Microsoft Antitrust Case

1. Nature of the case This was an appeal by the United States of America versus the Microsoft Corporation regarding the antitrust allegations. The case was a series of civil actions filed against Microsoft pursuant to the sections 1 and 2 of the Sherman Antitrust Act of 1980 on May 18, 1998 by the U.S. Department of Justice as well as the 20 states. The plaintiffs alleged that Microsoft abused its monopoly power on Intel-based computers in handling of operating system sales and web browser sales. The Facts Regarding the antitrust allegations, Judge Penfield Jacksons findings of fact revealed the following: i. The related antitrust market is the PC operating systems market for Intel-Compatible computers. ii. Microsoft has a monopoly in this market where it enjoys a large and stable market shares. iii. Microsofts monopoly is protected by the applications barrier to entry, which the judge defines as the availability of an abundance of applications running Windows. iv. Microsoft used its monopoly power in the PC operating systems market to exclude rivals and Harm Competitors. Issues On May 18, 1998, the U.S. Department of Justice, the Attorney General of the 20 states, and the District of Columbia filed a case against the Microsoft Corporation. The following were main allegations: i. Microsoft illegally monopolized the market for operating systems for personal computers under Par. 2 of the Sherman Antitrust Act. ii. Microsoft illegally attempted to monopolize the market for internet browser, an act that is illegal under Par. 2 of the Sherman Antitrust Act. iii. Microsoft bundled anti-competitively its Internet browser, IE, the Microsoft Internet browser, with its Windows operating systems; that this is illegal under Par. 1 of the Sherman Antitrust Act. Rule of the Law The Sherman Act of 1980 i. Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. ii. Section 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony Decision The decision for the issuance of remedies leads to the Microsofts break -up. The remedies would be in summary fashion without any examination on all sides.

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Questions: 1. Is Microsoft a monopoly? Yes, Microsoft is a monopoly. 2. What did the courts conclude? The courts concluded that Microsoft was really a monopoly because of the transparent operations that the company partook in other companies. They were obviously gaining bigger shares and were having significant influence over those companies. And there were barriers to entry. 3. In what basis did the court conclude that Microsoft was a monopoly? (Marker Share) It was through the findings of fact that was released on November 1999 and conclusions of law on April of the consecutive year. It was released by Judge Penfield Jackson. 4. What was Microsofts share of Intel-Compatible PC operating system? Include those of Apple? According to the findings of fact, Microsofts share of the market for Intel-Compatible PC operating systems is extremely large and stable. Microsoft would still own shares above eighty percent of the Apples Mac Os even if the operating system was included in the relevant market. 5. What evidence did the court cite in claiming that Microsoft charged above competitive price? (Price Behaviour) There was a study from November 1999 revealed that Microsoft could have charged $49 for an upgraded product but the study identified $89 as the revenue-maximizing price. Therefore, Microsoft opted for the higher price.

Tacit Pricing Collusion in the Philippine Cement Industry? By: Rafaelita Aldaba

1. The Facts Cement manufacturing in the Philippines is basically resource-based, with cement plants located in or near limestone quarry areas. There are currently five major natural markets in the country: Northern and Central Luzon, National Capital Region, Southern Luzon, Visayas, and Mindanao. Cement has a limited shelf life from three to six months and is characterized by high transport and handling costs. These high costs provide it with natural protection against cement imports. The PCIA and the Philippine Cement Corporation (Philcemcor) worked closely together in regulating the industry, with the PCIA delegating the setting of production quotas to Philcemcor. Collusion took place through the firms informal agreement to set production quotas and to assign geographic markets among themselves. Based on the currently available cost information from Philcemcor and Southeast Asia Cement Holdings, firms seem to have different cost structures. 2. Issues Cement firms are quoting similarly but the cost of their products is different even if the products they are selling are homogeneous. Cement firms are increasing their prices by almost the same amount together in what seems to be a harmonious fashion. Firms are colluding to fix prices in the industry. Increasing Prices amidst surplus of supply and overcapacity in the industry. 3. Theories There must be a collusion related to the issuance of high cost provided for natural protection against cement imports. Firms probably opt to add this cost resulting to an increase in price. The 1999 increase in cement pricing was due to the fact that collusion happened when firms held a particular agreement within them. The cement price increased consistently at a time characterized by surplus of supply, excess capacity, and depressed demand. It is because one major company would not participate in price reduction.