Microsoft's antitrust cases and impact on stakeholders

¶ … 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).

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.

Within this context, it is useful to inquire of the ethical decisions which were at the basis of this situation. The three ethical perspectives mentioned above constitute a good start in answering the posed question. The answer offered is even more relevant as it is recurrent. To better understand, under the utilitarian perspective, Microsoft is to be blamed for working towards its goals, and hurting others in the process. Then, under the virtue perspective, Microsoft is guilty of not implementing the highest standards of moral conduct; additionally, the central element of their efforts was the scope of becoming the ultimate leader -- a not so ethical goal. Third, under the common good perspective, Microsoft is guilty of implementing decisions which harmed those around it. Ultimately then, the main blame of the software giant is that it looked out for its own interests and in the process, damaged the success chances of other software producers as well as the consumers' freedom of choice.

7. Recommended Corrective Action

The current goal of Microsoft remains that of consolidating its leading position within the Information Technology and Communications industry. Yet, the efforts in this direction might have to be increased in the meaning that the company officials now have to focus on "damage control" as well. The company's reputation within the industry and the market has been negatively impacted and the software organization remains under the constant supervision of the United States Department of Justice as well as the European Commission. In terms of the antitrust case, the company has to focus its efforts onto two channels -- restoring its reputation and ensuring that it is no longer the target of such accusations. In achieving this desiderates, it is recommendable that the Microsoft executives consider the following:

(1) Creating a special department in charge of anti-trust policy; it would hire legal specialists in the field of antitrust legislation, which would continually conduct internal analyses to ensure that the company is in full accordance with the legal stipulations

(2) Restating the commitment to the development of the entire it&C industry -- this would generally be achieved through the Public Relations Department, which would sign the Microsoft officials and representatives to televised programs, interviews within radio programs and specialized journals and magazines and other communication media. This endeavor would bring the customers closer to the organization and would also increase the levels of transparency, a definite plus in strengthening organizational brand and reputation.

References:

Cooper, C., 1999, Microsoft Antitrust Judgment: Winners and Losers, ZD Net, http://news.zdnet.co.uk/software/0,1000000121,2074984,00.htm last accessed on August 14, 2009

Dale, N.B., Lewis, J., 2004, Computer Science Illuminated, 2nd Edition, Jones & Bartlett Publishers

Hunter, D., 2005, More Microsoft Employees to Get Antitrust Training, HunterStrat, http://www.hunterstrat.com/news/more-microsoft-employees-to-get-antitrust-training / last accessed on August 14, 2009

Kegel, D., 2006, Corporate Ethics, Dan Kegel's Web Hostel, http://www.kegel.com/corporate_ethics.html last accessed on August 14, 2009

Leiss, W., 1988, the Limits to Satisfaction: An Essay on the Problem of Needs and Commodities, McGill-Queen's Press -- MQUP

Tiberius, V., 2008, the Reflective Life: Living Wisely with our Limits, Oxford University Press