United States v. Microsoft Corp.

United States of America v. Microsoft Corporation, 253 F.3d 34 (D.C. Cir. 2001), was a landmark American antitrust law case at the United States Court of Appeals for the District of Columbia Circuit. The U.S. government accused Microsoft of illegally monopolizing the web browser market for Windows, primarily through the legal and technical restrictions it put on the abilities of PC manufacturers (OEMs) and users to uninstall Internet Explorer and use other programs such as Netscape and Java.

At the initial trial which began in 1998, the United States District Court for the District of Columbia ruled that Microsoft's actions constituted unlawful monopolization under Section 2 of the Sherman Antitrust Act of 1890, but the U.S. Court of Appeals for the D.C. Circuit partially overturned that judgment in 2001. The two parties later reached a settlement in which Microsoft agreed to modify some of its business practices.

By 1984 Microsoft was one of the most successful software companies, with $55 million in 1983 sales. InfoWorld wrote:

[Microsoft] is widely recognized as the most influential company in the microcomputer-software industry. Claiming more than a million installed MS-DOS machines, founder and chairman Bill Gates has decided to certify Microsoft's jump on the rest of the industry by dominating applications, operating systems, peripherals and, most recently, book publishing. Some insiders say Microsoft is attempting to be the IBM of the software industry. Although Gates says that he isn't trying to dominate the industry with sheer numbers, his strategy for dominance involves Microsoft's new Windows operating system ... "Our strategies and energies as a company are totally committed to Windows, in the same way that we're committed to operating-system kernels like MS-DOS and Xenix," says Gates. "We're also saying that only applications that take advantage of Windows will be competitive in the long run."

Softletter estimated that in 1986 Microsoft had 8% (more than $250 million) of total revenue of the top 100 microcomputer software companies. Of the 15 million Americans who used a personal computer in their job, more than 90% used MS-DOS. By 1987, Richard A. Shaffer of Technologic Computer Letter compared the company's dominance of operating systems, and consequent benefit to its application software, to a baseball game in which "Microsoft owns all the bats and the field". The Federal Trade Commission began an inquiry in 1990 over whether Microsoft was abusing its monopoly in the PC operating system market. The commissioners deadlocked with a 2–2 vote in 1993 and closed the investigation, but the Department of Justice (DOJ), led by Janet Reno, opened its own investigation later that year, resulting in a settlement on July 15, 1994, in which Microsoft consented not to tie other Microsoft products to the sale of Windows but remained free to integrate additional features into the operating system. In the years that followed, Microsoft insisted that Internet Explorer (IE) was not a product but a feature that it was allowed to add to Windows, although the DOJ did not agree with this definition.

The government alleged that Microsoft had abused monopoly power on Intel-based personal computers in its handling of operating system and web browser integration. The central issue was whether Microsoft was allowed to bundle its IE web browser software with its Windows operating system. Bundling the two products was allegedly a key factor in Microsoft's victory in the browser wars of the late 1990s, as every Windows user had a copy of IE. It was further alleged that this restricted the market for competing web browsers (such as Netscape Navigator or Opera), since it typically took extra time to buy and install the competing browsers. Underlying these disputes were questions of whether Microsoft had manipulated its application programming interfaces to favor IE over third-party browsers. The government also questioned Microsoft's conduct in enforcing restrictive licensing agreements with original equipment manufacturers who were required to include that arrangement.

Microsoft argued that the merging of Windows and IE was the result of innovation and competition, that the two were now the same product and inextricably linked, and that consumers were receiving the benefits of IE for free. Opponents countered that IE was still a separate product that did not need to be tied to Windows, since a separate version of IE was available for Mac OS. They also asserted that IE was not really free because its development and marketing costs may have inflated the price of Windows.

Bill Gates himself denied that Microsoft was a monopoly, stating "Microsoft follows the rules. Microsoft is subject to the rules." He further compared the situation with IBM thirty years prior: "People who feared IBM were wrong. Technology is ever-changing."