December 5, 1995 in Nation/World

Windows 95 Shutting Out Competition? Feds Want To Know If Microsoft Built Software To Thwart Rivals

Rob Wells Associated Press
 

Justice Department investigators want to know if Microsoft Corp. deliberately designed Windows 95 software to hamper rival services that let users connect to the global computer network known as the Internet.

Microsoft said Monday that some problems arose during testing earlier this year. But the world’s leading maker of personal computer software said those problems were resolved with the newer versions of most competitors’ products.

The investigation marks another government effort to scrutinize the fair-play practices of Microsoft, one of the most successful American businesses in the exploding arena of computer technology.

The Redmond, Wash.-based company has been dogged for years by questions about whether its dominant position in PC software amounts to a near-monopoly that hurts competition.

The Justice Department’s anti-trust division last month issued civil subpoenas to Netscape Communications Corp. and CompuServe Inc. on-line service, said Don Baker, a Washington lawyer representing CompuServe. A CompuServe spokesman also confirmed the investigation.

The subpoenas indicate Justice investigators are focusing on whether Microsoft’s Windows 95 and its related Internet software either disable or raise the costs of rival programs that let users access the Internet.

Windows 95, Microsoft’s upgraded operating system for PCs, debuted with great marketing fanfare last August.

Baker, the CompuServe attorney, went further, suggesting Windows 95 was designed to hobble rival programs.

“For a dominant firm to deliberately disable competitors in a dependent market raises serious anti-trust concerns,” Baker said.

Microsoft spokesman Greg Shaw said charges that company would deliberately disable a competitor’s program was “absolutely nonsense.”

He said a conflict with competitors’ software arose in the testing of Windows 95, which isn’t unusual. He understood that the issue largely had been resolved. Microsoft wants Windows 95 to run well with rival Internet software, because any problems would make the operating system less popular in the industry, he added.

Some industry analysts agreed that Microsoft couldn’t have deliberately plotted to disable competitors’ programs.

“I can’t imagine that they would intend to do it,” said Peter Krasilovsky, senior analyst at Arlen Communications, a consulting firm in Bethesda, Md.

The Justice inquiry apparently had no effect on investors, who bid up Microsoft stock by $1.75 a share to $88 on the Nasdaq Stock Market.

The civil subpoenas were issued Nov. 1 and were to have been returned Nov. 21, Baker said. Justice investigators want to know if the competitors made any software programming changes or alterations in marketing, sales or distribution as a result of Windows 95.

Netcom On-line Communications Services Inc. and Prodigy Services Co. also were contacted by Justice officials, but didn’t receive civil subpoenas. Both have software compatible with Windows 95.

Windows 95 is known as an operating system software, which controls a computer’s basic functions such as printing or storage of words and data. The program, now installed on an estimated 10 million computers, is expected to become the standard for the personal computer market.

Justice investigators have been examining whether Microsoft is using its dominance in operating system software to prevail in the on-line services market.

The investigation first focused on whether Microsoft was gaining an unfair advantage in the on-line services business by combining access software for Microsoft Network, the company’s new on-line service, with Windows 95.

Netscape’s involvement in the latest round of civil subpoenas is noteworthy because the company makes the most popular “browser” software for navigating the Internet’s popular World Wide Web. Netscape officials could not be reached for comment Monday.

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