b.

Discuss the importance of regulations against monopoly and restrictive trade practices,
with special reference to Microsoft.

Suggested answer

Free and fair competition has been regarded as inefficient market economy and better
satisfaction of consumer demand. However, in a market economy, enterprises may undermine
the market by resorting to anti-competitive practices such as misuse of authority or predatory
pricing. Since such market failures or distortions can be caused by monopolistic or dishonest
companies, there is a need for a regulation, to penalize and deter such behavior. This
regulation ensures that all firms act by the rules of free and fair competition that benefits the
economy as well as the consumers and are not trapped by a few and it will penalize any
attempt at destroying the market.

The importance of regulations, with special reference to Microsoft

(i)
Maintaining the competitiveness in the markets and generation of best products at the
lowest prices to provide benefits to consumers. Lawsuit claims that computers with free
operating systems (Linux) can be obtained, but most large computer vendors continue to pack
Microsoft Windows in the majority of their personal computers.

(ii)
To prohibit abuse of dominant position through unfair or discriminatory prices or
conditions (including predatory pricing), restricting production/development, denying of
market access. Tying one product into the sale of another can be considered abuse, being
restrictive of consumer choice and depriving competitors of trades. This was the so-called
case in Microsoft for including its Windows Media Player with the Microsoft Windows
platform.

(iii)
To curtail anti-competitive agreements which determine prices and limit, control,
share or manipulate markets in a fraudulent manner. Microsoft is accused of creating a
market where most computers from OEMs come with windows preinstalled and free internet
explorer through restrictive license agreement. Microsoft charges a higher price when they
ship PCs without its operating system and forces users not to use another system by taking
the option away from the control of OEM.

(iv)
To regulate combinations such as anti-competitive mergers and acquisitions that
causes an enough adverse effect on competition. Mergers that are anti-competitive can lead to
rise in consumer prices from time to time. Such questionable mergers may also diminish
product quality and as well as consumer choice and innovation. Microsoft modifies the
primary products of the companies it acquires (Suns Java) and offers them for free or
bundles them with their operating system.

(v)
To recognize the fact that the ongoing globalization of the economy has significant
impact on maintaining competition within the country and continued growth of business
beyond National boundaries. Microsoft defines itself as a platform company but attracts
third-party programmers by providing development tools; access to proprietary Application
Programming Interfaces. Microsoft software is also proved as a safe choice for IT managers
globally because of its broad functionality. The strategy seems to suppress competition and
gain an unfair advantage by adding proprietary features to open standards.

Conclusion

Regulations ensure that markets are robust, bright, efficient and free from restrictions that
harm trade and industry as well as the consumers. It has become a prime importance in the
context of present day global markets, high-technology innovations and the fast changing
economic point of view.