A monopoly, by definition, is an organization which engages in unfair and often unethical business practices to dominate an industry and eliminate all competition which might inhibit their profits. In the latter stages of the 19th and the early stages of the 20th centuries, the United States passed several crucial acts, most notably the Sherman Antitrust Act and the Clayton Antitrust Act, which made it illegal to own a monopoly in the United States. Since the early part of this century, the government has only come into battle with a couple organizations on these grounds. The two most notable of these are AT&T and IBM. The Department of Justice won the case against AT&T and forced the company to split into the many so-called "Baby Bells" and "Ma Bell", or AT&T, the long-distance company. The other notable case was the DOJ vs. IBM. Though the Department of Justice eventually dropped its case, IBM split itself up a mere two years later. A big software corporation, Microsoft, is the target latest of the antitrust trial. It has a current market capitalization of $323 billion, and used to be the highest valued corporation in world before a court ruled on April3, 2000 that Microsoft violated the antitrust laws on. On the other hand, Microsoft immediately announced its appeal on the same day.
The government’s central argument has been that Microsoft employed predatory tactics in the browser market, not for the purpose of dominating in the browser market, but for the purpose of protecting its dominance in the operating system software market. To substantiate this claim, the government has argued that Microsoft spent more money improving IE than could be justified on the basis of its likely return in the browser market alone. Actually, the decision to sell IE at zero price reveals that Microsoft was not motivated by obtaining profits in the browser market. The integration of IE into Windows was solely for the purpose of harming Netscape, and Microsoft used its power in the OS market to negotiate contracts with PC manufacturers and web service providers that had the effect of excluding Netscape from major segments of the browser market.
The OS market is characterized by the presence of network effects, which means that the value of a product is higher if more people buy it. For example, the more people who own fax machines, the...