Was Microsoft a monopoly in the 1990s?

[Mensch]

Do you think Microsoft was a monopoly back in the 1990s?

United States v. Microsoft - Wikipedia, the free encyclopedia

Here is the jist of it.

I tend to believe Microsoft was not guilty of being a monopoly. It was their product and their contract with IBM. It is no more a monopoly then say, when a person walks into a KFC and is offered ONLY Pepsi products but no Coke products.

Your thoughts?

 

[phattonez]

No. A monopoly can only be gained with government privilege, otherwise you are always subject to the whims of the market and can lose your market share at any time.

 

[Mensch]

No. A monopoly can only be gained with government privilege, otherwise you are always subject to the whims of the market and can lose your market share at any time.

I tend to agree with Friedman when he claimed there are true private monopolies, but they are extremely hard to find. Milton referenced the De Beers Diamond industry and one other industry (I can't remember the other one).

 

[phattonez]

I tend to agree with Friedman when he claimed there are true private monopolies, but they are extremely hard to find. Milton referenced the De Beers Diamond industry and one other industry (I can't remember the other one).

In a capitalist economy they do not exist. Simply put. Even the mythical Standard Oil was not one as it was losing market share by the time of the antitrust case.

 

[rathi]

Microsoft was (and is) a monopoly company when it comes to the desktop operating system market. They have a large enough market share to meet the qualification. That said, simply having a monopoly alone is not illegal. The case against Microsoft was based on using its monopoly to destroy competition in other software based segments, like the web browser market. Microsoft used its windows monopoly to destroy Netscape, by bundling internet explorer with windows for free. This was a deliberate action, as revealed in e-mails. After Netscape was ruined, Microsoft dramatically slowed adding news features to internet explorer as they no longer had serious competition until Mozilla showed up. Microsoft later lied in court by pretending that IE and windows were one product and could not be separated, but were proven wrong. Eventually, Microsoft was determined to have used their monopoly illegally, but they were given a slap on the wrist as punishment. Microsoft also messed with software API's to hurt other companies products and strong-armed OEM's into not including competitors products.

 

[Mensch]

Microsoft was (and is) a monopoly company when it comes to the desktop operating system market. They have a large enough market share to meet the qualification. That said, simply having a monopoly alone is not illegal. The case against Microsoft was based on using its monopoly to destroy competition in other software based segments, like the web browser market. Microsoft used its windows monopoly to destroy Netscape, by bundling internet explorer with windows for free. This was a deliberate action, as revealed in e-mails. After Netscape was ruined, Microsoft dramatically slowed adding news features to internet explorer as they no longer had serious competition until Mozilla showed up. Microsoft later lied in court by pretending that IE and windows were one product and could not be separated, but were proven wrong. Eventually, Microsoft was determined to have used their monopoly illegally, but they were given a slap on the wrist as punishment.

mo·nop·o·ly   /məˈnɒpəli/ Show Spelled
[muh-nop-uh-lee] Show IPA

–noun, plural -lies.
1. exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.

By this definition, Microsoft was not a monopoly. They did not have absolute control over the market, and there was no real evidence of them manipulating prices. The primary concern of a monopoly is that one company will be able to gain control of an entire market and fix, control, and raise prices. Microsoft, on the other hand, was one of the first software companies to offer the common man one of the most state-of-the-art electronics at reasonable prices. Microsoft adhered to a legal contract made with IBM that gave him exclusive rights to bind IE with PC hardware.

Microsoft also messed with software API's to hurt other companies products and strong-armed OEM's into not including competitors products.

That's a hollow statement. You need to elaborate in order to proceed further. First you need to state how Microsoft strong-armed OEMs. My idea of contract rights might be your idea of negative exploitation.

 

[Slartibartfast]

The problem with this discussion is that it is obvious that we have a different idea of what a monopoly is. I believe in this case, Microsoft was an audience because they were able to use their position to achieve a level of lock-in and lock out interoperability of other systems.

It is absurd to raise the standard of what a monopoly is to the position of being absolutely unassailable by market forces when the artificial raising of barriers for other entities would suffice.

 

[rathi]

By this definition, Microsoft was not a monopoly. They did not have absolute control over the market, and there was no real evidence of them manipulating prices. The primary concern of a monopoly is that one company will be able to gain control of an entire market and fix, control, and raise prices. Microsoft, on the other hand, was one of the first software companies to offer the common man one of the most state-of-the-art electronics at reasonable prices. Microsoft adhered to a legal contract made with IBM that gave him exclusive rights to bind IE with PC hardware.

Microsoft does has absolute control over the desktop OS market, with 90+% marketshare. The only reason price fixing cannot be determined is because nobody actually knows what a reasonable price for a desktop OS is because there has been no real competition in more than 20 years.

That's a hollow statement. You need to elaborate in order to proceed further. First you need to state how Microsoft strong-armed OEMs. My idea of contract rights might be your idea of negative exploitation.

Microsoft jacked up the prices of Windows to any OEM who sold computers with a competing OS or software.

 

[Demon of Light]

mo·nop·o·ly   /məˈnɒpəli/ Show Spelled
[muh-nop-uh-lee] Show IPA

–noun, plural -lies.
1. exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.

By this definition, Microsoft was not a monopoly. They did not have absolute control over the market, and there was no real evidence of them manipulating prices.

That is a dictionary definition that does not adequately describe what the term means, but even then the definition only requires that there be a level of control that makes price manipulation possible, rather than requiring that such manipulation take place. I agree with Rathi that Microsoft is still a monopoly in the operating system arena.

 

[Henrin]

Microsoft was (and is) a monopoly company when it comes to the desktop operating system market. They have a large enough market share to meet the qualification. That said, simply having a monopoly alone is not illegal.

No, they aren't nor were they ever a monopoly in the operating system market. They have been for decades other options available to people. What their market share was or is has nothing to do with anything, honestly.

The case against Microsoft was based on using its monopoly to destroy competition in other software based segments, like the web browser market. Microsoft used its windows monopoly to destroy Netscape, by bundling internet explorer with windows for free. This was a deliberate action, as revealed in e-mails.

I'm sorry but you either weren't alive when netscape was around or you forgot about netscape. Netscape wasn't killed because of packaging IE with windows, but instead that Netscape sucked, while, IE on the other hand, didn't.

 

[Slartibartfast]

No, they aren't nor were they ever a monopoly in the operating system market. They have been for decades other options available to people. What their market share was or is has nothing to do with anything, honestly.

Quite the opposite. They were in a strong enough position that they could manipulate other markets, which has everything to do with market share. The fact that there were minor alternatives is not relevent.

I'm sorry but you either weren't alive when netscape was around or you forgot about netscape. Netscape wasn't killed because of packaging IE with windows, but instead that Netscape sucked, while, IE on the other hand, didn't.

Indeed, netscape did suck.

 

[rathi]

From an internal Microsoft memo.

"The Windows API is so broad, so deep, and so functional that most ISVs would be crazy not to use it. And it is so deeply embedded in the source code of many Windows apps that there is a huge switching cost to using a different operating system instead...
"It is this switching cost that has given the customers the patience to stick with Windows through all our mistakes, our buggy drivers, our high TCO, our lack of a sexy vision at times, and many other difficulties [...] Customers constantly evaluate other desktop platforms, [but] it would be so much work to move over that they hope we just improve Windows rather than force them to move.
"In short, without this exclusive franchise called the Windows API, we would have been dead a long time ago."

Microsoft API's were written to increase the cost of porting an application to a new platform, raising the barrier to enter the market. When you combine this with their huge marketshare, you get a textbook example of monopolistic behavior.

I'm sorry but you either weren't alive when netscape was around or you forgot about netscape. Netscape wasn't killed because of packaging IE with windows, but instead that Netscape sucked, while, IE on the other hand, didn't.

Netscape was certainly a piece of crap, but IE was just as bad. IE only dominated because Microsoft used its desktop monopoly to force OEM's to bundle IE, and prevented them from bundling netscape. Netscape may or may not have succeeded on a competitive marketplace, but we will never know because they got squashed by an illegal exercise of monopolistic power.

 

[Slartibartfast]

If nothing else, this thread is useful for exposing the absurd definition of monopoly that some use when they claim that monopolies are not natural. It helps me understand their argument (and why its wrong) better.

 

[phattonez]

If nothing else, this thread is useful for exposing the absurd definition of monopoly that some use when they claim that monopolies are not natural. It helps me understand their argument (and why its wrong) better.

The reason that Microsoft has such a huge market share: patents.

Microsoft claims software like Linux violates its patents - May 28, 2007

We would have much more competition if it were not for those protections.

 

[Guy Incognito]

The reason that Microsoft has such a huge market share: patents.

Microsoft claims software like Linux violates its patents - May 28, 2007

We would have much more competition if it were not for those protections.

Very astute observation! Yet some people would claim that government protection of patents doesn't help the rich get richer. I have to wonder why this obvious fact is so elusive to some people.

 

[Slartibartfast]

The reason that Microsoft has such a huge market share: patents.

Microsoft claims software like Linux violates its patents - May 28, 2007

We would have much more competition if it were not for those protections.

Patents are a double edged sword, certainly. They are in cases both good and bad.

 

[Guy Incognito]

Patents are a double edged sword, certainly. They are in cases both good and bad.

This is a consequentialist outlook. Patents can lead to good things for patent-holders and bad things for honest competition. So, from this point of view, whether or not patents are good or bad depends on whether you hold it.

If we want to take a bird's eye view, though, and see what is good for free and competitive markets, it's quite different.

 

[Slartibartfast]

This is a consequentialist outlook. Patents can lead to good things for patent-holders and bad things for honest competition. So, from this point of view, whether or not patents are good or bad depends on whether you hold it.

If we want to take a bird's eye view, though, and see what is good for free and competitive markets, it's quite different.

The benefit of patents is that they spur investment because of a greater chance for a return. That is the good part. The bad part is that they can be used to stifle competition. In the IT world, where things evolve quickly, this can be extra bad (especially when combined with our stupid copyright laws). However, the point is, while they do stifle competition, a good bit of that competition would not have existed in the first place without the motivation to invest and create new technologies to compete with.

My opinion, based on being involved in patenting inventions, is that overall it is a good thing because technology is progressing faster than it would without patents. Again, that is an opinion based on my experience.

 

[rathi]

1) Software patents are completely and utterly absurd. They are so vague and obvious that you write right even the most basic program without violating someones patents. The only way to avoid getting sued is to have your own patents so you can counter-sue anyone who goes after you. If you want to see what a cluster**** the system has become look at this chart of patent lawsuits in the mobile phone world. Who’s Suing Whom In The Telecoms Trade? That chart was from October '10 and it has only gotten worse.

2) Patents are not responsible for Microsoft's ongoing monopoly. They didn't kill their competition through patent lawsuits in the 90's, they used their non-government backed monopoly.

 

[Kushinator]

mo·nop·o·ly   /məˈnɒpəli/ Show Spelled
[muh-nop-uh-lee] Show IPA

–noun, plural -lies.
1. exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.

By this definition, Microsoft was not a monopoly. They did not have absolute control over the market, and there was no real evidence of them manipulating prices. The primary concern of a monopoly is that one company will be able to gain control of an entire market and fix, control, and raise prices. Microsoft, on the other hand, was one of the first software companies to offer the common man one of the most state-of-the-art electronics at reasonable prices. Microsoft adhered to a legal contract made with IBM that gave him exclusive rights to bind IE with PC hardware.



That's a hollow statement. You need to elaborate in order to proceed further. First you need to state how Microsoft strong-armed OEMs. My idea of contract rights might be your idea of negative exploitation.

Microsoft was a price setter, not a price taker in terms of their operating system and MS Office products.

 

[Guy Incognito]

2) Patents are not responsible for Microsoft's ongoing monopoly. They didn't kill their competition through patent lawsuits in the 90's, they used their non-government backed monopoly.

So you're suggesting that patents have no effect on reducing competition, thereby protecting the patent-holder? My, what a confused view of the world you have.

 

[Slartibartfast]

So you're suggesting that patents have no effect on reducing competition, thereby protecting the patent-holder? My, what a confused view of the world you have.

At the time of Microsoft's monopoly proceedings in the 90s, software patents were not the concern they are today and at this specific instance, they were not much of a factor in microsoft's situation.

 

[Guy Incognito]

At the time of Microsoft's monopoly proceedings in the 90s, software patents were not the concern they are today and at this specific instance, they were not much of a factor in microsoft's situation.

Patents generally provide the very framework for Microsoft's monopoly. Without the legal fiction that a company can own a collection of 1s and 0s, there is no way that a software monopoly can be had.

 

[Slartibartfast]

Patents generally provide the very framework for Microsoft's monopoly. Without the legal fiction that a company can own a collection of 1s and 0s, there is no way that a software monopoly can be had.

Actually, the primary mechanism for that is copyright. And you are probably right, Microsoft probably would not have had a monopoly without copyright or patents, because advanced software would likely not exist in the first place. Which is a worse scenario.

Heck, even software like linux would not have existed (because we would not have had unix, multics, etc) and we would have had much more trouble adopting personal computers. Without widespread PCs, there would have been much less need for the internet, without a popular internet, the development model for GPL licensed software would have fallen short.

Ultimately though, that is moot, if you look at the court documents of the time, the primary problem was the complexity of microsoft's API's and how difficult they were to clone (heck the wine project is still working on it, even after a decade), not patents or copyright. It was not microsoft suing other entities for infringement but the justice department suing microsoft for their behavior. In this case, you are getting the problem precisely backwards. The simple fact is that microsoft would not have released their source code to the public and decompilers at the time only went so far in reconstructing that source code (in general decompilers tend to suck because they tend to output very low level code, except in the cases of some of the more modern languages that weren't around back then). Even without copyright and patents (and assuming the industry would still exist without it, which I doubt), a lack of copyright/patents would have made no difference in this particular case.

 

[rathi]

So you're suggesting that patents have no effect on reducing competition, thereby protecting the patent-holder? My, what a confused view of the world you have.

I am saying that in the specific instance of the Microsoft monopoly, patents were not the cause.