Trust Busters


April is the tenth anniversary of the largest recent antitrust action in history.

United States v. Microsoft was a civil action filed against Microsoft Corporation utilizing the Sherman Antitrust Act on May 18, 1998, by the United States Department of Justice (DOJ) and 20 U.S. states.

The plaintiffs alleged that Microsoft abused monopoly power on Intel-based personal computers in its handling of operating system sales and web browser sales. The issue central to the case was whether Microsoft was allowed to bundle its flagship Internet Explorer (IE) web browser software with its Microsoft Windows operating system. Bundling them together was alleged to have been responsible for Microsoft’s victory in the browser wars as every Windows user had a copy of Internet Explorer.

It was further alleged that this unfairly restricted the market for competing web browsers (such as Netscape Navigator or Opera) that were slow to download over a modem or had to be purchased at a store. On June 30, 2004, the U.S. appeals court unanimously approved the settlement with the Justice Department, rejecting objections from Massachusetts that the sanctions were inadequate.

Currently, a trust-busting initiative is being considered as part of the Health Care legislation passed by Congress. Senate Majority Leader Harry Reid indicated that Congress should work to pass legislation that would strip the health insurance industry from its cherished antitrust exemption implemented some 60 years ago by the McCarran-Ferguson Act.

This would force the health insurance companies to compete under the same rules as any other business enterprise. Presently, the health insurance industry is regulated by individual states under current law; and most states allow only one or two health care providers. That makes it easier for companies to collaborate to their mutual benefit rather than compete on price and level of services.

Reid went on to say, “Insurance companies have become so large they dominate entire regions of the country. They have become so powerful they block start-up businesses from entering the market, and they put smaller companies out of business. They have become so dominant that they dictate business practices. They … exert tremendous influence over public policy.”

Learning Activity

How did antitrust laws such a Sherman AntiTrust Act come into being and why? How effective were they during their initiation in the Progressive Era?

Assign students to write a report of at least 150 words, citing at least three resources. Student reports should address the examples below of essential questions for critical thinking (you may want to add or substitute your own):

  • What industries and which business leaders were the target of antitrust legislation?
  • What abuses by these businesses provided the incentive for antitrust reforms?
  • How did these businesses act to create monopolies?
  • How did the legislation break up existing monopolies and attempt to prevent them from forming in the future?

Online Resources

Los Angeles Times 1881-1986

New York Times 1851-2005

SIRS Knowledge Source

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