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Success Turns Microsoft Into Prime Target Suddenly Everybody’s Gunning For Nation’s Leading Software Developer

SUNDAY, DEC. 28, 1997

In the span of a year, Microsoft Chairman Bill Gates has gone from poster boy for the American Dream to robber baron of the information age.

As 1998 approaches, the company may be headed toward the same status once accorded another government target, AT&T;: a powerful, pervasive presence in American life both vital and reviled.

Big guns are pointed at Microsoft from Washington, Silicon Valley, Europe and 10 individual states. Consumer advocates, powerful lobbyists and wealthy competitors are joining the fray.

They accuse Microsoft of using its massive economic power as provider of the dominant PC operating system to roll over software competitors. And they say Gates is attempting to shape the future for personal computers and the Internet into a form that will guarantee Microsoft an important share of industry profits for many years to come.

The issue of Microsoft’s behavior has even opened debate about whether or not the country needs to scrap its century-old antitrust regime in favor of an approach better suited to the pace of a high-tech, intellectual-property economy.

“The ultimate sort of problem in antitrust is do you always let the dominant firm that does nothing wrong just keep on going?” said Jeffrey Harrison, a professor at the University of Florida school of law in Gainesville, Fla.

The sheer firepower of the opposition has raised questions about whether Microsoft’s top brass will be distracted from their core business and how the coming fight will affect the nation’s global competitiveness.

Some experts also have wondered if the nation’s high-tech firms will reap more trouble from government regulation, energized by the Microsoft case, than they will from Microsoft’s cutthroat competitiveness and huge hoard of cash. And there have been more than passing suggestions that the country may need some sort of regulatory body or expedited legal process to deal with the fast-paced computer industry as it reaches into the very fabric of society.

Microsoft has said it shares many of those concerns. In fact, the company insists its competitors are spending too much energy lobbying against Microsoft instead of on issues of common concern.

“We’re at a real critical juncture on several public policy issues, and one that comes to mind right away is encryption,” said Jack Krumholtz, Microsoft’s head of government affairs. “The next few months, the next six months, is a very critical window if we’re going to resolve this issue. This is clearly leaving scarce resources, especially government affairs resources, being distracted instead of being used to work together on encryption.”

Some observers have compared Microsoft’s predicament, at least in scope, to the troubles of the tobacco industry. While nobody is accusing the software giant of endangering public health - so far, at least, Internet Explorer hasn’t killed anyone - the sheer volume of the attacks makes an uncanny parallel.

The current battle, over the Explorer Internet browser, has garnered such widespread publicity that it was the subject of an editorial cartoon in an Oklahoma newspaper.

Santa Claus tells a child on his lap in the cartoon that his “contract with Microsoft” means he can’t bring the child a Christmas toy unless he also delivers a copy of Internet Explorer.

“The public image today is, ‘Who do these guys think they are?”’ said James P. Love, director of the Consumer Project on Technology, a Ralph Nader-led group.

Despite the public storm, Microsoft insists it has done nothing legally wrong.

But some experts believe plenty of people will be gunning for the Redmond, Wash., software giant regardless of the outcome of the current court fight.

“When you’re successful and you’re as dominant as they’ve been, you’re a target,” said Lawrence Chimerine, chief economist of the Economic Strategy Institute, a conservative think tank in Washington. “Regardless of the merits of the case, people want to get a piece of the action.”

There’s seemingly no limit to those seeking a piece:

Microsoft is fighting a pitched court battle against the Justice Department over its alleged failure to comply with a consent decree that ended four years of antitrust investigations. The case’s first substantial hearings are set for Tuesday before a “special master” and Jan. 13 before U.S. District Judge Thomas Penfield Jackson.

An appeals court is now involved in the same case, adding a second judge - not yet assigned - and more paperwork.

The Justice Department says it is continuing to investigate the company in other areas.

Meanwhile, some 10 states are conducting their own investigations into Microsoft’s competitive practices. None has taken any direct action, but the states are reportedly cooperating loosely, with each other and with the Justice Department.

The European Commission, a sort of Justice Department for the countries of the European Union, is conducting its own investigation into the company’s practices in Europe, one of Microsoft’s most valuable markets.

The U.S. Senate plans hearings into the state of the nation’s turn-of-the-century antitrust laws (the mainstay Sherman Act was enacted in 1890, and the two most significant statues since, the Clayton and Federal Trade Commission Acts, occurred in 1914). When he launched the hearings, Judiciary Committee Chairman Sen. Orrin Hatch, R-Utah, cited Microsoft’s behavior as the chief catalyst.

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