4. Microsoft had a monopoly in the market for PC operating systemand had used anticompetitive and predatory tactics to maintain itsmonopoly power.
ANALYSISMicrosoft behaviors that ethically questionable
1. Bill Gates had a meeting with IBM and agree to provide operatingsystem for IBM PC, although at the time he did not own a operatingsystem. Then Bill Gates buy an an operating system from a friend for $ 60,000 and without telling his friend, he sold the operating systemto IBM and along with the increase of IBM sales, Bill Gates company becoming a billion dollar firm. It is legal for Bill Gates to sell theoperating system to IBM, since he had bought it and became his property. However, Bill Gates was consider unethical since he boughtthe software for $ 60,000 and sell it for far higher prices and obtainroyalty as IBM PC market share increased. Before Bill Gates boughtthe software, he should calculate the market price of the OS(operating system) based on how much IBM willing to pay and use itas the based in pricing the OS. Thus the price of the OS he boughtwill be a fair price.2. Bundling its Internet Explorer with Windows operating system, sothat when Windows was installed on a computer Internet Explorer was also automatically installed, then users would tend to use InternetExplorer rather than go through the expense and trouble of purchasingand installing Netscape. Further, in Win98 the integration of InternetExplorer make it extremely difficult and risky for user to removeInternet Explorer and replace it with Netscape Navigator. Although incontrast, the integration of Internet Explorer made Win98 run moreslowly and consumed resources on the user’s computer. Microsoftalso claimed that it was now giving Internet Explorer for free. In thiscase, Microsoft’s customers have been suffer losses from unjustaction by Microsoft. The bundling has forced customer to pay and usesoftware that they did not prefer to, considering the fact that the use of Internet Explorer cost them more., make Windows 98 run moreslowly and consumed resources on the user’s. Microsoft directlyforced buyers to only one alternative source of operating system andsoftware which is Windows and its Internet Explorer that bundledtogether and by creating program that extremely difficult to remove
Case Study Playing Monopoly: Microsoft
Question 1: Identify the behaviors that you think are questionable in the history of Microsoft. Evaluate the ethics of these behaviors?
Answer: Some of the questionable behaviors in the history of Microsoft are:
1. In the year 1981, Bill Gates purchased an operating system written by his friend for $60,000. But he sold it to IBM without informing his friend. After that IBM licensed it as MS-DOS. Though the deal became profitable but Gates failed if ethical values of him are evaluated. Microsoft at that time was owned by him and his friend, so any decision taken by either of them before implementation should be well acknowledged by both of them. Gates didn’t think of it and without informing his friend about the meeting offered that operating system to IBM.
2. In the year 1984, Apple launched a new operating system for its computers which have advanced graphics aiding users to select icons and pull down menus on the screen with mouse. This operating system outperformed MS-DOS which uses characters to issue commands to the computers to perform the task but now commands can be issued by selecting icons. Then in 1987, Microsoft released a new operating system with IBM machine which copied the advanced graphics idea of Apple and named it Windows. On ethical terms, this was totally wrong on part of Microsoft copying the concept of Operating System of Apple which was all copyrighted.
3. In 1990, Netscape emerged as a new competitor for Microsoft in network market and launched in Dec, 1994, a new advanced web browser called Navigator. People started feeling lack of importance of Operating System and in their eyes browser became dominant. Netscape sales increased creating a threat to Microsoft. With response to the same Microsoft introduced its web browser called Internet Explorer by copying all the features of Netscape’s web browser. Internet Explore was also first licensed by Spyglass Inc. to Microsoft. The chairman gave taunting comments on Microsoft that this company can build itself the software you have developed and have licensed to them and then issue it in its OS and is put to use. Ethically again, copying features of Netscape was not a step to be taken.
4. In the year 1995, Microsoft saw the threat arising from navigator; a web browser by Netscape and Java by Sun Microsystems and therefore arranged a meeting with Netscape executives and proposed them to serve its browser to the users not using windows only i.e. 10 percent of the computers that run on Apple’s OS/2, remaining using Windows will be served by Microsoft’s Internet Explorer and later after refusal by Netscape on this deal, Microsoft refused to even share the codes of Windows 95.
5. By 1995, Microsoft had built Internet Explorer so as to compete with Navigator and the monopoly they thought was incorporating Internet Explorer in Windows. Windows incorporated a copy of Internet Explorer with its operating system which was the default browser for the computer and users were unable to remove its icon. Thus ethically Microsoft didn’t think about the consumers. Consumers now were bounded to use Internet Explorer only as Windows didn’t allow any other browser to get installed. Moreover Windows also incorporated a copy of digital media player with its operating system. Windows 98 also contained some codes for Internet Explorer but was made slow in functioning by the company so that user couldn’t even think of removing embedded software within Windows as it now became risky and slow.
6. In early 1998, Microsoft polluted the Java’s market by introducing Microsoft’s Java which was basically the property of SUN. It has removed Java’s platform independent feature and made it by default available with its operating system. Microsoft entered into an agreement with Sun Microsystems for giving it right to license and to distribute Java with Windows. Later Microsoft changed Java and embedded it with Windows and was called Microsoft’s java.
It is very much clear about incidences that Microsoft has been unethical in its approaches. Rather that applying their own thoughts, most of the products they have released by copying ideas unethically from other competitor’s products. Rather than having the fair competition in the market Gates always tried to monopolize the market. Though all the monopoly has brought him profit but ethically Microsoft didn’t
Question 2: What characteristics of the market of systems do you think created monopoly market that Microsoft’s operating system enjoyed?
Answer: Some of the characteristics of the market that created monopoly market that Microsoft’s operating system enjoyed are as follows:
- Incorporation of various Microsoft applications like Windows Digital Media Player and Internet Explorer in 1995 with its operating system gave an advantage to the company as this monopoly worked out for them. Users using Windows didn’t want themselves to get into trouble of purchasing a different browser and different Media Payer. Users were also not ready to pay extra money for buying other companies’ applications, as all those applications were readily available with Microsoft’s operating system.
- Every company was releasing their applications and operating systems in the market and every time Microsoft was able to know their programs. Using those programs Microsoft created monopoly in the market by releasing advanced version of competitors’ products. As when Navigator came in 1994, Microsoft launched Internet Explorer which was borrowed from Spyglass Inc. and made it similar to Navigator. It incorporated Internet Explorer with Windows. Media player was also incorporated in Windows. Sun Microsystems’s Java was also licensed to Microsoft first and then Microsoft built its own Microsoft java permitting Windows Users to be compatible with it.
- In the software industry users did not want to shift to new products or applications until proper training and workshops are organized. Microsoft’s used good strategies for training users. With the Installation disk, a proper tour of Windows is provided to facilitate user.
Question 3: Evaluate this market in terms of consumer choices/computer producer choices of different operating system choices?
Answer: In the market computer producers were free to choose any available operating system. There were no constraints on them. Earlier Apple was using Microsoft’s operating system (BASIC), but later in 1984 they developed their own operating system with attractive graphical interface and allowed users to issue commands by selecting the icons and allowed them also to minimize the menu. Similarly when IBM was entering in the PC market it approached to CP/M for license but turned down, then it approached to Bill gates and launched their computers with MS-DOS that uses characters commands to perform a task. Similarly Windows was introduced in market by Microsoft having same graphical features that Apple’s Operating System was enabled with. Though Apple fired a suit against Microsoft for copying their functionality but they lost the case and further development we have already seen in software industry. Windows 98, 2000, millennium, Windows Xp and Windows Vista are operating systems with better performance and features. Linux also came by then which is a free open source operating system. So every producer in market is free to produce its software until and unless it doesn’t demolish or violate copyright rules and rules mentioned in corresponding acts.
On the other hand, the consumer market from the given case prospective was seemed to be governed by monopolies. At that time users were not free to purchase any operating system and they were bound to use operating system installed with computers. Windows operating system was not allowing any other software to get installed that was not registered by Microsoft.
Question 4: In your view, should the government have sued Microsoft for violation of antitrust laws?
Answer: On May 18’1998, US Attorney General Janet Reno filed an antitrust suit against Microsoft in the court of Judge Thomas Jackson. Microsoft made the computer companies using Windows as their operating system not to license, distribute or promote competitive software products of other companies. It embedded Internet Explorer with Windows and thus demolished consumer freedom to go for any other Browser plus it also degraded windows performance. In the agreements with computer companies those using Windows, Microsoft wanted them to leave Internet Explorer as the default Web–Browser and didn’t allow installation of any other browser.
The judge was having complete authority to take hard actions against Microsoft’s unethical business strategies. As per the case study it is evident that Microsoft has used various unethical business strategies to make their business profitable. Microsoft copied the copyright of Apple’s OS/2 and developed its own operating system on the same line. Moreover they forced users to use its Internet Explorer and digital media player. They suppressed the platform independent functionality of Sun’s Java by releasing Microsoft’s Java and making it cross platform language. In my view, government should not have sued Microsoft. Consumers were well satisfied by Windows which was evident from the market share of its use. So signing of agreement involves approval of computer companies and Microsoft and if computer companies have signed that agreement that means they weren’t having any problems and neither consumers upon implementing the agreement. So Microsoft just used a marketing strategy over here.
Question 5: In your view, was Judge Jackson’s order that Microsoft be broken into two companies fair to Microsoft?
Answer: Judge Jackson’s order was fair for the competitors as well as for the software industry because Microsoft has really invoked the monopoly situation in the market. It was essential to have fair competition in the market. As an operating system and applications are totally two different aspects and Microsoft should not club these two aspects. This order would have helped competitors and users to choose their favorite applications.
From Microsoft’s point of view it was not the fair decision, as they never wish to separate their business into two domains. It was a marketing strategy adopted by Microsoft so that it can withstand with the competition. According to them it also facilitated consumers for not spending their money in buying other corresponding software and also playing a risk of installing and uninstalling.
Question 6: Was Judge Kollar-Kotelly’s November 1, 2003 decision fair?
Answer: According to the settlement between Microsoft and DOJ, Microsoft was asked to share its application programming interface with other software rivals and to allow users to hide Internet Explorer icon from the screen. It was asked not to prevent other competitors programs to install on its operating system and not to retaliate against computer makers in releasing their products. This settlement was officially approved by Judge Kollar-Kotelly on November 1, 2003.
The decision was really fair for the competitors as well as users. The decision has created free competitive market in the software industry. It allows users to use other available applications and allow them to hide icons which they do not want to use. From competitors point of view market became much more open to release more products with advanced technologies. This move also helped people to think out of Microsoft’s box and helped to showcase their technical skills.
As a result various new operating systems with better performance than Windows like Linux, Suse, Knoppix, and Solaris came in market.
Question 7: Was the April 2004 decision of the European Commission fair to Microsoft?
Answer: In April 2004, European commission concluded that Microsoft Corporation has broken European Union competition law by leveraging its new monopoly in the market and fined Microsoft $613 million and ordered it to disclose the interface to competitors which is required for their sever software and to offer Windows without Microsoft’s digital media player.
The decision was really fair in consumer prospective so as to stop the monopoly created by Microsoft into the market. This law would help competitors to launch windows compatible software. It will also help the customers to choose other digital media players available in the market.
When we see it in Microsoft’s prospective, the decision was not fair as the decision would definitely going to decrease the sales and increase competition for Microsoft. The dominance of the own server software and digital media player would vanish.
Question 8: Who, if anyone is harmed by the kind of market that Microsoft’s operating system has enjoyed? Explain your answer.
Answer: Monopoly of Microsoft’s operating system has harmed everyone from users to computer producers. Due to unavailability of fair market the users were bound to use Microsoft’s operating system and applications. They were unable to hide icons of the Microsoft’s applications from their operating system.
From producer’s point of view, they were not free to launch Windows compatible applications due to unavailability of Windows application programming interface (APIs) in the market. The competition became minimal in the market due to monopoly enjoyed by Microsoft. Due to monopoly in the market one single company Microsoft was holding maximum market share. It hampered the technical advancement and innovation in the market as well.
Question 9: What kind of public policies, if any should we have to deal with companies that have a monopoly on a given technology/system/industry?
Answer: Some of the following public policies could be used to deal with monopoly
- Government should issue some standards for a given technology/system/product which should be followed by everyone in the industry.
- Anti-monopoly law can be created to prevent monopoly to occur in the market.
- Some policies can be incorporated in the system to motivate and encourage newly launched companies to increase the innovation in the market.
- Some policies should be made to share information among the companies whose applications are inter dependant.
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