Monopolies and Antitrust Laws - The Microsoft Case

A monopoly is a market environment where there is only one provider of a good or service with no other competitors in that specific industry. Monopolies can be organized into a specific category because they lack substitute goods or services, and they have no competitors. They set the prices and have total market control of the supply of goods and services. A monopoly normally sells fewer goods and services but at a higher price relative to competitors in a purely competitive market. Consumers will continue to pay the price of goods and services no matter how high because there is only one provider and such goods are a necessity. The consumer does not have choices and is forced to pay the set price. Monopolies tend to become less efficient over time due to a number of different factors. Competitors may arise in such situations and call for investments in new alternatives. Monopolies may also tend to be less efficient in the long run due to low market entry barriers. Although there are some benefits to monopolies, once a firm becomes too big, they can be controlled through different types of regulation. Often times a government will step in and regulate the monopoly. The United States has antitrust laws that prohibit unfair business practices, and they mainly protect consumers.

Antitrust laws have been put into effect and are used to protect consumers and their rights. These laws make practices such as trying to hurt other businesses, trying to hurt consumers, or violating the general standards of ethical behavior, illegal. Governmaent agencies are the main regulators of competition, and they play a major role in the protection of consumers. The government does not allow big businesses to take advantage of the average consumer. Therefore, they regulate and protect against anticompetitive behavior and unfair business practices. One situation in particular in which the United States intervened was during the Microsoft incident nearly ten years ago. Microsoft was accused for using monopoly power in its operating systems sales and its web browser sales. The web browser, Internet Explorer, and the operating system, Windows, were linked together, helping Microsoft win the browser wars because every user of Windows had a copy of Internet Explorer. Many questions arose whether or not Microsoft manipulated different applications to favor Internet Explorer over other internet browsers. The main question in the case was whether or not the two were one product or separate products.

Microsoft stated that Windows and Internet Explorer were linked as a result of competition and innovation. They said that the two were put into one and the consumers were getting the benefits of Internet Explorer for free. The people who opposed Microsoft said the internet browser and the operating system were two separate products and did not need to be tied together as one final product. They also said Internet Explorer was not actually free due to the higher costs of Windows when the internet browser was included. The ultimate question was whether or not Microsoft tried to take advantage of their customers by misleading them. It is evident that Microsoft is looking to make a profit through consumers, and they hope to maximize this profit while maintaining a very satisfied customer. It is questionable whether or not Microsoft tried to take advantage of their customers or whether this was just an act of innovation. The government initially became interested in Microsoft in 1991 when suspicion arose over whether Microsoft was abusing its monopoly on the pc market. The investigation was then closed. However, the Department of Justice opened its own investigation and reached a settlement in 1994. Microsoft agreed not to tie in other products with the operating system but was allowed to integrate more features into Windows. Microsoft continued to support the idea that Internet Explorer was not a product but a seperate feature in the Windows operating system.

The government and the Department of Justice deemed it necessary to take some sort of action because they felt Microsoft was participating in unfair business practices. Antitrust laws permit government regulators to intervene when a monopoly may be taking advantage of customers. However this case is unique because it offers some sort of controversy because of two different beliefs. Microsoft feels that it is completing acceptable to do what they are doing and think they should be able to take the necessary steps to compete in the real world. However, the Department of Justice feels that Microsoft took advantage of their customers by disguising their product. They feel that customers should not be mislead when it comes to the operating system and the internet web browser. Antitrust laws were created for this very situation. One can see how a business can mislead their customers into believing different things. The business is a much greater force with more power and is no match for that of a consumer. Therefore, government regulators participate and side with the customers in this battle between business versus consumer.

Monopolies have many advantages and disadvantages in every economy throughout the world. If a monopoly becomes too strong, government regulators may need to take some sort of action to protect the everyday consumer. Monopolies can gain this strength because they set their own prices and determine the output of their goods and services. The average consumer is no match for such big businesses and needs help when competing in such an environment. The Microsoft case debated the linked sales of the Windows operating system and Internet Explorer, one of the internet's main web browsers. Governernment regulators deemed it necessary to intervene under the United States's antitrust laws. They were interested in protecting the customers as they do not possess as much power as big businesses like Microsoft do. The ultimate decision in the case was whether or not Microsoft was misleading their customers and making a greater profit. The average consumer cannot compete with businesses such as Microsoft, and therefore making it appropriate for government agencies to regulate.

1) http://en.wikipedia.org/wiki/Antitrust

2) http://en.wikipedia.org/wiki/Monopoly

3) www.tutor2u.net/economics/content/topics/monopoly/benefits_of_monopoly.htm

4) http://en.wikipedia.org/wiki/United_States_v._Microsoft

5) http://www.wired.com/techbiz/it/news/2002/11/35212

6) http://www.tutor2u.net/economics/content/topics/monopoly/monopoly_profits.htm