Microsoft Corp announced on Saturday that it had signed a consent decree with the US government, thereby heading off an anticipated antitrust suit against it by the US Department of Justice. At the same time, it said, it signed a substantially identical undertaking with the European Commission ending the Community’s year-old probe of its questionable practices. With the consent decree, Microsoft has bound itself to abandon its notorious per-processor OEM pricing scheme for Windows and MS-DOS, which the government deemed anti-competitive, and to use uniform wording in its non-disclosure agreements. The company’s infamous undocumented systems calls were not made an issue nor were any holes in the wall between its operating system and application development groups. The consent decree expires in 2001. Over the next six and a half years, the Justice Department may police Microsoft’s non-disclosure agreement and OEM arrangements and demand information concerning them. Bill Gates and his chief counsel Bill Newcomb repeatedly swore during the course of the four-year investigation that they would never cut such a deal with the feds, but it actually creates little hardship for Microsoft. The company remains intact. The brilliantly clever per-processor licensing scheme that required OEM customers to pay for operating systems they didn’t necessarily ship, and played a key role in establishing Microsoft as king of the hill had obviously run its course, especially now Microsoft is trying to move beyond the desktop. By agreement with Justice, Windows NT, which Microsoft plans to reprice by the time Daytona is released in a few weeks, is not covered by the consent decree because it is a sufficiently different product with low volumes and relatively small value, Newcomb said. Microsoft will now adopt per-copy or per-system pricing in the desktop market and OEM customers unhappy about their MS-DOS and Windows contracts will be able to renegotiate specific terms – but only going forward, and they will have to initiate any negotiations. The decree will also forces Microsoft to abandon contracts that obligated vendors to commit themselves to particular volumes years in advance but Microsoft’s volume discount structure remains unaffected. Newcomb claimed Microsoft’s OEM revenues would not be hit by the move. The government estimated that its per-processor agreements accounted for 60% of all operating systems sold.

Reasonable terms

Microsoft’s rationale for accepting the consent decree was its reasonable terms, and the opportunity to avoid any legal proceedings, Newcomb said during a Saturday afternoon teleconference – which had to be repeated twice because of sound difficulties. He declined to characterise the government’s position as either…or, either sign the consent decree or face a lawsuit, as is widely believed to have happened. However, the unrepentent Newcomb, who resisted the monopolist’s mantle and attempted to minimise the case the Justice Department could have made against the company by claiming that Microsoft has not accumulated market power in the anti-trust sense of the phrase, said his time over the past four weeks had been absorbed by the decree, just about the length of time the government usually allows for such things after effectively saying to the subject of such a probe, ‘Pick your poison.’ We do not believe we’ve ever had a monopoly, he said. The agreement we have with the government is not that their allegation is true. It is that we are willing to accommodate them in these reasonable ways. Newcomb called the non-disclosure agreement issue a tempest in a teapot. Because of a flap three months ago when Microsoft sought to restrict developers at Wordperfect Corp and Lotus Development Corp who were working on non-Microsoft standards such as OpenDOC from beta testing Chicago, Microsoft will have to be even-handed in the way it applies its non-disclosure agreements. The decree also loosens the terms of such non-disclosure agreements. It had previously required independent software vendors not to disclose an

y information about its operating system for three years after it came to market. The government found this worked a hardship on software developers while Microsoft was free to recruit development staff anywhere. Competitors, whom Newcomb blamed for the investigation without naming them, now have 60 days to file comments, protests and questions with Justice and the federal courts. Novell Inc could still bring its own anti-trust suit: chairman Ray Noorda was unavailable to calls placed to his home Saturday. While the thrust of the consent decree could open Microsoft to new competition from OS/2 and Novell DOS, its entrenched position will limit this. The consent decree represents the first time in antitrust history that the US Department of Justice co-ordinated a settlement with European authorities. Newcomb indicated the concession was made at Microsoft’s behest. – Maureen O’Gara