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May 18, 1998: Microsoft Antitrust Case Forever Changes the Company's Business Strategy

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By 1984, Microsoft  (MSFT) - Get Microsoft Corporation Report was one of the most successful software companies in the world, with $55 million in 1983 sales. But 22 years ago today, Microsoft was sued by the Department of Justice for violating federal antitrust law. The result of the suit would forever change the company's trajectory.

The Federal Trade Commission began an inquiry in 1992 over whether Microsoft was abusing its monopoly on the PC operating system market. The Department of Justice ended up suing Microsoft for illegally thwarting competition in order to protect and extend its software monopoly.

The government case accused Microsoft of making it difficult for consumers to install competing software on computers operated by Windows. The issue central to the case was whether Microsoft was allowed to bundle its flagship Internet Explorer web browser software with its Windows operating system.

Bundling them is 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 restricted the market for competing web browsers such as Netscape Navigator since it typically took time to download or purchase such software at a store.

The November 5, 1999 ruling stated that Microsoft's dominance of computer operating systems constituted a monopoly, and that Microsoft had taken actions to crush threats to that monopoly. The court also called for Microsoft to divide the company in half and create two separate entities.

Microsoft didn't take the ruling lightly and appealed the decision. The company took issue with the judge's position, citing bias.

On November 2, 2001, the Department of Justice reached an agreement with Microsoft to settle the case. The Department of Justice abandoned the requirement to break up the company, In return, Microsoft agreed to share computing interfaces with other companies.

The tech giant saw its once invincible market share erode due to old-fashioned competition. The case marks one of the most important turning points in Microsoft’s history and left deep scars. Some believe the antitrust case was what pushed Bill Gates out of the top job at Microsoft in 2014.

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