According to the US Department of Justice, Microsoft has been accused of breaking antitrust and trade regulatory laws by attempting to retain an unjustified monopoly in the computer software sector.
The first time Microsoft tried to maintain this monopoly illegally was in 1995 when it persuaded Netscape, a company that had developed its own “Navigator” browser to compete with Microsoft Internet Explorer, to split the market with Microsoft so that Microsoft’s Explorer would be used on all PCs running Microsoft’s Windows 95 operating system and Netscape’s Navigator would be featured on all other PCs.
Following Netscape’s rejection of this offer, Microsoft attempted to entirely eliminate Netscape from the market by requiring PC manufacturers to install and license Internet Explorer in order for the manufacturers to obtain a license for Windows 95 and then Windows 98.
Microsoft had also implemented rules of exclusionary restrictions, making it difficult to uninstall Internet Explorer and prohibiting any other rival browsers from being displayed with more prominence than the Internet Explorer software on a computer. In actuality, Microsoft’s browser application is typically displayed with less prominence than rival programs.
Additionally, Microsoft has entered into anticompetitive agreements with Internet Content Providers (ICPs) under which ICPs are only permitted to advertise themselves in the Internet Explorer browser on the active desktop feature and are not permitted to pay for advertisements on competing browsers or even to publicly discuss those competing browsers.
To prevent Netscape’s Navigator browser from dominating the Internet browser industry, Microsoft has essentially created a number of anticompetitive agreements and cunning programming.
What Was the Outcome of the DOJ’s Lawsuit?
Microsoft and the Department of Justice reached a settlement in 2002, which was authorized. Microsoft was prohibited from entering into any more anticompetitive agreements as part of the settlement. The settlement required Microsoft to have standard contracts with computer manufacturers.
The settlement also stipulated that Microsoft must permit software developers to create programs that function with Windows just as well as Microsoft programs by granting them access to some sensitive technical information and the right to erase icons for specific Microsoft program capabilities.
Microsoft’s Antitrust Case Is Strongly Reminiscent of the DOJ’s Case Against Google
The government’s antitrust case against Microsoft, which was filed about 20 years ago, is expressly referenced in the Department of Justice’s long-anticipated antitrust complaint against Google, providing a more concentrated justification than the Microsoft case provided.
The central question in the Microsoft case, which involved numerous lines of argument, was whether Microsoft had improperly combined its web browser, Internet Explorer, with its market-dominating Windows operating system, thus limiting the market for rival browsers, such as Netscape Navigator.
After a number of detours, including a breakup order that was later rejected on appeal, Microsoft and the government finally settled their dispute in 2001 on a relatively small scale. That agreement neither ruled that Microsoft’s decision to bundle Internet Explorer with Windows was unlawful nor demanded that the company separate its browser from Windows. The restrictions and limitations that Microsoft could put on PC manufacturers who delivered Windows were nevertheless limited.
In other words, the Microsoft antitrust case in the US was mostly about distribution when all was said and done.
This time, the DOJ is focusing on how Google leverages distribution, particularly on mobile devices, to support its alleged monopolies in search and search advertising.
Exclusionary Contracts
According to the DOJ’s case, to ensure that its search engine is the default, Google pays distributors, such as mobile device manufacturers and mobile carriers. The complaint claims that in compensation, Google occasionally asks these distributors to place additional Google applications, such as search apps, “on devices in prominent positions where customers are most likely to start their internet searches.”
It is said that Google forces some device manufacturers to accept Google apps they don’t want, keep them permanently installed on the device, and provide Google apps and services “the most precious and important real estate on the default home screen.”
Google purportedly forbids manufacturers and carriers from preinstalling or defaulting to competing search engines on specific mobile devices.
According to the complaint, these supposedly exclusionary agreements cover more than 80% of mobile search searches.
In-depth information is provided regarding Google’s management of the Android mobile operating system, which it developed and made available under an open-source license.
Theoretically, open-source licenses grant anybody the freedom to copy, change, and redistribute the software’s source code. However, Google essentially provides tiers of Android. The core operating system is available for device manufacturers to use however they see fit. However, they are required to sign contracts that restrict what they may do with Android in order to have access to specific Google apps or services.
According to the complaint, Google utilizes this authority to increase the spread of its search engine and search ads business.
Microsoft Is Used as a Precedent
According to the complaint, both corporations used these agreements to stop distribution for competitors. It specifically compares what Google is doing right now to what Microsoft did more than 20 years ago. Notably, the complaint refers to the DC Circuit’s decision, the court of appeals that partially overturned the lower court’s considerably more comprehensive conclusion:
Nearly 20 years ago, the DC Circuit in United States v. Microsoft recognized that exclusionary agreements by a high-tech monopolist were exclusionary and illegal under Section 2 of the Sherman Act. Examples of such agreements include requiring preset default status (as Google does) and making software undeletable (as Google also does).
The DOJ complaint asserts that Google avoided using specific terminology to conceal its operations from antitrust authorities after closely studying Microsoft’s failures. According to the complaint, Google’s top economist advised staff to refrain from using phrases like “Cutting off the oxygen supply,” which a Microsoft executive reportedly used to describe the company’s attitude toward Netscape. (The executive, Paul Maritz, denied saying it.)
The DOJ complaint further alleges that Google told staff to refrain from using words like “bundle” and “kill” when discussing rival companies and to refrain from claiming “market strength” in any area.
Google is a vast company with numerous distinct business divisions.
For instance, when the Democratic-led staff of the House Judiciary subcommittee on antitrust released its extensive report on antitrust and Big Tech last month, it called the company “an ecosystem of interlocking monopolies” and touched on many alleged cases of abuse, such as how Google uses other products like Chrome, Android, and the Google Play Store as well as how it uses search results to favor its own properties.
The DOJ complaint wisely steers clear of this all-inclusive strategy and instead zeroes in on Google’s strongest and most significant businesses, search and search advertisements, and how it allegedly leverages distribution on mobile devices to stifle competition.
The DOJ boosts its probability of winning in this case while leaving the door open for future cases in other areas by concentrating its arguments and referring very precisely to the Microsoft case.
The result is unlikely to be a single strike that eliminates Google or ushers in a tidal wave of fresh rivalry. As was the case with Microsoft, a decade-plus wave of antitrust litigation is more likely to begin now, which may slow the business and make it more susceptible to encroachment from powerful and well-funded rivals like Facebook and Amazon.
What Do I Do If My Company Is Suspected of Using Anticompetitive Practices?
If you are a business owner and are being investigated by the Department of Justice for alleged anticompetitive behavior, you may wish to speak with a business attorney.
Your lawyer will be able to inform you of your rights and available options, and assist you in navigating the court system so that your interests are best served.
