Microsoft Corp., whose relentless drive for dominance in the personal computer software industry has overwhelmed both competitors and government regulators for more than a decade, suffered a major setback Thursday when the Justice Department sued to block the software giant’s $2 billion acquisition of personal finance software vendor Intuit Inc.
In a 14-page complaint filed in U.S. District Court in San Francisco, the Justice Department said a Microsoft takeover of Intuit - whose Quicken program controls more than 70 percent of the market for personal finance software - “would likely lead to higher prices and lessened innovation” and thus would violate antitrust laws.
“Allowing Microsoft to buy a dominant position in this highly concentrated market would likely result in higher prices for consumers who want to buy personal finance software and would cause those buyers to miss out on the huge benefits from innovation,” said Anne K. Bingaman, who heads the department’s antitrust division.
Microsoft, which has been dogged by a separate government antitrust probe for more than four years, vowed to fight Justice Department action, asserting that the Intuit deal is “very clearly in the interest of consumers.” But few now expect the deal to be completed: Intuit’s stock plunged 10 1/4 to 72 3/4 on Nasdaq before trading was halted Thursday, and Microsoft’s shares - which have been climbing sharply for weeks - fell 1 to close at 78 5/8.
The government action, one of the most aggressive antitrust moves yet by the Clinton administration, could blunt Microsoft’s ability to compete not only in personal finance software but in a range of other new businesses - and there are sharply differing views as to whether that is a good thing.
Financial analysts denounced the Justice Department’s action, saying Microsoft and its hard-driving chairman, Bill Gates, were being penalized for the sin of being successful, and that the U.S. economy would ultimately be worse off for it. But many of Microsoft’s rivals cheered - and anti-trust experts said the Justice Department appeared to be on firm ground. A court hearing on the Justice Department’s request for an injunction blocking the acquisition - which would have been the largest software industry merger ever - is expected within a few weeks.
Intuit’s Quicken software was conceived in the 1980s as a simple program to help families balance their checkbooks and create a monthly budget, and it quickly came to dominate the personal finance filed - largely because it was very easy to use and Intuit provided firstrate customer service. Microsoft’s efforts to compete with a product called Money were mostly futile - as were challenges from company’s such as Computer Associates and H&R; Block.
Mindful of antitrust issues, Microsoft had planned to give the Money program to Novell Inc. as part of the Intuit transaction. But Bingaman dismissed that gesture: “This so-called fix just won’t work” she said in announcing the suit.
And the Justice Department is concerned not only about the future viability of the personal finance software industry, but also about the fledgling world of online commerce. In the future, many people are expected to do bank and shop and pay bills via their personal computers.
“The acquisition threatens harm to consumers in other important areas of commerce, especially in the area of personal computer based home banking, which is a relatively tiny part of the (personal finance) … software market today,” the department said.
From the day that it landed a contract to provide the basic operating software for the original IBM personal computer, Microsoft’s influence over the personal computer industry has grown steadily.
Its market dominance and aggres sive expansion plans have long been criticized by competitors, who allege that Microsoft doesn’t play by the rules and unfairly exploits its near-monopoly in operating software.