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What Google, Facebook And Apple Can Learn From Microsoft’s 1998 Antitrust Fight


If you’ve paid attention
to anything technology-related
recently, you’ve probably seen
headlines like these.
Antitrust regulation is gaining a
lot of traction in the
media as well as in
the Department of Justice.
But in general, we’ve started to
see what has been broadly
termed a ‘techlash’.
A lot of concern about the
role of technology as well as
the size of these companies and
the impact that they may be
having on individuals
in society.
Since May 2019, the DOJ
has opened antitrust probes into
the likes of Apple,
Google and Facebook.
The last major antitrust action
against a major company
occurred more than
two decades ago.
Remember Internet Explorer?
Microsoft’s browser has since been
eclipsed by the likes of
Google’s Chrome and
Apple Safari.
But it was once so powerful
the federal government had to
step in. Here’s what happened.
In 1994, Microsoft was on
top of the blossoming tech
industry. Its operating system was
fast becoming the go-to
software for professionals and
casual computer users alike.
But if you wanted to get on
the Internet in the early 90s,
you were using this.
Netscape Navigator.
Software which makes it easy
for people to connect the
global computer network
called the Internet.
Netscape Navigator was the king
of Web browsers at the
time, but there
was a downside.
You had to pay $49 to
install Netscape on your computer,
the equivalent to about
$85 dollars today.
You could also choose from AOL
or Prodigy, but those cost
$9.95 a month.
But these options were still
light years ahead of Microsoft
at the time.
Microsoft didn’t even have
internet connectivity built into
its software until
the mid 90s.
But the new wave of
popularity surrounding Navigator was
reason enough for Microsoft CEO Bill
Gates to pen a letter
to the company in 1995
titled The Internet Tidal Wave.
With this document, Gates laid
out his vision of the
Internet. He wanted Microsoft’s
development teams to,
quote, go overboard
on Internet features.
Gates also laid out seven broad
examples of the ways the
company could conquer
the Internet.
One specific example, Microsoft
needed a Web browser.
Fast forward to the second
half of 1995, and Microsoft
released its brand new Windows
95 operating system, as well
as Internet Explorer 1.0.
But they were separate.
They weren’t bundled until 1996
as part of Windows’s first
major update and this changed
the game for Microsoft.
It was a new way to
get online without any extra
installation. It came with
the operating system.
And best of all, Microsoft had
the advantage of being a
massive company that could offer
its software for free.
And it was a massive success.
In just over a year,
Microsoft gained 10 percent market
share. This, of course,
sent other companies revenues
plummeting. But I eat success
might not have been purely
from the popularity
of Windows.
Allegations that Microsoft began
making it incredibly
difficult to install other Web
browsers began to surface.
The allegations were enough to
spark a DOJ antitrust probe
into Microsoft in 1998.
The antitrust case against Microsoft
was a bit different to
how the law was
used in the past.
Before cases were based on
one central issue: Was a
dominant company charging super
high prices without anyone
to compete with. But
this case changed that.
The DOJ argued that Microsoft
stifled competition by using
its sheer size to barge
into the browser wars.
It could offer Internet Explorer
for free, included in the
OS and Netscape would be cut
out of the business from the
very first time the
computer was turned on.
If you suppress your competitors’
innovation and you’re the
only game in town, and
you keep suppressing innovation,
surely that’s the
harm to competition.
In fact, it’s one of the
biggest harms to competition and
it’s been known in economic field
for all these years that
suppressing innovation is even
worse than raising prices
because you’re preventing the
progressive movement of the
markets.
On top of that, if a
person wanted to install Netscape on
the computer. Microsoft allegedly
made it incredibly
difficult to do so.
Microsoft, on the other hand,
argued that people chose to
use its operating system because
it was simply better than
the competition. But
Microsoft lost.
The court ruled that the company
had to split its software
and operating system divisions in
order to abide by
antitrust regulation, at
least at first.
That decision was later thrown
out in appeals court, right
as the Bush administration settled
into the White House.
By the time a settlement
had been reached in 2001,
Microsoft’s position in the browser
wars was already being
eaten away by competition from
the likes of Mozilla
Firefox, an offshoot
of Netscape.
Internet Explorer wasn’t the
only antitrust battle that
Microsoft faced, Novell was
a company specializing in
network computing and software in
the early 80s and 90s.
The company was also known
for its word processing
software, WordPerfect.
The company complained in
2004 that Microsoft intentionally
made it difficult to install its
software, just like it did
with IE. But Novell’s case
spent a decade bouncing around
the courts.
Unlike the United States v.
Microsoft case that came
before it, Novell lost.
An appeals court said
that Microsoft’s actions didn’t
constitute antitrust behavior.
And the Supreme Court declined to
take up the case in 2014.
Those two cases are really in
great tension with each other
because the U.S. against Microsoft,
as I would say, the
opposite point of view, that a
firm with market power does
have a duty to deal
fairly and not anti-competitively with
those who want to
use its platform.
Novell was acquired in 2014 and
by then had left the word
processing business.
It’s unclear whether an antitrust
case brought against tech
giants today would rule in the
same vein as United States
v. Microsoft or more
like Novell v.
Microsoft.
If U.S. against Microsoft is
giving credence above Novell
against Microsoft, it has a lot
to say on controlling the
almost unaccountable power of
the Big Tech firms.
Accusations that Apple’s App
Store stifle competition
resemble arguments that Microsoft
prevented downloads of
other applications. And Google Chrome
is now the king of
Internet browsers. Big Tech
companies are also swallowing
up startups and smaller
firms left and right.
The tech world has become
a winner-take -all affair.
Tech mergers have faced
particular scrutiny, especially in
congressional hearings.
When a company owns four
of the largest six entities
measured by active users.
We have a word for it.
And that’s monopoly, or at least
Monopoly power.
The Big Tech executives
might beg to differ.
We face intense competition for
all of the products and
services that we provide to
name a few examples.
Twitter, Snapchat, iMessage,
Skype, Telegram,
Google, YouTube and Amazon are
for photo and video sharing,
messaging, advertising and other
services that compete with
Facebook.
There’s also concern that
antitrust regulation remains too
broad to tackle
tech’s problems.
Antitrust is a sledgehammer where
even if you have some
concerns about specific policy issues
such as privacy, what
you really need is
more of a scalpel.
So it is this
very powerful tool.
And breaking up could result
in things like breaking up
teams that make
innovation more difficult.
So as Congress, the public
and Big /tech itself start
calling for more regulation,
Microsoft’s past antitrust
troubles could hint
at what’s ahead.

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