A central issue in the Microsoft case involved tyingin particular whether

A central issue in the microsoft case involved

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A central issue in the Microsoft case involved tying—in particular, whether Microsoft should be allowed to integrate its Internet browser into its Windows operating system. The government claimed that Microsoft was bundling these two products together to expand its market power in computer operating systems into the unrelated market of Internet browsers. Allowing Microsoft to incorporate such products into its operating system, the government argued, would deter other software companies from entering the market and offering new products. Microsoft responded by pointing out that putting new features into old products is a natural part of technological progress. Cars today include CD players and air conditioners, which were once sold separately, and cameras come with built-in flashes. The same is true with operating systems. Over time, Microsoft has added many features to Windows that were previously stand-alone products. This has made computers more reliable and easier to use because consumers can be confident that the pieces work together. The integration of Internet technology, Microsoft argued, was the natural next step. One point of disagreement concerned the extent of Microsoft's market power. Noting that more than 80 percent of new personal computers use a Microsoft operating system, the government argued that the company had substantial monopoly power, which it was trying to expand. Microsoft replied that the software market is always changing and that Microsoft's Windows was constantly being challenged by competitors, such as the Apple Mac and Linux operating systems. It also argued that the low price it charged for Windows—about $50, or only 3 percent of the price of a typical computer—was evidence that its market power was severely limited. Like many large antitrust suits, the Microsoft case became a legal morass. In November 1999, after a long trial, Judge Penfield Jackson ruled that Microsoft had great monopoly power and that it had illegally abused that power. In June 2000, after hearings on possible remedies, he ordered that Microsoft be broken up into two companies—one that sold the operating system and one that sold applications software. A year later, an appeals court overturned Jackson's breakup order and handed the case to a new judge. In September 2001, the Justice Department announced that it no longer sought a breakup of the company and wanted to settle the case quickly. A settlement was finally reached in November 2002. Microsoft accepted some restrictions on its business practices, and the government accepted that a browser would remain part of the Windows operating system. But the settlement did not end Microsoft's antitrust troubles. In recent years, the company has contended with several private antitrust suits, as well as suits brought by the European Union alleging a variety of anticompetitive behaviors.
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