Friday, January 17, 2014

U.S. v. Microsoft Corp. case brief summary

U.S. v. Microsoft Corp. case brief summary

The DOJ accused Microsoft of monopolizing the market of Intel compatible PC operating systems and using the monopoly to maintain a monopoly on internet browsers (i.e. Internet Explorer).

The Court ruled that there are essentially two feasible methods to get a browser to a customer: either to install it through an OEM or to get an ISP to provide the browser.

  • Microsoft suggests both that it has not actual monopoly and that Netscape is not actually excluded from the market.
  • Microsoft didn’t challenge the facts.
Market Definition
  • The Court excluded Macs, non-PC competitors (Palm, etc..), and so-called “middleware” (Navigator, Java, etc…) that provided certain APIs for software developers.
Market Power
  • The Court found that the persistently high market share and barriers to entry constituted circumstantial evidence of market power in the short term. Moreover, direct evidence of market power included the fact that Microsoft set the price of Windows without considering its rivals’ prices and that its pattern of exclusionary conduct was rational only if the firm knew it possessed market powerbehavior that indicates it considered itself to have market power is evidence of market power.
  • A price lower than a short-term profit maximizing price is not inconsistent with a long-term monopoly price.
Legal Considerations
  • The requisite bad act must have “anticompetitive effect” that harms the competitive process, not merely one or more competitors. 
  • The Court’s discussion of the market does not really take into account consumers; it doesn’t explore whether they are businesses or personal users and talks about OEMs more than might be necessary.
  • The Court’s discussion of “applications barrier to entry” is a discussion of the network effects that affect software applications and OS platforms. Direct network effects occur when networks do not interconnect and access to a large network creates an upward spiral that makes it harder to new networks to break in (e.g. Facebook). Indirect network effects occur when a significant amount of many people using the same system results in a lower cost of complementary goods (e.g. toner is cheaper for widely used printers).
Microsoft Test
    1. Π makes prima facie case demonstrating anticompetitive effect
    2. Δ makes “precompetitive justification”—a nonpretextual claim that its conduct is indeed a form of competition on the merits (e.g. it involves greater efficiencies or greater customer appeal).
    3. Π may rebut Δ’s precompetitive justification

Π may demonstrate that the anticompetitive harm outweighs the precompetitive benefit

1 comment:

  1. Qwerty vs. Dvorak
    Learning the qwerty layout vs. dvorak will create more job opportunities and companies want to pick the layout that most typists want to use (e.g. qwerty). Every additional qwerty keyboard being used makes it more valuable for the company to buy another qwerty keyboard (because each additional keyboard used makes it a stronger incentive to learn qwerty for keyboardists).

    In Microsoft, applications programmers are the keyboardists.


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