DOJ Complaint Levels Serious Allegations Against Microsoft
from thessaSOURCE.... (5/19)
Since yesterday (5/18) and its press conferences, press releases, and interviews, most of the public is now full aware of the three tiers of the federal and state complaints against Microsoft (see related story, below). In its actual court filing, however, the Justice Department outlines some serious allegations against the Redmond, WA-based giant — none of which have been denied to date from Microsoft officials. Instead the company yesterday held a long press conference, including statements from Bill Gates himself and involving several product demonstrations, all attempting to prove why Microsoft was in the clear. Here are some of the highlights of the federal complaint, available at the DOJ web site. Please note all statements below are allegations made solely by the Justice Department:
- Back in May, 1995, officials from Microsoft approached Netscape Communications in an attempt to dissuade the company from competing against Microsoft in the browser market. Microsoft proposed splitting the market where it would produce browser software for its Windows 95 operating system and Netscape would produce browsers for other platforms. Netscape Communications refused, and Microsoft then made a strategic decision to destroy the company. Microsoft officials, to date, have not denied this charge.
- The Justice Department alleges Microsoft required personal computer makers to bundle Internet Explorer with all new systems or they would be denied a license for Windows.
- By integrating Internet Explorer into the operating system, Microsoft thus illegally ties a formerly separate, commercial product into its Windows 98 operating system.
- Microsoft is requiring all personal computer makers to use a specified "boot-up" or "first screen" sequence by Microsoft which promotes the Microsoft name or its products. The Justice Department considers this a "continuance of its misuse of its Windows operating system monopoly." Microsoft has denied this.
- Microsoft — in what is referred to as an exclusionary practice — requires the Internet Explorer icon on the Windows 98 desktop and does not allow a competing product to be seen in leiu of its browser. This is part of the Windows 98 license.
- Microsoft has entered into "anticompetitive agreements" with nearly all of the major Internet service providers and online services wherein the companies agree to promote only Internet Explorer, and not mention competing software, and to use Microsoft "proprietary standards and tools" in their content delivery. Thirty percent of users receive their browsers from their service providers, so the Justice Department considers this another way Microsoft is shutting Netscape Communications out of the marketplace.
- Microsoft has entered into "anticompetitive agreements" with major content providers wherein the content producers are given buttons on the Windows 98 desktop or free advertising in exchange not to enter into any similar agreements with Microsoft competitors and to highlight Microsoft "proprietary standards and tools" on their web sites or use "Microsoft-specific, proprietary programming extensions." The Justice Department says these agreements are flat out unlawful, and is a criminal violation of federal law.
- In mid-1995 Microsoft realized Netscape Communications was attempting to create products which would make the Internet a virtual platform and thus make Windows "obsolete." The Justice Department alleges that Microsoft then decided to destroy the company not through competing on the open market with superior products, but by leverging its monopoly in the operating systems world to shut Netscape out of the market illegally.
- Microsoft recognized Internet Explorer could not compete on its merits and quotes Microsoft memos and executives in proving the company decided to leverage its operating system monopoly to corner the Internet browser software market. The Justice Department is using this evidence mainly in seeking a preliminary injunction against the shipment of Windows 98.
Related story . . .
Justice Department, Twenty States Sue Microsoft
Comparing it to similar actions taken against Standard Oil at the turn of the twentieth century, Attorney General Janet Reno, associate Attorney General Joel Klein, and three state attorneys general this afternoon announced their respective lawsuits against software giant Microsoft. Settlement negotiations to avoid this legal entanglement — which analysts have already predicted to be long, drawn out, and very costly — were broken off over the weekend when Microsoft chairman Bill Gates ordered his attorneys to pull out of discussions. Stressing the move to to protect the consumer and other possible innovators in the technology arena, Attorney General Reno told reporters that Microsoft had engaged in anticompetitive, predatory, and exclusionary business practices in an effort to extend its monopoly of the operating systems market to the Internet world in a wholly illegal fashion. Reno said that although Microsoft had "a long history of innovation," the suit would ensure other future Microsofts, those wishing to innovate and grow because of the merits of their products, could flourish.
Saying Microsoft had been engaging in illegal practices in violation of the Sherman Anti-trust Act and other anti-trust laws, associate Attorney General Joel Klein outlined the three main counts in the civil complaint the Justice Department was filing against the company. First, the federal government alleges that Microsoft has illegally mandated that the startup sequence of Windows 95 and Windows 98 promote only Microsoft products. Second, that Microsoft has illegally tied its browser software to its operating system to extend its monopoly to the Internet browser arena, and third, that Microsoft has entered into illegal contracts with a majority of the major Internet service providers and key content providers to shut its competitors out. Klein also said that Microsoft knew from the beginning that Netscape Communications presented a major competitive threat to the company and, in the words of an unnamed Microsoft executive, moved to "cut off Netscape's air supply" with Internet Explorer. At one point Microsoft even approached Netscape and asked them to split the browser market with the Redmond, Washington,-based giant and not to directly compete against each other's products. When Netscape refused, the company began a series of illegal maneuvers to shut out Netscape and other Internet competitors.
The federal government is also filing for an injunction against the shipment of Windows 98, requesting that the courts order Microsoft to either unbundle its own browser from the operating system or to bundle a competing browser as well and allow computer makers to choose which package they want on their systems. This issue was brought up over the weekend, prompting chairman Gates to pull his team out of settlement talks (see related story). In an interview the software mogul said the idea was like forcing Coca-Cola to ship one or more cans of Pepsi with every six-pack they sold. Industry analysts as well consider the idea to force bundling of a competitor's product to be a request the courts will most likely not act on. Nevertheless, both the federal government and a coalition of twenty states and the District of Columbia filed two suits this afternoon in U.S. federal district court against the software giant and subsequently held a press conference at the Justice Department. The states are going even further — which they say is because they more directly represent the consumer — and are charging Microsoft with illegal dealings to keep its Office productivity suit on top and shut out competing suites from other software publishers. One key issue not in either suit relates to the Java platform and Sun Microsystems, contrary to earlier reports.
Whether or not the governments will be able to force Microsoft to end such agreements and business practices is in serious doubt, with Microsoft having amassed a huge legal team and a long list of supporters. Also legal analysts say the suits do appear to favor Microsoft competitors as opposed to being centered merely on anti-trust grounds, and note that many of the states attorneys general have been using the Microsoft legal actions for political purposes. Microsoft says it has the right to innovate and include what ever feature it bloody well wants in its products and that the government has absolutely no place dictating what products should have what features. Even Microsoft opponents have said the government should look beyond the browser debate and go toward the heart of the matter: the Windows monopoly over the operating systems market and how Microsoft is able to maintain it.
Nevertheless the federal and state governments are gearing up for what will be a long and very tough legal battle ahead. At least New York attorney general Dennis Vacco seems to have a cause. He said that contrary to what the company says, it is indeed Microsoft that looms over the consumer like an "Orwellian 'Big Brother,'" forcing consumers to use its products. Quoting former President Roosevelt, Vacco said, "we do no man an injustice when we require him to obey the law." We'll be watching to see if that happens. The suit has tremendous importance with regards to the future of the software industry and government regulation of the technology industry. Large numbers of companies are directly involved including the likes of Apple, Compaq, Hewlett-Packard, IBM, Netscape, Sun, and of course, Microsoft. Media coverage will be extensive throughout the day, so keep your televisions tuned into CNBC, CNNfn, or the Fox News Channel for the latest and head over to MacSurfer Headline News which will be linking to breaking stories throughout the day. We'll be watching too.
Other stories have been added to the thessaSource archives (to be posted later this week).
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