Essay on Microsoft Corporation Anti-Trust Case
Is Microsoft a Monopoly?
When a single company
exclusively sells a product for which there are no adequate substitutes a case
of monopoly is said to exist (Musgrave and Kacapyr 117). Monopoly is abhorred in a free market economy
since it is thought that the company which has the monopoly may raise its
prices to exorbitant levels or may produce a lower quality output. For this reason, the question of whether
Microsoft Corporation is a monopoly is a question that has serious
repercussions for all consumers who use its operating system.
Microsoft
Corporation is accused of monopoly because of the argument that it engaged in certain
activities that are exclusionary and predatory to its competitors which have
the effect of restricting or preventing the entrance of new competitors in its
industry. Specifically, it is alleged
that Microsoft Corporation entered into different contracts with companies to
exclusively use Microsoft’s products and to prevent them from using its
competitors’ products. It is believed that Microsoft gave incentive to
manufacturers by giving them substantial discounts in return for preloading its
operating system on their PCs. A second
argument that Microsoft engaged in predatory and monopolistic activity is when
it integrated its Windows operating system with Internet Explorer, which is
thought to have prevented the Netscape, a competitor web browser, from
competing with Microsoft (Gilbert and Katz 35).
To allege that a
company has engaged in monopolistic activities it is necessary to adduce
substantial proof that there was an exclusionary behaviour or predatory
behaviour. If Microsoft has a monopoly over the industry it is feared that it
will eventually increase its prices to recover the initial losses to prevent
the entrance of competitors. On the
contrary, Microsoft’s products are such that would prevent Microsoft from
raising its prices haphazardly. In the operating system industry, people do not
necessarily have to upgrade their operating systems now and then. At the same time, its customers will not be
encouraged to upgrade its products if it will raise prices of its
products. The more effective business
strategy, therefore, is to avoid charging exorbitant fees for its operating
systems to encourage its customers to get an upgrade every now and then.
Microsoft also
argues that it could not restrict manufacturers of personal computers from
doing business with other companies.
Since the computer industry is a very competitive industry it is simply
not possible to control all the manufacturers and dictate how they will do
business with other companies. Microsoft
believed that if it will even make an attempt to dictate computer manufacturers
it may trigger a hostile reaction from them which could motivate them to
abandon their support for Microsoft Corporation’s products. It is apparent
therefore that the rewarding manufacturers by giving them discounts for
supporting their products is a perfectly legal and effective business
strategy.
The bundling of
its operating system with the Internet Explorer is also a legal business
manoeuvre designed to introduce its lesser-known products to its
customers. In fact, it can even be
argued that bundling the Internet Explorer with its operating system allowed
the customers to purchase two products for the price of one.
In conclusion,
Microsoft Corporation does not have a monopoly over the computer industry. It is clear the Microsoft simply utilized
effective business skills and acumen to make sure that it stays relevant in the
computer industry.
Cited Works
Gilbert,
Richard J. & Michael L. Katz. “An Economist’s Guide to U.S. v. Microsoft.” Journal of Economic Perspectives 15
(2001): 25-44
Musgrave,
Frank and Kacapyr, Elia. Barron’s How to
Prepare for the AP Microeconomics/Macroeconomics Advanced Placement
Examinations. Hauppauge, New York: Barron’s, 2006.
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