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Litigations Involving Microsoft
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This essay discusses various litigations involving Microsoft over the years, focusing on the issue of ethics of Microsoft itself, the US Department of Justice and the accusatory companies. Microsoft was founded in 1978 to create software for Apple II and later IBM computers. The success of personal computers in the market boosted Microsoft’s own success. It is after this that Microsoft began the use of business tactics that analyzed the strengths and weaknesses of its competitors in an attempt to gain competitive advantage. Though successful, these unethical practices have led it to come under investigation over the years for various decisions they have made. Throughout Microsoft’s history, it has been involved in numerous litigations with various parties including the United States, the European Union and many of its competitors. Many of these claim the use of predatory tactics against its competitors, non-compliance and abuse of contracts, use of underhanded tactics and taking advantage of their dominant position in the market to bully competitors. Microsoft’s behavior which is termed as excessively opportunistic has harmed accusatory companies through impeding innovation. It has also been blamed for obstruction of consumer choices.
One of the most well-known litigations against Microsoft is the Microsoft Antitrust Case. On 18th May 1998, the US Department of Justice together with 21 other states compiled a set of consolidated civil actions against Microsoft. One of them was that Microsoft was abusing its monopoly over the market to increase its sales ofInternet Explorer. It was doing this by bundling Internet Explorer together with each copy of Microsoft Windows Operating System. This meant that every purchase of Windows got a free copy of Internet Explorer. To obtain a competitor browser, one would have to purchase a modem which would be an added expense. This led to Microsoft winning the ‘browser wars’. Microsoft explained that the bundling was due to the innovation and competition and that the two were now the same product, inextricably linked. A claim which was refused as false because there was a fully functioning version of Internet Explorer still available for Mac Operating System users. Microsoft was also accused of manipulating Action Programming Interfaces (API’s) to favor Internet Explorer while slowing down competitor browsers. The investigations were, however, stopped when the Bush administration came into power (Associated Press 2001). There was later a settlement with the Department of Justice and the other states.
Some of the other reasons why Microsoft was sued included the use of exclusionary licensing. This meant that PC manufacturers were forced to pay for MS-DOS even if the PCs could operate with alternative operating systems. There was also the use of predatory tactics where Microsoft created barriers in its Windows systems which made it seem like software other than its own did not function (The Washington Post 1998). Microsoft finally agreed to a deal in which there would be no more conditional sale of its products.
Microsoft was again sued for illegal tying of products by the European Union (EU) for bundling Windows Media Player with Windows. The company was fined a total of US $ 666 million. Later a version of Windows without Windows Media Player was created. However, Microsoft delayed in the payment of the fines and has been accused of non-compliance by the EU. It has also been accused of setting above market prices for its products. Microsoft later filed for an appeal which was denied and so it provided interoperability of information as it had been requested.
In 1994, Microsoft wanted to purchase Intuit, a similar company. This deal was rejected by the courts as it would have been the removal of a competitor serving to maintain Microsoft’s monopoly over the market (The Washington Post 1998).
Another litigation where Microsoft’s business ethics has been questionable is when the company wanted settlement of its numerous private law suits through donation of US $ 1 billion in the form of cash, refurbished PC’s and licenses to underprivileged students. This move was, however, protested by Apple Inc. as it was a selfish move designed to increase Microsoft’s market share among students. Apple Inc.’s protests led to rejection of the settlement (CNET News 2002).
On 27th February, 2008, Microsoft was fined the hefty sum of US $ 1.3 billion for its failure to comply with a judgment passed on the company back in 2004. The judgment had been due to Microsoft’s abuse of its market dominance. Microsoft’s habitual non-compliance led to the largest fine ever being demanded by the EU (Stephen & David 2008).
In 2004 in Minnesota, Microsoft had a class action law suit filed against it as a result of findings from subpoenaed internal documents. The findings in these documents indicated that Microsoft had been in violation of non-disclosure agreements seven years earlier. It was found that Microsoft had obtained business plans from Go Corporation about its part in building tablet PC’s. It then built a competing product it called PenWindows for use in the tablet PC. It even managed to convince Intel to reduce its investment in the Go Corporation. However, Go Corporation was purchased and its tablet PC plans shelved. Microsoft consequently dropped its PenWindows plans. Its actions were not in accordance with proper business ethics (Markoff 2004).
A class action law-suit was filed against Microsoft where it was accused of overcharging its customers in California. This was also a case of questionable ethics on the part of Microsoft. Finally there was a US $ 1.1 billion settlement in addition to another US $ 258 million in legal fees that it was required to pay. The amount was later reduced so that it was not passed onto consumers (BBC News 2004).