Microsoft is undoubtedly the world’s biggest software company. Its size makes it a formidable force for any competitor who dares venture into its business territory. A firm of such status, and any other firm for that matter, would strive to keep this dominance in place. However, the nature of its industry requires it to constantly innovate and invest in new products and technologies. The company’s financial strength allows it to put a lot in innovation and research in order to stay ahead of the competition. However, its true power lay not in its finances, but its platform monopoly. The platform here would refer to its operating system. Since it has a monopoly in controlling the system, it can lock out competition by manipulating this unique advantage. This is where antitrust law steps in.
Antitrust laws are laws that are aimed at keeping the markets competitive and not dominated by monopolistic forces. They are not meant to destroy competition, but keep competition alive by making sure that forces that would destroy it are controlled. Antitrust laws allows the economy to have sustainable and desirable activities. So how did Microsoft breach ethics?
The first accusation leveled is that Microsoft instituted a barrier to entry, especially about the browser market. This is because the company refused to divulge its source code. This ensured that software companies that offered software products that would run on the Windows platform would be unsure of its compatibility and quality. Netscape’s Navigator was a casualty of this tactic. They were unable to ensure that the product run seamlessly with Windows while Microsoft optimized Internet Explorer (IE), its own web browser, for Windows. Additionally, Microsoft turned into a bully, using its size to force computer manufacturers into exclusionary deals. The manufacturers were forced to license a copy of Windows with every computer they produced, but the IE icon on the desktop and were expressly forbidden from putting competitor’s software icons on the desktop. This promotional greatly hindered the competition.
They also obtained exclusionary deals with Internet Access Providers to use IE as their default browser in exchange for the position of home page. In addition, they practiced bundling Windows with IE. This practice resulted in the reduction of choice for consumers.
However, it is the Java war that really brought out the ugliness of Microsoft’s tactics. Sun Microsystems developed a cross-platform programming language called Java. Its function was to provide a standard programming language across multiple platforms. Microsoft saw this as a threat to its platform dominance and sought to end it brutally. It created its own version of Java while simultaneously making Sun’s Java incompatible with Windows. Additionally, it entered agreements with Independent Software Vendors (ISVs) to provide them with technical information in exchange for exclusive use and promotion of Microsoft’s Java.
These competitive tactics applied by Microsoft were not only illegal, but were also grossly unethical. Unethical behavior here is determined with respect to the consumer and the economy as a whole. In examining how this affects the consumer, we must look at the effects in long-term. Microsoft sought to retain its leading position by making the cost of their browser zero. By bundling the product with Windows, it allowed the consumer to obtain this software at no extra cost. This is only beneficial to the consumer in the short run. In the long run, with competition dead, the company would so easily be able to increase its price since competition no longer exists.
However, apart from price, the major consumer concern is quality. It is common knowledge that competition breeds quality. This is why the antitrust laws exist in the first place, to preserve competition; so as to preserve quality by extension. In the market segment such as IT, quality would encompass the traditional meaning of quality and innovation. Microsoft’s unfair business techniques mean that the competition is stifled and therefore innovation is slowed. If companies such as Sun Microsystems cannot create a financially viable product such as Java, then the creativity is stalled. The immorality of stifling creativity is that the customer in the end loses out.
What is needed is there to be a leveling out of the playing field. A level playing field means that one does not take unfair advantage of one’s position in order to defeat competition. The firm is judged on the basis of the quality and innovativeness of its products, not the strength it can muster to stave the competition.
In summary, in the end, the customer loses out in terms of price, quality and innovation. The unethical practice Microsoft undertook was to use illegal and unfair practices to kill off competition to maintain its dominant position. By instituting checks and balances to maintain positive competition, we benefit the market. Therefore, competitive ethics are not observed to the advantage of the firm, but rather to the advantage of the consumer and the whole market in total.