Archive for February 12th, 2009

EC Theme: The Paradox of Being a Monopoly

February 12th, 2009

A number of comments in the EC – Microsoft discussion have asked why Microsoft would be treated differently than everyone else, or shouldn’t be able to do whatever it wants with Windows.

Microsoft is treated differently because of the monopoly status of its Windows operating system. Having a monopoly position has enormous consequences, both business and legal. A monopoly exists when a single entity controls nearly all of the market for a given type of product. Or, to quote from Wikipedia “a monopoly . . . exists when a specific individual or enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it.” By the mid-1990’s Microsoft Windows had over 90% market share for Intel-based personal computer operating systems, and was moving closer to 95%.

Being a monopoly has some great rewards for a company. It can mean very little pressure on price or quality, even for a critical product. But a monopolist is not free to do whatever it wants to protect its dominant market position. A variety of governments, including the EU, have concepts of unfair competition. These concepts include limits on what a monopolist like Microsoft can do. Both the EC and the US courts have found Microsoft guilty of engaging in impermissible activities with regard to its Windows monopoly.

So to answer the question, yes there is a reason for singling Microsoft out: it alone has a monopoly on (Intel based) personal computer operating systems.

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