Microsoft antitrust battles case analysis

¶ … Microsoft: Antitrust Battles

The it&C community is gaining an important role within the contemporaneous society and pieces of evidence in this direction include the increased numbers of PC and laptop owners, as well as internet users. Microsoft is the undisputable leader of the industry, with the specification that the domain in which they excel is that of software applications. However, the position of leader attracts the envy and criticism of other parties. Microsoft has been for years accused of unfriendly competition practices and sustained attempts to establish monopoly within the market.

The aim of this paper is to look into the antitrust cases and assess the impact they have had on the various categories of stakeholders, the legal and ethical issues behind the cases, the factors which may have contributed to the breaking of the legal and moral codes and finally, to recommend some corrective action.

Background

Accusations on grounds of antitrust have existed against Microsoft since the middle of the 1980s, but they culminated in 2001, when the United States prosecutors brought the software giant to court. The company had existed within the market since 1975 and was constructed on the belief that, once personal computers became a regular commodity with American households, the demand for software would exponentially increase. The organization flourished, but by early 1990s, the threat of the internet was making its presence felt in the meaning that PC users were no longer directly dependent on their software provider. As smaller firms were launching online services, Microsoft created the Internet Explorer browser and, to ensure that internet users were using it exclusively, the company threatened to revoke the customers' Windows license if they used other browsers. Throughout the same period, Microsoft and IBM were believed to be working together with the aim of monopolizing the software market. The Federal Trade Commission and the Department of Justice withdrew any accusations against them, but "prevented Microsoft from requiring computer manufacturers who license Windows to license Internet Explorer. Microsoft was not, however, prohibited from "integrating" products within its operating system. It was this distinction that would "later become an important argument for Microsoft in the antitrust suit set against them" (Dale and Lewis, 2004, p.353).

In 1997, the Department of Justice sued Microsoft and accused it of having broken the decree it had signed in 1994. Other players within the software industry perceived Microsoft's incorporation of the Internet Explorer within the Windows package as an attempt to monopolize the market and eliminate competition. Three years later, the decision of the court came and it concluded that the software monolith had indeed broken antitrust regulations. At that time, the judge also decided that the company had to be broken up -- this decision was later on revoked, although the first stands (Dale and Lewis, 2004).

The ruling of the judge in the antitrust case generated a series of impacts upon various categories of stakeholders. For once, there were the Microsoft competitors, such as IBM, Oracle or RealNetworks, who found the decision right and who were able to better promote their own products without the constraints that Microsoft was imposing on the market. In this order of ideas, the other software producers gained a growing access to the market and increased their profits. There were however also some companies which remained unaffected by the decision, such as Apple Computers Inc. Or at&T.

Another category of stakeholders is the group formed by the Microsoft's business partners. In this order of ideas, it was possible that Hewlett-Packard sign its contracts with another software vendor, as it had initially stated; they did not however do this. Intel learned a valuable lesson on policy and corporate culture and Sun Microsystems enjoyed a prosperous period after Microsoft decided to contract the operating language that they were developing (Cooper, 1999).

The impact upon the employees depended on the personal features of each and every individual. On the one hand, some employees were shocked by the decision and demoralized relative to the company's actions, as well as the potential impact this could have on the development of the company. On the other hand, other staff members saw it coming and took it as it was. In terms of professional formation however, the direct impact was that more of Microsoft's employees were subjected to training in antitrust regulations. As some analysts showed, "the company says it will beef up training and also implement an online checklist for PSD [Platform and Services Division] employees as well as those working in the Entertainment and Devices, or E&D, division. E&D employees will have the training starting next month, with those from both divisions scheduled for multiple sessions through February" (Hunter, 2005).

Finally, in terms of the customers, last category of shareholders to be analyzed here, the decision was welcomed and perceived as an increased freedom to choose those software applications which were best able to serve their individual needs, rather than being imposed the applications they needed to purchase and use in large packages, such as Microsoft would do.

3. Legal Analysis

In early 1990s, Microsoft was first brought to justice by the Federal Trade Commission under accusations of antitrust breaches with the intent of monopolizing the software market. The case was passed on to the United States Department of Justice, which settled the issue out of court. The legal stimulation in this out of court decree was that Microsoft would not be able to peg its Internet Explorer to the Windows.

The decision had a twofold effect. First of all, it ensured that Bill Gates' organization would not establish monopoly and that fair competition would be fostered. The legitimacy of this decision was praised by the other software vendors, who believed that it would now be possible for them to sell their products more easily. The second legal impact was felt by the consumers, who would no longer be forced to purchase the Internet Explorer browser, but would be able to use other World Wide Web browsers as they pleased. This particular effect is in direct connection with the federal legislation on consumer protection.

Despite the stimulations in the decree however, Microsoft failed to comply with these and continued to include the Internet Explorer in its Windows operating system. The actual reasons behind this failure to comply have never been clearly pointed out by Microsoft representatives and can only be guessed. From a legal standpoint, the company might have felt like they had found a loophole as the 1994 decree did not forbid them to incorporate software application within its operating system. Then, with a market share of 90%, Microsoft could have easily become the single important player within the industry and all the profits would have gone to them. In other words, the most likely explanation behind the failure to comply with the stipulations of the 1994 decree was that the company had ambitions of ruling the software industry.

Three years after the decree, the Federal Trade Commission brought the software monolith to court and filed complaints of antitrust actions. The main accusation in the trial was that Microsoft had bundled the Internet Explorer within their Windows package. The company replied that this did not constitute a felony as the Internet Explorer was an integrant part of the Windows system, an argument analyzed in the previous paragraph.

Additionally, they stated that removing the web browser from the operating system would reduce the former's quality, which would in fact create customer dissatisfactions. Testimonies of the competition followed, who continually argued that the software giant had included the Internet Explorer within the Windows package in an attempt to control the market and "monopolize [it] by eliminating competition" (Dale and Lewis, p.353).

4. Ethical Analysis

The matter of the ethical issues at the basis of the Microsoft antitrust battles is a highly complex one and often based on features internal to the organization, such as its culture or its desire to be the best. A first unethical decision occurred in the early 1990s, when the company threatened its customer to revoke their Windows license if they were to use internet browsers other than Internet Explorer.

Directly pegged to this decision is the one following the 1994 decree, which clearly stated that the company was not to ask computer manufacturers to license Internet Explorer with Microsoft. Yet, the software giant did not comply. This situation is unethical from two standpoints. First of all, it points to the fact that the company did not comply with an understanding it had previously made and had as such proven that it could not be considered a reliable party.

Secondly, the motivation behind not respecting the decision was also unethical as the organization was striving in fact to monopolize the market and eliminate the competitive forces of other players within the software industry. Finally, the ruling judge in the case found that Microsoft's entire approach was based on its desire to increase its profits and in doing this, the company has competed in a manner described as unfair, if not unethical.

Additionally, he argued that the best interest of the consumers, as promoted by Gate's organization, was in fact not the core element of new endeavors, as the company had argued, but that whenever a new product or service was being projected, this would be done in order to serve the financial interests of the organization rather than increase customer utility (Kegel, 2006).

In order to better understand why the above mentioned actions were ethical or unethical, it is best to assess them in light of three ethical perspectives. From the standpoint of the utilitarian perspective, the company is able to seek out those actions which maximize its gains, but in doing this, it must remain aware of the needs of others. More specifically, they can work towards their goals as long as these do not impede with the goals of others (Leiss, 1988). From this standpoint, the behavior of Microsoft was unethical. On the one hand, the organization did follow its own agenda, but on the other hand, in doing this, it stopped other parties from achieving their goals -- while Microsoft strived to maximize its profits, it also created a situation in which its competitors found it harder to develop on the market.

The virtue perspective sees that an individual or an entity should base its decisions and actions on values which create virtue, such as honesty and integrity, and these should be used to pursue the most important goals (Tiberius, 2008). From this standpoint, Microsoft has dedicated its efforts to achieving the goals it considered of the utmost importance, but, as the court decided, it broke antitrust regulations, meaning as such that its creation of virtue was limited to inexistent. This in turn means that the actions of the software company were unethical. Finally, from the angle of the common good perspective, Microsoft's actions are also unethical as the company's pursuit of personal gains has materialized in negative impacts upon fair and friendly competition, as well as consumers' choice.

5. Contributing Factors

Given the situation so far presented, one could wonder about the forces which contributed to the achieved outcome. In this endeavor, one should look at the corporate culture and the act of corporate governance. In this order of ideas, the company was revealed as a strong entity that valued creativity and originality and which implemented a wide series of human resource policies. The aim of these strategies was that of increasing employee on-the-job satisfaction with the final purpose of increasing their performance levels. Some of the actions included the ability of Microsoft employees to purchase corporate stocks, the creation of groups based on common interests or features (such as the gay group or the single parent group) or the implementation of flexible work schedules. On the reverse side however, it requested great commitments from the employees. These were often asked to put in long extra hours. Competition between employees was also intense and the overall environment was dynamic and stressful.

Decisions would often be made top-down and the role of the employees was that of executing the managerial commands. It is highly probable that the internal environment and the corporation's antitrust actions intersected at some stages, but in the opposite direction than initially expected. In this order of ideas, it is possible that the intense competition within the market, where Microsoft strived hard to become the indisputable leader, was transferred within the company, where the employees strived forcefully to be the most valuable organizational acquisition.

6. Ethical Decisions

The antitrust situation within Microsoft can be simply summarized as follows: the young software organization brought in a fresh breath within the society and reached the peaks of success with the aid of its user-friendly applications. In its later existence however, Microsoft's leadership ability was challenged by the emergence of more software developers who wanted a market share. In response to the growing competition, the mature Microsoft engaged in actions of a questionable ethical character, for which it was in fact fined, under the United States legislation, while the trials with the European Union are still ongoing.