Microsoft Monopoly Case Study

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Register to read the introduction… A monopoly is a situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterized by an absence of competition - which often results in high prices and inferior products. For a strict academic definition, a monopoly is a market containing a single firm. A real-world monopolist does not have or need 100% of the market. He needs enough market share to be able to distort the free market in a way that adversely affects competitors. The reason, of course, is that society is not homogeneous and so a high market share plus other technological factors creates local monopolies in one market or section of a market. So it will be interesting to see what the courts took into account while delivering the initial judgment against Microsoft, declaring it a monopoly guilty of abusing its position.

• Defining the relevant market

Microsoft Windows was said to hold over 90 percent of one particular market, namely, the market for operating systems used in Intel-compatible PCs. Other forms of operating systems - such as those used in hand-held computers, Apple Macintoshes, network computers connected to other machines, or servers for hosting Internet sites - were judged by the courts to constitute separate markets and thus to offer no competition. This is a necessary distinction, for if the relevant market had been defined as operating systems
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This in turn means that, unfettered by competition, Microsoft did not need to succeed on its merits; it could charge a price for Windows higher than if it had to respond to competition. The Case for Microsoft

Still, the possession of these attributes merely made Microsoft a monopoly - Microsoft would be in violation of antitrust law only if it misused that power, by engaging in an illegal form of "exclusionary conduct" to protect or extend that monopoly. This, in fact, was the burden of the accusation that started the case in the first place, an accusation involving what was once called "the browser wars" – pitting its Internet Explorer against Netscape's Navigator.

Microsoft effectively made its browser and the OS (as the company itself would assert) inseparable. This effectively created a massive distribution network - and seemed, indeed, a clear use of monopoly power to win the browser wars. In addition, Microsoft sought to make deals both with computer manufacturers and with online services like AOL to offer Internet Explorer with their products, sometimes exclusively, and it prevented manufacturers from deleting Microsoft's browser even when they also installed Netscape's. In short, it threw its weight

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