Nov 24, 2017 in Research

Antitrust Investigation

Introduction

Antitrust Investigations find their mandate in the 2009 Agreement of the European Commission, which regulates activities of monopolies, and the 1311 (c) [Title 15, Commerce and Trade; Chapter 34. Antitrust Civil Process], in which it involves an inquiry carried out by an antitrust regulator to ascertain whether a business is involved in antitrust violations. Microsoft was recently investigated after bridging the 2009 European Commission Agreement, as well as the U.S antitrust law stated above. The antitrust investigations are associated with some costs calculated depending on the nature of the violation. The regulations are aimed at ensuring that monopolies or oligopolies do not rise from unfair competition. The main aim of this report is to discuss the impact of antitrust investigations and their impact on monopolies in the society.

Why Microsoft Was Investigated For Antitrust Behavior

Microsoft is faulted for failing to honor a 2009 settlement agreement which required that the company provided the Windows users alternative browsers to choose from.  The Norwegian Opera Software’s browser maker had filed a case accusing Microsoft of combining the Internet Explorer (IE) and Windows thus manipulating the browser share battle. Microsoft later threatened to delay the Windows 7 that was about to be introduced into the market. The company was compelled to show the Microsoft users in Europe the operating system of its Windows a “browser ballot,” which is a screen that serves the purpose of displaying the download links to the browsers of its rival companies such as Mozilla’s Firefox, Opera’s name sake and Google’s Chrome.

Microsoft once again committed the offence of not displaying the browser ballot to the Windows 7 Service Pack 1 (SP1) users between May 2011 and July 2012. This was a period of fourteen months such that the browser ballot could not be seen as expected by approximately15.3 million users. Instead of correcting the mistake, Microsoft feigned oversight and apologies in July 2012 but again took the problem lightly transferring the blame to the engineering team, hence branded it merely a “technical error”. Infuriated by Microsoft’s behavior, Joaquin Almunia, the top antitrust regulator in the European Commission was prompted to file a case against Microsoft (Keizer, 2013).

Costs Associated with the Antitrust Behavior

As a punishment, Microsoft was fined $US732 million which is equal in value with 561 million Euros. Some had argued that this fine needed to be higher than this. This value is on account of the justifying circumstances, the contravention and the severity of the violation. However, there has been fallout other than the fine hit on Microsoft. The chief of Windows, Stephen Sinofsky, had 40% of his bonus cut off after he had been accused by the board of the company for failing to offer alternative choices on the Windows PCs’ browser as the European Commission’s 2009 commitment required (Keizer, 2013).

Perception of Monopolies and Oligopolies to the Society

Monopoly and Oligopoly Market Structures are not always bad to the society since they have an equal right to respond to competition as long as the exclusives do not abuse the monopoly power. For instance, Microsoft, which is believed to be monopolistic in the market of operating systems, is synergistic and compatible to Netscape software in providing pro-consumer services. The same case applies to the exclusive contracts between Microsoft and Internet service providers such as CompServe and America Online. The companies such as Netscape that provide complementary services to the software operating systems or compete directly with it have been found to be doing well.

The European Commission and the justice system do not find Microsoft’s formation of monopoly to be illegal, and the government has in the last ten years not won any case concerning the monopoly of Microsoft. Also, the applications created by Microsoft were by no means an illegal conduct. Microsoft's becoming a monopoly was mainly due to superior efficiency. However, the antitrust laws require that once a corporation acquires the monopoly power the behavior has to change; for instance, in the case of an exclusive contract in which according to the opinion of Judge Jackson, Microsoft stands guilt of threatening its customers (Hazlett, Litan & Rockefeller, 2000).

Benefits of Monopoly to the Society

First, in the interest of consumers, monopoly is beneficial to consumers basing the argument on Microsoft’s actions of protecting its profits in the package market of its operating systems. The prices become lower for the final product incase all markets are monopolized by one firm, but consumers are harmed when, for example, Microsoft is split to form two companies, one producing the operating systems and the other the Windows as ordered by Judge Thomas P. Jackson. In 1942, the economist Joseph Schumpeter wrote about Pursuing a short  run monopoly, which can be likened to what the  current profit seeking enterprises do to drive significant economic growth and innovation. The rising of the business-school discipline of strategy in the 1970s was aimed at studying how the short-run monopolies would have been built and defended. These studies were also a reflection classes on antitrust in law schools.

Monopoly is nowadays so intertwined with profit as a result of application of technology in entrepreneurship. The more items produced, especially in the software industry, the lower becomes their cost consequently causing a decline in the prices. If Microsoft is split, the advantage would be that the coming years will be characterized by growth in high tech that would lead to another upcoming generation of innovators.

Conclusion

Antitrust investigations play an important role in regulation development of monopolies hence ensuring fair competition between similar services providers. Microsoft recently fell victim of the investigations and was fined $US732 million after failing to display the “browser ballot” for its users and allegations of exclusive contract practices with business partners. The European Commission monopoly regulator conducted an investigation and found Microsoft guilty of the offences. Monopolies are not generally bad but must adhere to the regulations of antitrust laws. There are, however, some benefits of monopolies in the society since their products have reduced prices as a result of reduced cost per product.

Related essays