I consider the case of Microsoft, which was investigated for antitrust behavior. Microsoft is a largest software manufacturing company having one of the highest valuations in the world. It manufactures windows required for an operating system of servers and personal computers. Since 1991 the Microsoft has been investigated many times for the violation of antitrust laws particularly for Sharman Antitrust Act. The litigant alleged that the Microsoft misused its monopoly power on personal computer based on Intel while handling sales of its operating system and web browser. The issue of content was whether Microsoft should be allowed to bundle its internet explorer web browser with its operating system. It was alleged that it is the bundling of this web browser with its operating system which allowed Microsoft to get victory in the browser wars as copy of internet explorer was available with every window user. Also the question was whether Microsoft manipulated or altered the programming of its applications to give favor to Internet Explorer over web browser of any other third party and restricting options available to consumers in the market. These facts implies that Microsoft was trying to gain computer software industry since bundling of internet explorer web browser with its operating system might have provided a monopoly power to Microsoft over these product.
Costs associated with Anti-trust behavior
Firms having market power can regulate the market on their own terms. They will have freedom to charge any price from the customers. Therefore, they would often charge higher prices from the consumers and produce less as compare to the competitive outcome, resulting in net welfare loss for the society. Further, due to lack of competition, firm’s incentive to participate in innovations or cost reducing technology will get eroded; thereby productivity growth will get hampered.
Case for Monopoly
Monopolies are not always bad. For example, if we have an industry with large fixed cost initially but relatively lower variable cost, then having monopoly in such industry is good from the point of efficiency. These industries are characterized as natural monopoly industry. In this kind of industry, average cost falls if only one firm is operating but if more than one firms are operating, average…