To Tame the Tech Titans: The Lasting Influence of United States v. Microsoft on Antitrust Law

In a fluctuant platform economy, which refers to a digital ecosystem powered by technologies (and dictated by platform enterprises acting as intermediaries), the nature of transactions and various exchanges of value have significantly progressed traditional modes of power dynamics and institutional structures, amongst other fixed features. Charged by advancements in technology, control is wielded not through human-centered management structures, but through impersonal algorithms, interfaces, and analytics that establish a pronounced power asymmetry. This presents an indistinct understanding of how to grapple with technology-driven business models that evade recognized antitrust frameworks. 

On this basis, however, antitrust regulation — specifically efforts that are sector-specific to technology — have not taken interoperability fully into account. This allows technology companies, or more specifically, “tech titans” of Big Tech such as Microsoft, to meld competitive functions once characterized as “distinct” into an integrative whole. There are two main types of interoperability, syntactic and semantic, with the latter acting – more or less – as a function or prerequisite of the former. This is accomplished via “disparate systems” by way of local area networks, which connect devices in a single area, or wide area networks, which provide connectivity across larger geographic areas. 

An example of this is U.S. and Plaintiff States v. Apple, Inc., an antitrust case filed by the Department of Justice (DOJ) in March 2024, calling for a “judicial redesign” of the iPhone smartphone that utilizes Apple’s own mobile operating system (iOS). The DOJ, alongside sixteen state and district attorneys, allege the iPhone’s “closed ecosystem” is at the expense of both consumer value and market innovation, imposing “contractual restrictions on and [withhold] critical access points from developers,” as according to the National Association of Attorneys General. The complaint points to several key examples:

1. Diminished cross-platform message quality, meaning when iPhone interacts with competing platforms quality worsens, is less innovative, and less secure;

2. Prevented third-party developers from implementing tap-to-pay functionality to digital wallets;

3. Blocked “super apps” that possess a wide level of functionality that would allow consumers to interchange platforms;

4. Suppressed mobile cloud streaming services that forces consumers without paid smartphone hardware to experience underdeveloped cloud-streaming apps and services; 

5. Decreased non-Apple smartwatch functionality if not paired with iPhone.  

This more recent case reveals the importance of a landmark case, United States of America v. Microsoft Corporation. This case brought forth salient conversations about what holds more value: the nature of interoperability which allows data to be exchanged in a sophisticated manner, or the clear threat to a competitive market. The implementation of interoperability can ultimately grant dominant firms the “instruments” to “obtain and entrench their monopoly power.”

Background on United States of America v. Microsoft Corporation

Historically, the United States’ antitrust legal framework — specifically, the Sherman Act, Clayton Act, and Federal Trade Commission Act — has functioned to dismantle monopolies and impede anti-competitive business conduct. Antitrust regulation is critical across all sectors, but especially technology, due to the influence large digital platforms hold over the markets they operate in. In United States v. Microsoft, the United States government alleged that Microsoft had engaged in anti-competitive behavior to illegally retain its monopoly in the market for PC operating systems. 

Under  section  2  of  the  Sherman  Act,  liability  for  monopolization requires the possession of a “monopoly power in the relevant market,” as well as the “willful  acquisition  or  maintenance  of that  power.” This is not based on “superior  product,  business  acumen,  or historic  accident.” 

The Federal Trade Commission began its initial inquiry over whether or not Microsoft was monopolizing the PC operating systems market; this inquiry eventually  resulted in a deadlock. The deadlock led to the Department of Justice (DOJ) opening their own investigation in 1994, where Microsoft consented not to tie product sales with the operating system, but retained the freedom to integrate additional “features” into it. The DOJ challenged Microsoft’s claim that its web browser, Internet Explorer, was a feature, not a separate product, leading to the primary issue in the case. It concerned Microsoft’s practice of integrating its Internet Explorer browser with the Windows operating system, which hindered the entry of competitors. 

Moreover, the government alleged that Microsoft had enforced restrictive license agreements with original equipment manufacturers (OEMs) and had modified its application programming interfaces (APIs) to prefer Internet Explorer over other browsers. Microsoft justified this practice by claiming that consumers actually benefited from having Internet Explorer included in Windows at no additional cost and that the combination of Windows and IE was the result of permissible innovation and competition. 

In the initial proceedings, Microsoft was found to have engaged in unlawful monopolization by the United States District Court for the District of Columbia, in violation of Section 2 of the Sherman Antitrust Act of 1890. However, an aspect of that ruling was later overturned by the U.S. Court of Appeals for the D.C. Circuit. The parties settled after this appellate decision, with Microsoft agreeing to amend particular practices. The DOJ declared on September 6, 2001, that it would not be pursuing Microsoft’s breakup, but would instead apply a less punitive antitrust penalty. As a result, Microsoft conducted an extensive concession by allowing PC manufacturers to install non-Microsoft software.

The DOJ and Microsoft came to a settlement agreement on November 1, 2001. Microsoft committed to sharing its APIs with outside developers as part of the agreement, with the goal of enhancing market competition. For a period of five years, Microsoft's systems, documents, and source codes were completely accessible to a panel of three experts who were designated to oversee compliance. Nonetheless, the agreement does not mandate Microsoft to modify its current code or cease bundled Windows software moving forward. 

Prior to the court’s ruling on November 1, 2002, Microsoft made further concessions on August 5, 2002. Judge Colleen Kollar-Kotelly then approved the majority of the settlement proposal. The settlement was thereafter rejected by nine states as well as the District of Columbia, who claimed that it did not sufficiently curtail Microsoft's anti-competitive behavior.

However, in June 2004, the U.S. Court of Appeals for the D.C. Circuit dismissed the states’ objections, such as Massachusetts’ and upheld the settlement, concluding that it was in the public interest. The court’s position maintained that the settlement adequately addressed Microsoft’s antitrust violations, specifically its “exclusionary conduct” under the Sherman Act. While Massachusetts stated that the district should have imposed broader structural remedies, as well as harsher penalties, the appellate court ultimately found the district court acted within its discretion. The court found that “remedying the anticompetitive effect of commingling” ultimately did enact change within the “heart of the problem Microsoft had created and it did so without intruding itself into the design and engineering of the Windows operating system.” The court also emphasized how crucial it is to avoid going further than necessary in enforcing excessive regulations —  and intervening in Microsoft’s design — as this might compromise the consumer through decreasing product quality and innovation. 

This rationale is consistent with the court’s general approach of maintaining a balance between the need to uphold competition without imposing unreasonable restrictions. The court came to the conclusion that the remedial measures, which included limitations and disclosures of its application programming interface (intermediaries that allow access to features and data transmission within a system), were adequate in resolving antitrust violations without causing undue injury to business operations. 

In its 2008 Annual Report, Microsoft reviewed the outcome of cases filed by the DOJ, 18 states, and the District of Columbia. Microsoft's business methods were limited by the settlement, which also gave computer manufacturers the power to conceal specific Windows features and required the disclosure of software protocols. Microsoft disclosed that the company fully complied with the rules, although further penalties could potentially be imposed if it failed to do so. The settlement had been anticipated to conclude in 2007, but Microsoft consented to extend the portion of the agreement pertaining to licensing communication protocols until 2012, guaranteeing that the goals of the settlement were fulfilled in full without pointing to any infractions. 

Settlement Analysis 

Following the settlement, Microsoft was ordered to implement several remedies to their business practices, including the aforementioned API sharing with third-party companies, but also prohibiting “exclusive” deals with PC manufacturers. Oversight mechanisms were enacted to ensure compliance. While numerous anti-competitive activities were successfully stopped as a result of the Microsoft case, it was contended that the remedies were insufficient in comparison to those that had been suggested earlier in the litigation, which included breaking up the company. The appealed judgment would have had Microsoft split into two separate units, with one producing the operating system and the second producing other software components. 

This calls into question whether or not traditional antitrust law is sufficient for modern monopolies because today’s economic landscape presents a number of novel obstacles, including the concept of network effects, which describes the idea that a product or service gains value as more people use it. Technology companies, like Apple and Meta, operate on a far greater scale today, using a variety of economic models that frequently involve network effects, data monopolies, and platforms that span several marketplaces.

For instance, Google controls the majority of search advertising because of its enormous user base, which gives it access to data that is difficult for rival businesses to replicate. In these situations, where market domination is fueled by data collection rather than just price or exclusionary methods, traditional antitrust law is ill-prepared to handle the situation.

Determining the precise definition of “market power” has also grown more difficult, particularly when businesses leverage their dominance in one market to stifle competition in another. While the operating system and browser industries were the main focus of the United States v. Microsoft case, many contemporary technology businesses operate across several markets (such as Amazon in e-commerce, cloud computing, and logistics tracking).

These companies also maintain gatekeeping power, such as Apple with the App Store. According to a 2023 report published by the Commerce Department, it was found that both Apple and Google “play a significant gatekeeping role by controlling (and restricting) how apps are distributed.” It also states that the fees and rules imposed on app developers lead to “hampered” innovation. The various factors it details “translate to potential losses for consumers,” which also include the “loss of choice of apps that are not featured or even accessible for smartphone users” and “prices that are inflated due to the fees collected by gatekeepers.”

Proposed Solutions 

An effective way of eliminating cross-market dominance and conflicts of interest is through structural solutions, such as dismantling powerful corporations or mandating the sale of important business lines. Separating the search engine from Google's advertising business, for example, could set competitive conditions. These remedies have historical precedents, such as the AT&T Corporation breakup, which led to the relinquishment over the control of the Bell Operating Companies. They provided local telephone service in the United States and abided by the antitrust principles under Section 2 of the Sherman Antitrust Act, which targets the unlawful maintenance of monopoly power.

Behavioral remedies can be employed in addition to structural adjustments to control the behavior of tech monopolies without necessarily breaking them up. Fostering competition in digital marketplaces involves measures such as ensuring algorithmic transparency, restricting self-preferencing, and regulating data portability. More rigid oversight of mergers and acquisitions will further avoid market consolidation from undermining competition, especially by preventing anti-competitive “killer acquisitions”. These acquisitions  refer to transactions in which an incumbent player acquires a target firm with the intent of halting innovation — and conducting retrospective reviews of completed deals.  

Conclusion 

Traditional antitrust law has served as a proper basis for combating monopolistic business behavior. However, it is ill-equipped to handle the scope and intricacy of present-day technology monopolies. In order to regulate these modern business titans more effectively, new laws and updated methods may be necessary due to network effects, cross-market dominance, and the swift pace of technological innovation.

While Microsoft's anti-competitive activity was curbed, the remedies may not be enough for today’s digital monopolies, where the unprecedented functions of a platform economy and data dominance are crucial factors.

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