Weekly Wire
Memphis Flyer The Other Legal Story

By Ann Mulhearn

AUGUST 24, 1998:  Nothing quite like Washington in the summer – greed, corporate money flowing like water, allegations of abuses of power, legal wrangling over a guy named Bill – and we’re not even talking about interns!

The world’s greatest nerd done well is embroiled in a high-stakes court battle – defending himself and his brainchild against serious allegations of anti-competitive business practices and antitrust violations brought by the Department of Justice (DOJ). Poor Bill. Poor Microsoft (MS). Everyone is out to get them.

It’s not as if Bill didn’t know it was coming – he and the government have a sordid history. As early as 1990 the Federal Trade Commission began investigating allegations of illegal coercion of resellers. Although the FTC closed their investigation in 1993, unable to decide on an appropriate course of action, the DOJ immediately stepped up the probe into Bill’s kingdom.

To make a long, tortuous story short, Microsoft eventually signed a consent decree that, among other things, barred the tying of Windows reselling rights with the purchase of other MS products. (MS had required resellers such as IBM and Compaq to sign binding agreements that based a volume discount for Windows on the mandatory inclusion of other MS products at the expense of excluding competing packages from new computers. No signature, no license to resell Windows.) The judge who presided over the hearing, however, initially opposed the agreement, saying MS “is so powerful that neither the market nor the government is capable of dealing with all of its monopolistic practices.”

An anonymous amici curiae brief (basically a letter to the court from interested parties supporting a particular side of a legal issue) went so far as to predict the scenario of the current legal battle. “Microsoft will succeed in using its dominance in operating systems to monopolize all other aspects of transaction software, from desktop applications to online systems,” it read.

And here we are, almost five years later, watching Microsoft and the Department of Justice duke it out over just that – whether MS can use its 90 percent plus share of the operating system market to leverage its way into the Internet. As always, that depends on whom you ask.

Most computer users have Windows because, as Thomas Lacki of Memphis put it, “What else is there?” There have been attempts by other software manufacturers to market competing Windows-based operating systems, but Microsoft’s use of exclusionary contracts with resellers forced those products off the market rather quickly (OS/2 by IBM is the most prominent example.) It follows that virtually all software produced must be Windows compatible to be profitable – including MS’ true nemesis in this brouhaha, Netscape.

Netscape alleges that MS only integrated its Internet browser with Windows 98 in order to gain control of the burgeoning Internet browser market. Since the overwhelming majority of consumers purchase PCs with Windows pre-installed, having an Internet browser tied into the operating system (OS) gives that browser an unfair advantage over competing browsers that must be acquired separately. Given that Netscape had an 85 percent market share before MS began bundling its Internet Explorer (IE) with later versions of Windows 95, that argument has merit – at least for the government.

“It would seem that Microsoft is playing the game to its fullest extent,” says Dave Barger, president of Memphis-based Internet service provider Lunaweb. “Enter the market, operating at a loss, under the guise of filling some niche; crush the competition; bully manufacturers to operate under your terms. [It] happens all the time.”

But there is a fine legal line between working the system and violating antitrust provisions. The DOJ has assembled an impressive array of experts to pick apart MS and its products. They even convinced a judge to force MS to release its sacrosanct source code for Windows 95 and 98 to government programmers. Industrious reporters dredged up an archaic 1913 federal statute that requires depositions of key players in antitrust suits to be held in a public venue – the DOJ loved that idea. Despite MS’s appeals that it would expose precious “trade secrets,” the courts seem to be holding Bill and company to it. As legal maneuverings continue, the case gets more and more interesting.

Now that the DOJ has MS on the chopping block, industry insiders are popping out of the woodwork, most tattling on MS for past wrongs. Former Acer executive Ricardo Correa said in a series of interviews with Reuters news organization that “computer makers live in a climate of fear that drives them to seek safe relationships with Microsoft.” MS, of course, denies the charges.

In a hearing on Capitol Hill last month, Robert Glaser, RealNetworks Inc. CEO and a former 10-year Microsoft veteran, claimed MS deliberately wrote code into Windows 98 that would essentially “break” their product, RealPlayer, a multimedia application, forcing users to switch to the competing MS product.

“Microsoft’s actions send a chilling message,” said Glaser. “Innovate only in a Microsoft-approved way. What Microsoft is doing is wrong and must be stopped.”

Larry Ellison, Oracle Corporation chairman, echoed Glaser’s feelings. “If an innovative piece of software comes along, Microsoft copies it and makes it part of Windows,” Ellison said. “This is not innovation. This is the end of innovation.”

Which brings us back to Netscape versus Internet Explorer, the crux of the antitrust case. Was Microsoft “innovating” by merging its browser with its OS, or was it using its OS monopoly to force competitors out of the Internet software market?

The majority of informed consumers would probably go with the latter – it’s hard to find an actual Microsoft fan. But few can think of a solution to the problem that doesn’t involve punitive damages and limits on Microsoft’s software development and distribution practices. Or world domination by Bill Gates if MS wins.

“It seems like Bill Gates wants to change the Internet to the Microsoft Internet,” laments Memphis computer whiz Barry Boggs.

Most computer users, however, are blissfully ignorant of the ruckus going on in Redmond, Washington. Maybe they don’t see how their Internet browser directly affects their lives. Or perhaps they are too caught up in the bedlam reigning in the other Washington to be bothered with something as dry as lawsuits.

Or maybe they just don’t care. But I bet Bill does.


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