7 Anti-Competitiveness and Monopoly Power
Jessie Martinez
The United States Justice Department sued Microsoft Corporation in 2021 for using their market power in an anti-competitive manner. The antitrust case was brought forth as the government contends Microsoft was using anti-competitive practices to establish and maintain their Monopoly power in PC operating systems by bundling their Internet Browser (i.e. Internet Explorer) free of charge. You might not realize that there was a time when people paid for internet browsers. During the early part of the internet “browser wars” the top selling software package was Netscape. There were several other packages that you could purchase to “surf” the internet but in the mid 1990’s Netscape was king with almost ninety percent of the market share. However, its hard to beat free when the quality is comparable. Internet Explorer by 2003 had over ninety percent of the market share.
Technology companies know the power of network effects. Once users feel comfortable using a program they tend not to switch. Then as more and more users use the same program it gains market power though the network effect which creates a barrier to entry making it difficult for new companies to establish market share and investment. Microsoft was found guilty of creating contracts with Personal Computer companies that required them to load the windows operating system with the Internet explorer bundle. Nobody was going to buy a browser when one came for free on the new computer purchased.
The United States Justice Department sued Google 2023 arguing that it was using anti-competitive practices to establish and maintain their monopoly status in search engines. According to MIT economics professor Michael Whinston, who was a witness for the government, Googles U.S. Market share in search was nearly ninety percent. As disclosed during the court trial, Google has paid 26.3 billion in 2021 to Apple, Samsung, Mozilla, and others to be the default search engine on their devises and browsers (Bartz). The government argues these contract payments create a significant barrier for competition that has allowed google to use the monopoly power to extract higher prices from advertisers. You can be a monopoly in the United States. However, you can not use that monopoly power to eliminate competition.
The Government had also filed anti-trust cases against Mehta and Amazon.
Questions
- Why did the US government sue Microsoft and Google?
- Do a search on the net and find the profitability of Microsoft and Google for the year 2022.
- In your opinion, how has Microsoft and Google monopoly practices in browser and search impacted you as a consumer?
- Why did the government file anti-trust cases against Meta and Amazon?
- Why do consumers generally dislike Monopolies? Do the technology anti-trust cases fit this?
Sources:
Bartz, Diane “US wraps up antitrust case against Google in historic trial” Reuters News Service. Nov 16, 2023
Eagle, James. “Animation: The Rise and Fall of Popular web browsers since 1994.” Visual Capitalist Website. July 2022. https://www.visualcapitalist.com/cp/the-rise-and-fall-of-popular-web-browsers-since-1994/
Lohr, Steve. “How Microsoft’s Legal Legacy Shapes the Antitrust Case Against Google”. New York Times Nov 14, 2023. https://www.nytimes.com/2023/11/14/business/google-antitrust-microsoft-precedent.html