United States vs. Microsoft
Early Antitrust Problems
The Untied States Government first accused Microsoft in 1994 of anti-competitive practices, due to its affiliation with OEM's (Original Equipment Manufacturers), such as personal computer manufacturing companies. Microsoft licensed Windows to computer manufacturers in an attempt to combat software piracy, which would pay royalties to the company for every computer sold with or without Windows as its operating system. Such acts stimulated questions regarding the corporations business practices for using exclusive licensing agreements to maintain economic dominance over the software industry. Despite in direct violation of section two of the Sherman Antitrust Act, which forbids "Monopolization, attempts to monopolize, and conspiracies to monopolize," but it was not until its internet web browser did Microsoft suffer from severe antitrust scrutiny.
Microsoft Antitrust Trial
The development of Internet Explorer 4.0 marked the literal beginnings of the United States vs. Microsoft antitrust case. The Department of Justice alleged that Microsoft's bundling of its web browser into the Windows operating system was an obvious effort to eliminate the Netscape browser, and the opportunity of other companies to compete in this market. It attested that Internet Explorer and Windows were two separate products, and should be sold separately, based on the logic that consumers will not go out and buy any other browser since one is already installed on the operating system, virtually suffocating any competition. Microsoft defended itself by stating that "bundling and tie-ins pose no greater threat to competition than packing of tires with cars or laces with shoes," also that without Internet Explorer vital functions of other Windows applications such as word processing, imaging, and drawing could not be done properly.
Following several court injunctions in 1997 ordering the temporary halt of all manufacturers selling Windows 95 to include Internet Explorer with it, formal charges were brought by the Justice Department and 20 states on May 18, 1998. These charges state that Microsoft "illegally thwarted competition to protect and extend its monopoly on software." The solution of the Justice Department for this antitrust act was the breakup of Microsoft into two companies, one managing its business applications such as Microsoft Office and Internet Explorer, while the other controls the Windows operating system.
On October 19, 1998 the Microsoft Antitrust Trial began, overheard by US District Judge Thomas Penfield Jackson. On November 5, 1999, Judge Jackson declared in preliminary findings that Microsoft is a monopoly, stating "the companies actions are stifling innovation and hurting consumers." Microsoft refuted these allegations with a formal response in early 2000, stating "its Windows software does not represent a monopoly because the company does not control the price or availability of software to run the world's PC's."
Disregarding their pleas, Jackson found Microsoft in violation of the Sherman Antitrust Act, and "maintained its monopoly power by anti-competitive means..." (such as its affiliation with OEM's). Also,"...attempted to monopolize the web browser market with Internet Explorer 4.0, and unlawfully tying its web browser to its operating system." Upon this ruling the Justice Department asks the company be broken up, and on June 7 Jackson grants their wish. Gates quickly appeals the verdict, and after being denied a hearing with the Supreme Court in 2000, an appeals court of the District of Columbia overturns the breakup in June of 2001.
In October, Microsoft and the Justice Department reach a tentative settlement, which is finalized in August of 2002, ending over four and a half years of legal deliberation. The settlement:
The final feature of the settlement is the most important to Microsoft's future. This lets software manufacturers develop programs for Windows that work just as well as Microsoft programs, essentially restoring some sort of competition and consumer decision.
Another resolution was agreed upon. Over one hundred private antitrust cases contending that the company overcharged consumers were thrown out in trade for an increased presence in schools in low income neighborhoods, which would include donations of software, services, and training valued at $1 Billion.