The Relevant Market for Operating Systems
It is difficult to clearly define whether older computers that utilized older versions of Windows should be considered a relevant market because older operating systems may be updated, which would force them to include a free version of the Microsoft Internet Explorer that caused the company to be seen as a dominant force in the market. Moreover, Microsoft operating systems were already present on 80% of all the computers in the market.
This makes the majority of the computer users potential buyers of the new Microsoft operating system. The incompatibility of older software and the enhanced capabilities of the new operating system in some cases force users to upgrade to perform their job, meaning that they would not have a choice but receive Internet Explorer for free with the purchase of the new system. While it is not a guarantee that all the older users would update to the new software, their potential number is high enough to consider Microsoft to have a “dominant market position” in the operating systems market.
Microsoft’s Anti-Competitive Conduct
Microsoft was one of the first companies to gain major control over the personal computer market due to the introduction of DOS, and subsequently Windows. Initially, the almost universal presence of their operating systems allowed for a lot of competition in the software market because programmers had a single operating system to create programs for. Business applications such as spreadsheet managers, calculators, text and document managers, as well as other applications were gaining popularity and pieces of the market.
However, this process did not last long as Microsoft began bundling its versions of such applications with the new iterations of its operating systems. The market adjusted but when Microsoft began providing its internet browser for free, it became a large issue. At the moment, internet browsers were expensive pieces of software that competed with each other, while improving their features. By providing a free and fully functional version of the same product, Microsoft began acting beyond the fair competition.
Other companies would not be able to compete with Microsoft because their survival depended on people purchasing their software. At the same time, Microsoft was able to provide it preinstalled, and for free by subsidizing it from the price of the operating system itself. Internet browsers have a very specific set of features, and most users would not have a desire to purchase better products if the free one is capable of all of them.
Possible Remedies if the Sherman Act is Violated
It is possible to imagine a scenario in which Microsoft is found guilty of violating the Sherman Act. Since the issue of the case is in the unfair competition due to forced and free installation of Internet Explorer with the purchase of the new Windows operating system, Microsoft may have to make it completely optional. The company may also have to provide it at a competitive, but fair cost. It would be important to establish that the market contains multiple companies that provide internet browsers.
This could be done by stocking internet explorer as another type of the browser on store shelves or advertising it in the same manner as the competition. The free and built-in nature of Internet Explorer created a market dynamic in which it was impossible to sell an internet browser, effectively destroying the market altogether.