Question

In 2002 a U.S. court of appeals imposed remedies relating to a lower court’s findings that Microsoft had a monopoly in personal computer (PC) operating system and had maintained its monopoly through illegal actions.

At the U.S. Justice Department’s Web site, www.usdoj.gov,

Click on the Agencies on the top of the window,

Click on Antitrust Division and then on website

Click on Antitrust Case Filings

Find U.S. vs. Microsoft case filings.

Scroll down to District Court filings and find Findings of Fact

In the list of Findings of Fact find Court’s Findings of Fact (11/5/99).

In your initial response to the topic you have to answer all questions:

1. On what basis did the court conclude that Microsoft was a monopoly (see “Market Share”)?
2. What was Microsoft’s market share of Intel-compatible PC operating system? Of all operating system, including those of Apply computers?
3. What evidence did the court cite in claiming that Microsoft charged above-competitive prices (see “Microsoft’s Pricing Behavior”)?
4. Reflection – the students also should include a paragraph in the initial response in their own words reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace.

Answer 1

1.The court declared that Microsoft enjoys monopoly power in the market.

According to the court there are three factors which indicates that Microsoft enjoys monopoly power

1) Microsoft's share of the market for intel compatible operating systems is extremely large and stable

2) Microsoft's dominant market share is protected by a high barrier to entry.

3)As a result of high barrier, Microsoft's customers lack a commercially viable alternative to Windows.

2. Microsoft's market share for intel compatible pc Operating systems was above 90 percent.

3. The Court ruled that Microsoft pricing behaviour is consistent with the preposition that the firm enjoys Monopoly power in the market for intel compatible PC operating systems .The company's decision not to consider the prices of other vendors' Intel compatible PC operating systems when setting the price of Windows 98 is probative of monopoly power. Microsoft also increased the price that it charged OEM's for Windows 95 with trivial exception to the same level as the price it is charged for Windows 98 just prior to the releasing the new product.

Microsoft even felt that it had substantial descretion in setting the price of Windows 98 upgrade product.

4.The assignment helped us to realise how the theoretical concepts we learned in the class like Monopoly firm, monopoly power,price maker ,price discrimination etc have huge practical importance.What Microsoft has actually done is the abuse of monopoly power and in the end company had to face the judiciary.The experience of Microsoft will act as learning experience and prevent us from misusing monopoly power at work place.