Microsoft Corp was charged yesterday by the US Department of Justice, 20 states and the District of Columbia with engaging in anti-trust and exclusionary business practices in its operating system business, and with attempting to extend illegally its dominance of that business to the internet browser market. While they are not attempting to prevent the shipment of Windows 98, which began yesterday to personal computer manufacturers, the states and DoJ are charging Redmond with the following: that it requires PCs makers to use a uniform boot sequence that promotes Microsoft products to the exclusion of all others; that Microsoft attempted to persuade Netscape Communications Corp not to compete in the Windows-based browser market; and that Microsoft engaged in exclusionary tactics with PC makers, internet and online service providers. In the short term the government and the states are seeking a preliminary injunction forcing Microsoft to either provide Windows 98 to PC makers with no browser (as it has already forced it to do with Windows 95) or bundle Netscape’s browser along with its own. The states go a little further, requiring Microsoft to bundle Netscape and one other alternative, along with Internet Explorer. The preliminary injunction also seeks to force Microsoft to let PC makers control the boot sequence so they can promote whatever products they choose on the start-up screen and it would also forbid Microsoft from entering into agreements with internet and online service providers that would ensure they agree not to promote competitor’s browsers in return for a place on the Windows 98 desktop. The injunction would also protect the PC makers and other Windows licensees from any retaliatory tactics from Microsoft that may occur in the future. Any computers that already had Windows 98 installed would be subject to the injunction – and presumably users will be sent a new CD to make corrections – but the DoJ and states are not seeking any product recalls, they said.
Restricting consumer choice
Attorney General Janet Reno said at a Washington press conference yesterday that Microsoft has, through its business practices, restricted the choices available to consumers in America and around the world. The suit alleges that Microsoft recognized the threat posed to it by Netscape’s early dominance in the browser market, particularly as Navigator could work across multiple platforms. So in June 1995 the two companies met at Netscape’s headquarters and Microsoft put it to Netscape that if it stayed clear of the Windows-based browser market Microsoft would do the same across all other platforms and permit Netscape preferential access to certain Windows APIs. Specifically, according to Netscape co-founder Marc Andreessen’s account of the meeting, Microsoft drew a metaphorical line above which lay the application layer, which Netscape would stick to and below which lay the operating system layer, which would be Microsoft’s domain. Netscape declined the offer at the time. DoJ antitrust chief Joel Klein called the proposed deal an illegal conspiracy agreement. He went on to say that despite Microsoft’s claims to have already amended the contracts with internet and online service providers to remove the exclusionary elements, they remained unlawful. He also said the investigation into other parts of Microsoft’s business practices and products continued, but he later declined to be more specific about the products or practices to which he was referring. New York attorney general Dennis Vacco claimed that as PC hardware prices have tumbled over the past few years, the cost of Microsoft software has increased, although he had no empirical evidence to hand to back this up. The case brought by the 20 states and the District of Columbia has another significant addition to the DoJ’s case: it also alleges that Microsoft used similar exclusionary tactics with its Office suite of products whereby it made Office much cheaper to those PC makers that took it in addition to Windows 95, than to those who just wanted O
ffice, which Vacco called outrageous business practices.
Competition will dry up
Vacco and his staff in New York did most of the work in the states’ case and will provide the lead counsel for the group. Texas and Massachusetts are credited with kicking off the investigation last year. The other states filing the suit are California, Connecticut, DC, Florida, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, North Carolina, New Mexico, Ohio, South Carolina, Utah, West Virginia and Wisconsin. Yesterday’s move was applauded by the Software Publisher’s Association and, predictably enough by Sun Microsystems Inc and Netscape Communications Corp. The attorney general’s office of Microsoft home state, Washington, issued a guarded statement saying that it did not feel it necessary to join the state’s efforts because that would be duplicating the effort of the DoJ. It said to date it had seen no harm done to Washington’s consumers by Microsoft’s practices, but would continue to review all evidence to see if there is any reason to change our position. Klein insisted that the DoJ and the states are not trying to tilt the playing field [in favor] of any competitor, nor are they trying to cage or shackle Microsoft. Earlier attorney general Reno said Microsoft has an excellent record of innovation, but if it was allowed to carry on in this manner competition will dry up. We are confident about the merits of our claims, said the DoJ’s Klein. As for how long this could all take, is anybody’s guess. But when faced with trying to compare this to the IBM Corp antitrust case that took almost 30 years to settle and the effects of which are still felt in the mainframe industry today, Klein would only say that he thought the preliminary injunctive relief would be timely and efficacious.
