Law School Case Brief
United States v. Microsoft Corp. - 346 U.S. App. D.C. 330, 253 F.3d 34 (2001)
While merely possessing monopoly power is not itself an antitrust violation, it is a necessary element of a monopolization charge. Monopoly power is the power to control prices or exclude competition. More precisely, a firm is a monopolist if it can profitably raise prices substantially above the competitive level. Courts generally examine market structure in search of circumstantial evidence of monopoly power. Under this structural approach, monopoly power may be inferred from a firm's possession of a dominant share of a relevant market that is protected by entry barriers. Entry barriers are factors (such as certain regulatory requirements) that prevent new rivals from timely responding to an increase in price above the competitive level.
In July 1994, officials at the Department of Justice ("DOJ"), on behalf of the United States, filed suit against Microsoft Corp., charging the company with, among other things, unlawfully maintaining a monopoly in the operating system market through anticompetitive terms in its licensing and software developer agreements. The parties subsequently entered into a consent decree, thus avoiding a trial on the merits. Three years later, the Justice Department filed a civil contempt action against Microsoft for allegedly violating one of the consent decree's provisions. On appeal from a grant of a preliminary injunction, the Supreme Court held that Microsoft's technological bundling of IE 3.0 and 4.0 with Windows 95 did not violate the relevant provision of the consent decree. On May 18, 1998, the United States and a group of State plaintiffs yet again filed separate (and soon thereafter consolidated) complaints, asserting antitrust violations by Microsoft and seeking preliminary and permanent injunctions against the company's allegedly unlawful conduct. The complaints also sought any other preliminary and permanent relief as is necessary and appropriate to restore competitive conditions in the markets affected by Microsoft's unlawful conduct. The District Court ruled that Microsoft had indeed violated § 1 and 2 of the Sherman Act and analogous state antitrust provisions, and ordered various remedies, including divestiture. Microsoft thereafter appealed the legal conclusions and the resulting remedial order.
Did Microsoft Corp. violate the Sherman Act?
Yes, in some aspects.
The Court held that exclusionary contracts with Internet access providers violated the Sherman Act, but dealings with Internet content providers, software vendors, and a computer manufacturer did not, since there was no proof that these deals substantially effected competition. The Court determined that inter alia, the appellate court’s finding of monopoly power was not error. Except for one license restriction prohibiting automatically launched alternative interfaces, all the original equipment manufacturer license restrictions were market power uses unredeemed by legitimate justification. Exclusion of the company's Internet browser from a program removal utility and commingling of browser and operating system codes was exclusionary conduct.
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