Microsoft Corporation spent at least 19 years fighting an antitrust case with the U.S. government and narrowly escaped being split in 2000; to exist as two separate units producing operating system and software components respectively. The antitrust law case which remains the biggest antitrust fight war in the U.S. was led by Joel I. Klein after the U.S. government developed an interest to investigate Microsoft in 1992. The case filed by the Department of Justice (DOJ) alleged that Microsoft was abusing its monopoly to force consumers on Windows by integrating Internet Explorer to sideline the sales of Netscape browser and other counterparts.
The Federal Trade Commission was the first to follow up the investigation in 1992 and ended with no penalty in 1993. But on August 21 of the same year, Janet Reno of the Justice Department (DOJ) led a team and opened an investigation. And in 1998, the DOJ and 20 states charged Microsoft to court with claims of abusing antitrust competitive practices allowed by the 1890 Sherman Antitrust Act sections 1 and 2.
The claims filled stated that:
- Microsoft monopolized operating systems market illegally
- Microsoft had contractual agreements with several vendors of related goods to protect competition. This includes Internet Service Providers and computer manufacturers, and other actions to enhance its monopoly and prevent competition.
- Microsoft illegally tried to monopolize Internet browsers market
- Microsoft included Microsoft Internet Explorer (IE) to its operating system to shut down competition in Internet browsers.
Trial and Microsoft’s Defense
The trial began on May 18, 1998, with the stated allegations, but got worst for Microsoft in October the same year when the DOJ further sued the company for violating a 1994 consent decree. The new allegation claims that Microsoft is forcing its Internet Browsers on computer makers by incorporating it into Windows operating system.
Microsoft argued that the addition of new features and functions to Windows are legally approved by Court of Appeals rule on June 23, 1998. Hence, its competition with Netscape was fair and not an anti-competition act. Microsoft also argued not to hold the power of monopoly in the operating system market since any competitor could take over its leadership position at any time. The company also argued that consumers were not harmed by its action to include more features, rather they benefited.
The court provided a remedy and ordered a breakup of Microsoft into two separate units on June 7, 2000, though this was not implemented sequel to other Appeals by Microsoft.
An agreement was reached between Microsoft and the DOJ on November 2, 2001, to settle the case. The settlement mandates Microsoft to appoint a panel that will have full access to the company’s source code, records, and systems for five years (extendable till 2012) and to make their APIs open to third-party companies as a measure to ensure compliance. Nine states pursuing the case with DOJ argued that the proposed settlement did not curb Microsoft’s anti-competitive business enough and did not agree with the settlement.
The U.S. court of appeals unanimously rejected all objections, referring them as “inadequate” and approved the settlement on June 30, 2004. This agreement held and was continually extended until May 12, 2011, when it expired to end the biggest antitrust case saga in the U.S.