The Microsoft Trial: 1998-2001

Defendant: Microsoft Corporation
Offenses Charged: Violations of the Sherman Antitrust Acts. Two counts under Section 1: exclusive dealing and unlawful tying; two counts under Section 2: monopoly maintenance in the operating systems market, and attempted monopolization of the Internet browser market
Chief Defense Lawyers: Bill Neukom, John Warden
Chief Prosecutors: David Boies and lawyers of the U.S. Department of Justice
Judge: Thomas Penfield Jackson
Place: Washington, D.C.
Dates of Trial: October 1998-July 2001
Verdict: Guilty of violating antitrust laws
Penalty: Microsoft to be broken into two companies, and conduct restrictions imposed, pending outcome of appeals

SIGNIFICANCE: The United States government's prosecution of America's largest and most successful computer software company for violations of the antitrust laws was the most important and controversial use of these laws by the Department of Justice in the latter part of the twentieth century.

The origins and growth of the Microsoft Corporation had become the stuff of legend in America by the end of the twentieth century. Founded in 1975 by Bill Gates and his friend Paul Allen when the former left Harvard University as a sophomore, it rapidly outpaced all its competitors in the computer software business. By 1988 it was the world's largest software company; by 1998 its Windows operating system was to be found in 90 percent of the personal computers in America, and 50 percent of all homes possessed one. That same year, Microsoft's profits of nearly $4.5 billion were double those of General Motors, the world's largest corporation.

In May 1998 the U.S. Department of Justice charged Microsoft with four counts of violating the Sherman Act: two under Section 1, exclusive dealing and unlawful "tying"; and two under section 2, monopoly maintenance in the operating systems market, and attempted monopolization of the Internet browser market. Congress passed the Sherman Act in 1890 as a result of an upsurge of public opinion against the arrogance and power of corporate "trusts." The domain of the law was expanded by the Clayton Antitrust Act of 1914, and in that year Congress created the Federal Trade Commission (FTC) and empowered it to conduct ongoing policing of unfair trade practices. The use of the acts against Microsoft has been likened to their use to achieve the breakup of the monopoly held by the Standard Oil Company in the first decade of the twentieth century and the voluntary breakup of the telephone monopoly in the 1980s. Antitrust law, however, has become complex and controversial since its application. By its very nature, it involves the making of fine distinctions between the legitimate consequences of an aggressively competitive spirit, so highly valued in an entrepreneurial market economy, and practices which subvert or eliminate the environment of free competition which is essential to the capitalist system.