http://www.linux.org/news/2003/08/07/0006.html. Viewed: 18.12.03
95'Microsoft in court ... again,' The Guardian, 19.12.03. See: http://www.guardian.co.uk/microsoft/Story/0,2763,1110564,00.html. Viewed: 19.12.03