Justice Revives Microsoft Probe Government Launches Inquiry Into How Company Sells Internet Software
The Justice Department is investigating how Microsoft Corp. sells its Internet software to determine whether it is trying to stifle competition in the fastest-growing part of the technology industry.
The company announced the inquiry Thursday and said it would comply with antitrust regulators’ request for documents. It is the first time the agency has sought information from Microsoft since summer 1995, when it explored the company’s plans for an on-line network.
A Justice Department spokeswoman declined comment on the statement by Microsoft.
While the agency for months has said its investigation into Microsoft is ongoing, lawyers and observers of the software industry have perceived it as dormant for some time.
Last month, Netscape Communications Corp., the leading maker of software used to find and publish information on the Internet’s World Wide Web, urged antitrust regulators to examine Microsoft’s practices and plans for its Internet products.
Netscape said Microsoft is using its dominance in personal computer operating systems to influence computer makers, Internet service companies and others into making Microsoft’s software the only choice for accessing the Internet.
Netscape accused Microsoft of charging PC makers less for its Windows 95 operating system if they don’t pre-install competitors’ Web browser programs.
Microsoft has maintained Netscape’s accusations are an attempt to divert attention from the release of a Microsoft browser program that matched many of the qualities of Netscape’s product.
William Neukom, Microsoft’s senior vice president for law and corporate affairs, said Netscape’s complaints are reminiscent of allegations made by other competitors that the Justice Department has reviewed previously.
“It is disappointing that our competitors continue to seek government intervention in the competitive process rather than concentrating on improving their products,” Neukom said in a statement.
In statements early last month, Microsoft specifically denied the charge that it had used pressure tactics on PC manufacturers. However, the computer newspaper PC Week on Aug. 26 published a front-page article quoting seven PC makers anonymously who detailed price discounts and marketing incentives Microsoft has used to encourage them to use its browser on their PCs instead of Netscape’s.
Attorney Gary Reback, outside counsel for Netscape and an advocate for other companies who have fought Microsoft previously, said he was glad to see the Justice Department take up the issue.
“On the one hand, I would say it’s about time,” Reback said. “On the other hand, there’s still time for the government to get in there and maintain a free and open Internet that would benefit all of us.”
However, Netscape faces a daunting legal challenge since its Web browser is dominant with about three-quarters of the market.
The Justice Department’s antitrust division has had Microsoft’s business practices under scrutiny since 1993. In 1994, the agency forced Microsoft to cease discounting practices that had tilted the competitive landscape in favor of its MS-DOS and Windows operating programs.
Critics said the settlement came too late to have a significant impact on the competitiveness of that market. Today, Microsoft’s products run the basic functions of nearly 90 percent of personal computers.
If a court found that Microsoft had violated the 1994 agreement with its Internet products and sales tactics, the Justice Department could seek fines and further restraints on its business.
“Both of those require a fairly significant showing that the terms of the order have been violated,” said Jonathan Jacobsen, an antitrust lawyer in the New York office of Akin Gump Strauss Hauer & Feld.
Last year, the Justice Department examined Microsoft’s plan to combine software for accessing its new on-line service with a new version of the Windows operating system. It took no action.