Concise Argument in Favor of
U.S. District Court Judge Penfield’s Ruling
Against Microsoft Corporation
The Sherman Act, enacted in July 1890, provides for protection of business enterprises against unfair monopolistic or anti-competitive practices. With specific reference to the Department of Justice (DOJ) action against Microsoft Corporation (MS), filed originally in May of 1998, there are two operative Sections of the Sherman Act that have been invoked.
Section One specifically prohibits "contracts, constraints or conspiracies in restraint of trade." Under this Section, DOJ attorneys argued that MS launched an intensive campaign, actually labeled by MS executive officers a "jihad", against their principal competitor, Netscape, to block access of the latter from the computer desktop market. Additionally, clear evidence of conspiracy was offered by the DOJ demonstrating that MS had arranged non-competition agreements with other PC makers, essentially against potentially competing operating platform firms such as Linux or Netscape. Not only was ‘restraint of trade’ demonstrated, but the ‘rule of reason’ applied under this Section showed that MS’s action was more than unreasonably competitive; it was exclusionary. Additionally, MS steadfastly refused to enter into negotiation concerning possible pre-judgement remedies. The foregoing points appear to me, as they did to Judge Penfield, perfectly valid reasons for ruling against MS, under Section One of the Sherman Antitrust Act.
Section Two of the Sherman Act clearly stipulates that monopolies are illegal. To rule against MS on this basis, intent to monopolize business in a given (properly defined) market must be, and was, proven by the DOJ. MS demonstrably used ‘restrictive agreements’ to achieve overwhelming dominance in virtually all sectors of the platform and software market, in effect monopolizing the entire industry. While Section Two speaks of proving intent to dominate and control prices across-the-board in a given sector, MS was, in fact, achieving price and market-control by producing software packages that were compatible only with its operating system (WINDOWS), a system that already enjoyed a vast share of the market. The net effect was to discourage innovation on the part of other firms breaking into, or already competing in, the operating platform and software industries. Thus, in my opinion, the conditions of Section Two of the Sherman Act were also clearly violated by MS, and Judge Penfield’s decision was valid on these grounds, as well as under the provisions of Section One.
Boehmer, B., Associate Professor of Legal Studies, University of Georgia, Terry College of Business,
Business Week Online: "Microsoft on Trial (1998)"