Microsoft Found Guilty of Antitrust Violations, Judge Imposes Significant Restrictions

Strategic Insights -

A United States District Court Judge Thomas Penfield Jackson has ruled that Microsoft Corp. is in violation of the Sherman Antitrust Act, stating that the company engaged in anti-competitive and predatory behavior by linking its Internet Explorer Web browser to its Windows operating system software. The ruling came two days after the federal government and Microsoft were unable to agree on a settlement, and the company is expected to appeal. Other possible restrictions include requiring Microsoft to make its source codes available to competitors, imposing fines, or enforcing rules of behavior. The Nasdaq market lost 8 percent of its value, and Microsoft's stock price fell to $90.875, down $15.375 a share, or $80 billion.

Key Takeaways:

  • Judge Thomas Penfield Jackson ruled that Microsoft is in violation of the Sherman Antitrust Act, finding that the company engaged in anti-competitive and predatory behavior by linking its Internet Explorer Web browser to its Windows operating system software.
  • The judge stated that Microsoft maintained its monopoly power by anticompetitive means and attempted to monopolize the Web browser market, as well as "unlawfully tying its Web browser to its operating system."
  • The ruling came after four months of settlement talks, which collapsed, and the stock markets reacted by losing value, with the Nasdaq market declining 8 percent and Microsoft's stock price plummeting $80 billion.
  • Microsoft's chairman, William H. Gates, said the company would appeal the decision, stating that "we believe we have a strong case on appeal."
  • Attorney General Janet Reno and other officials welcomed the ruling, stating that Microsoft has been held accountable for its illegal conduct.
  • The judge's decision is expected to have significant implications for the company, including possible break-up or enforced restrictions on its business practices.

Statistics:

  • 43-page brief presented by Judge Thomas Penfield Jackson
  • 8% decline in the Nasdaq market value
  • $80 billion decline in Microsoft's stock price
  • 14% drop in Microsoft's stock value on the day of the ruling
  • 2-1 decision by a three-judge panel of the Court of Appeals in 1998 that overturned an order by Judge Jackson requiring Microsoft to offer a version of Windows without the browser

Sources:

  • "Microsoft Found Guilty of Antitrust Violations, Judge Imposes Significant Restrictions." NYT.
  • "Microsoft Faces Break-up: Antitrust Ruling." NYT.
  • "Microsoft's Antitrust Case Ends in Victory for Government." NYT.
  • Jackson, T. P. (1998). [US District Court Ruling]. (Page C14, Excerpts).