Part 11- Regulation of Business, Chapter 49: Antitrust The Sherman Act, Note 7

Summary of the Antitrust Findings in Microsoft's Case Under the Sherman Act 1. OEM License Restrictions Microsoft imposed several restrictions on Original Equipment Manufacturers (OEMs) to protect its Internet Explorer (IE) browser and operating system monopoly. Key restrictions included:    Prohibition on Removing IE Access Points: OEMs could not remove visible icons or shortcuts for IE, discouraging the preinstallation of rival browsers. This increased costs for OEMs to support additional browsers and prevented effective competition from middleware. Boot Sequence Restrictions: OEMs were barred from modifying the computer’s initial boot sequence to promote rival Internet Access Providers (IAPs) that often used Netscape Navigator instead of IE. Desktop Customization Limits: Microsoft disallowed changes to the Windows desktop, such as adding rival browsers’ icons, further reducing competition. These actions were found to reduce rival browser usage not by improving Microsoft’s product but by restricting OEMs’ ability to promote alternatives, thus constituting anticompetitive behavior. 2. Integration of IE and Windows Microsoft bundled IE with Windows in a way that:   Prevented Removal: IE could not be uninstalled using the "Add/Remove Programs" utility, unlike in earlier Windows versions. Code Commingling: Browsing-specific code was integrated into system files, making it technically infeasible to remove IE without impairing the operating system. The district court ruled this bundling as exclusionary, increasing costs for OEMs to install rival browsers and deterring consumers from exploring alternatives. 3. Agreements with Internet Access Providers (IAPs) Microsoft entered exclusive agreements with top IAPs, including AOL, ensuring:   IE was the default or only browser offered to their subscribers. Rivals like Netscape were significantly limited in browser distribution opportunities. This foreclosure of key distribution channels was deemed anticompetitive, as Microsoft failed to provide a legitimate justification beyond protecting its own market power. 4. Deals with Independent Software Vendors (ISVs) and Apple   ISVs: Microsoft incentivized software developers to use IE as the default browser in their applications, offering technical support and certifications. This strategy limited the development of software compatible with rival browsers. Apple: Microsoft leveraged its dominance in productivity software (e.g., Mac Office) to secure exclusive deals with Apple. Apple agreed to make IE the default browser on Mac OS, further hindering Netscape’s distribution. Both sets of agreements were judged as exclusionary under the Sherman Act, designed to protect Microsoft’s monopoly rather than promote competition. 5. Java Middleware Java, a platform-independent technology developed by Sun Microsystems, posed a threat to Microsoft’s monopoly. Microsoft took actions to undercut Java’s compatibility and adoption, including:   Releasing an incompatible version of Java. Pressuring partners to avoid promoting Java. These efforts sought to maintain Windows’ dominance as the primary software platform. Court’s Ruling The court concluded that Microsoft’s practices consistently used its market power to suppress competition. These actions violated §2 of the Sherman Act, as they:    Reduced consumer choice. Hindered innovation by restricting rival technologies. Did not provide legitimate, procompetitive justifications.