Question

In the Microsoft Case, Bill gates ignored the advise of his attorneys about Microsoft's potential "Alcoa Problem."

What is an Alcoa Problem?

This is not a long essay - be concise and focus on the main point

Answer 1

The US government’s decision to penalize Alcoa has definitely served to makeAmerica’s aluminum industry more competitive. The positive effects of punishingMicrosoft for violating the government’s antitrust laws, on the other hand, are less clear. After Alcoa was forced to sell most of its aluminum plants to Kaiser and Reynolds, theU.S. was left with four major aluminum manufacturers- Alcoa, Alcan, Reynolds andKaiser. To ensure that Alcoa did not remonopolize the markets, the U.S. Department ofJustice retained jurisdiction over the company until 1957 (Alcoa). By guaranteeing thatReynolds and Kaiser were allotted a larger share of market, the United States created amore competitive environment for aluminum companies to function. The increasedcompetition ultimately allowed for easier entry into the industry. By 1958, three morecompanies, Anaconda, Orment and Harvey, had entered the American aluminum market(Alcoa). Thanks to government intervention, Alcoa’s monopoly had been dismantled,allowing for greater competition and efficiency. In fact, even Alcoa benefitted from the new state of affairs. As the American aluminum business flourished, “Alcoa’s loss ofmarket share was more than offset by increased demand for products.” (Alcoa)

Since U.S. vs. Alcoa happened half a century ago, the effects of that ruling arevery clear. In the case of U.S. vs. Microsoft, however, it is more difficult to determine whether the government’s decision made the American technology industry more competitive. On one hand, the Department of Justice has determined that “the judgment protected the development and distribution of middleware - including web browsers, media players and instant messaging software - thereby increasing choices available to consumers.” (Department of Justice). In much the same way that U.S. vs. Alcoa produced greater competition in the American aluminum industry, the Department of Justice claimsthat its actions prevented Microsoft from continuing its monopolistic behavior, increasedcompetition and allowed for easier entry into the technology market. The governmenteven goes as far as to claim that its decision“helped create competitive conditions that enabled new kinds of products, such as cloud computing services and mobile devices, to develop.”(Department of Justice)

Although it is certainly true that companies like Apple and Google have thrived since the ruling, it is unclear whether their rise can be attributed to the government’s decision to penalize Microsoft. Technology has developed in ways that could not have been predicted and the center of the government’s argument against Microsoft- that itsdomination of the PC market stifled competition from other internet browsermanufacturers- is largely irrelevant today. Some argue that the penalties imposed onMicrosoft did not actually increase competition, but rather forced a once-innovative company to become a shell of its former self, to the detriment of consumers.Michael Cusumano, a professor at the MIT School of Management states that “Since the antitrustsuit, (Microsoft) has become much more cautious and much less aggressive. They'reafraid, it seems. Whether it's antitrust in U.S. or in Europe, they seem to be slowlyreacting to the world around them, rather than trying to get in there fast." (Seattle Times)Both U.S. vs. Alcoa and U.S. vs. Microsoft were landmark cases that had far reaching consequences. Although hindsight allows us to look back and see that breakingup Alcoa ultimately increased competition and benefitted consumers, decision to penalize Microsoft remains controversial.