Antitrust Laws

The antitrust laws were adopted by Congress to outlaw or restrict business practices that were considered to be monopolistic or which restrained interstate commerce.

* The Sherman Antitrust Act of 1890 declared illegal "every contract, combination...or conspiracy in restraint of trade or commerce" between states or foreign countries.

* The Clayton Antitrust Act of 1914, amended by the Robinson-Patman Act of 1936, prohibits discrimination among customers through pricing and disallows mergers, acquisitions or takeovers of one firm by another if the effect will "substantially lessen competition.

There were three main facts that indicate that Microsoft enjoys monopoly power. First, Microsoft's share of the market for Intel-compatible PC operating systems is extremely large and stable. Second, Microsoft's dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft's customers lack a commercially viable alternative to Windows.

Let's take a look at what pushed the government decided to move forward with the lawsuits against Microsoft:

1. The US Department of Justice alleged that Microsoft had used its domination of the operating system market to restrict competition.

2. Microsoft licensed its operating system more cheaply to computer makers such as Dell and Compaq, if they exclusively installed its software.

3. When IBM refused to drop sales of its own rival operating system and software packages, it lost millions of dollars worth of sales by not receiving the crucial details of Windows 95 until 15 minutes before it launched. Other PC makers had computers with it installed and ready to ship.

4. But the key element involved the way in which Microsoft forced its Internet Explorer browser to leadership in a market which had been dominated by Netscape's Navigator.

It was found that Microsoft not only gave away Internet Explorer but also "bundled" it into its Windows operating system, forcing manufacturers to pre-load it on to their computers. Once Windows was installed and the user tried to use Navigator instead, it was much slower in running, and at times, no matter what happened, Internet Explorer was preset as the default browser. Microsoft also encouraged Apple to pre-install Internet Explorer on its PCs, even though it used a different operating system.

The debut of Internet Explorer and its rapid improvement gave Netscape an incentive to improve Navigator's quality at a competitive rate. By including Internet Explorer in Windows at no extra charge helped to increase the familiarity with the internet and reduced the cost