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The Sherman Antitrust Act refers to a landmark U.S. law that banned businesses from colluding or merging to form a monopoly. Passed in 1890, the law prevented these groups from dictating, controlling, and manipulating prices in a particular market.<ref>https://www.britannica.com/topic/Miller-Tydings-Act-of-1937</ref><ref>https://www.investopedia.com/terms/s/sherman-antiturst-act.asp</ref> | The Sherman Antitrust Act refers to a landmark U.S. law that banned businesses from colluding or merging to form a monopoly. Passed in 1890, the law prevented these groups from dictating, controlling, and manipulating prices in a particular market.<ref>https://www.britannica.com/topic/Miller-Tydings-Act-of-1937</ref><ref>https://www.investopedia.com/terms/s/sherman-antiturst-act.asp</ref> | ||
* Section 1 outlaws "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". This prohibition applies not only to formal cartels but also to any agreement to fix prices, limit industrial output, share markets, or exclude competition. | * Section 1 outlaws "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". This prohibition applies not only to formal cartels but also to any agreement to fix prices, limit industrial output, share markets, or exclude competition.<blockquote>“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 hereby declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.”</blockquote> | ||
* Section 2 prohibits "monopolizing, or attempting to monopolize, or combining or conspiring with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations" | * Section 2 prohibits "monopolizing, or attempting to monopolize, or combining or conspiring with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations" | ||
<blockquote>“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, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.”</blockquote>For “monopolization,” plaintiffs have to prove that the defendant | |||
# Possessed market power; | |||
# Willfully acquired or maintained this monopoly power as distinguished from acquisition through a superior product, business acumen, or historical accident. | |||
Therefore, contrary to popular belief, for monopolization to be illegal under U.S. antitrust law, it is not sufficient for a company to “monopolize” a market in the sense of possessing a very large market share, even a market share of 100%. | |||
To prove “attempting to monopolize” (under Sherman Act 2), plaintiffs have to prove that the defendant | |||
# Engaged in predatory or anti-competitive conduct | |||
# with specific intent to monopolize | |||
# and that there was a “dangerous probability” that the defendant would succeed in achieving monopoly power. | |||
These two provisions, which constitute the heart of the Sherman Act, are enforceable by the U.S. Department of Justice through litigation in the federal courts. Firms found in violation of the act can be ordered dissolved by the courts, and injunctions to prohibit illegal practices can be issued. | These two provisions, which constitute the heart of the Sherman Act, are enforceable by the U.S. Department of Justice through litigation in the federal courts. Firms found in violation of the act can be ordered dissolved by the courts, and injunctions to prohibit illegal practices can be issued. | ||
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===== Meta Case ===== | ===== Meta Case ===== | ||
=== | === Past Cases === | ||
==== Microsoft 2000 Case ==== | ==== Microsoft 2000 Case ==== | ||
The Justice Department filed antitrust charges against the software company. The charges came about in response to Microsoft bundling additional programs into its operating system. It meant that for customers who wanted to access a particular Microsoft application, buying the Microsoft Windows operating system was a prerequisite. <ref>https://neconomides.stern.nyu.edu/networks/homeworks/Microsoft_Case.pdf</ref><ref>https://corporatefinanceinstitute.com/resources/management/microsoft-antitrust-case/</ref> | |||
During the week following the Court of Appeals defeat of its 1995 consent degree enforcement suit, DOJ filed a major antitrust suit against Microsoft. In this action (DOJ Complaint 98-12320), filed on May 18, 1998, DOJ was joined by the Attorneys General of 20 States and the District of Columbia. This paper focuses on this last and continuing lawsuit against Microsoft. Over the years, Microsoft has integrated in the Windows class of operating systems many functions and features that were originally performed by stand-alone products.11 Moreover, the Court of Appeals in its June 23, 1998 decision affirmed that Microsoft’s practice of bundling IE with Windows was legal under the terms of the 1995 consent decree. To overcome this interpretation of the law, '''DOJ argued that Microsoft’s bundling of IE with Windows and its attempt to eliminate Netscape as a competitor in the browser market was much more than adding functionality to Windows and marginalizing a series of add-on software manufacturers.''' '''DOJ alleged (and the District Court concurred) that Microsoft added browser functionality to Windows and marginalized Netscape because Netscape posed a potential competitive threat to the Windows operating system''' | |||
In DOJ’s logic, Microsoft gave away IE and integrated it in Windows so that Netscape would not become a platform that would compete with Windows. Thus, DOJ alleged that Microsoft’s free distribution of IE, its bundling with Windows, and all its attempts to win the browser wars were defensive moves by Microsoft to protect its Windows monopoly. | |||
<u>Verdict:</u> | |||
'''Microsoft lost the case against the government''', and the presiding judge, Thomas Penfield Jackson, ruled that the company violated multiple sections of the Sherman Antitrust Act. However, the trial was not a smooth one. The case was riddled with false and misleading statements, tampering with evidence, such as executive emails, and a plethora of courtroom distractions. | |||
Microsoft was formally charged with constituting a market monopoly by making it difficult for users to install competing software and simultaneously making it difficult to uninstall the company’s browser, Internet Explorer. | |||
The company argued that these practices were non-coercive and that consumers enjoyed the freedom of choice due to the presence of products such as Macintosh, Unix, etc. The government also found that the company, by stifling competition, threatened innovation in the software industry. '''The company was also forced to share its data with other third parties.''' | |||
'''The government also ruled that the company should be divided into two, thus creating two separate entities. One would be solely for the Windows operating system, while the other entity would be responsible for all other software products offered by Microsoft. The ruling was challenged by Microsoft, and an appeals court overturned the ruling.''' | |||
=== Scholars Assestment === | === Scholars Assestment === | ||