Gates Refuses To Yield As Trustbusters Press Case Stakes High For Both Sides In Battle Between Microsoft, Justice Department

In 1972, well before he became the world’s richest man, Microsoft co-founder Bill Gates spent a summer here as a page on Capitol Hill. His patron at the time, then Rep. Brock Adams, D-Wash., recalls that after Democratic presidential nominee George McGovern dumped Thomas Eagleton from the ticket, his 16-year-old charge sought to buy up the entire stock of McGovern-Eagleton buttons.

Since then, Gates has often shown his deep disdain for Washington. But Gates’ aloofness hasn’t kept policy-makers from viewing Microsoft’s control over software that now runs 85 percent of the world’s personal computers as a much bigger deal than his bid as a teenager to corner the market in an extinct campaign button.

For his part, Gates vigorously denies that he is now or ever has been a monopolist.

“We control only about 4 percent of the world’s software business,” the 43-year-old Gates noted earlier this month in a Swiss hotel over a salmon steak during the World Economic Forum in Davos. “What’s more,” he added, “the market for operating systems remains fiercely competitive. Who knows where we’ll all be a few years down the road?”

He railed against the U.S. Justice Department’s efforts to “cripple” Windows software by trying to force his company to unbundle its Internet Explorer browser from the underlying Windows 95 operating system.

But Gates’ protests cut no ice with Joel Klein, the Justice Department’s chief trustbuster. “This kind of product-forcing is an abuse of monopoly power and we will seek to put an end to it,” Klein says.

Contrary to the court papers filed in the pending antitrust action against his firm, Gates charged in Davos that the government wants not only to limit his freedom over Windows 95 - the object of a 1995 consent decree - but also the more powerful products that Microsoft has in the works. (Appellate arguments in the current case are set for April 21 and a decision may not come for weeks or even months after that.)

While Gates misspoke in the narrow sense, he may well be right in the way he views the big picture.

Justice officials confirm that a broad scale antitrust action against Microsoft is under active review. The department has recently brought in a top outside litigator, David Boies, to frame the dimensions of any such case. Klein, who brought the forced browser bundling charges against Microsoft last October, says when it comes to the Internet, the government retains “an ongoing concern about the use of monopoly power to protect or extend a monopoly.”

Meanwhile, the challenges to Microsoft continue to grow. In recent weeks:

The Senate Judiciary Committee said it will soon open hearings probing whether Microsoft seeks to leverage its operating system near-monopoly into seeking to gain effective control of the Internet.

The attorneys general of 11 states banded together to probe Microsoft for alleged antitrust violations.

The 1,200-member Software Publishers Association, to which founding member Microsoft pays $100,000 in annual dues, released stiff “competition guidelines” for the industry that take direct aim at Gates’ 23-year-old firm.

The European Union, a fast-growing market of 350 million potential consumers, forced Microsoft to modify several of its business practices.

The Japanese Fair Trade Commission raided Microsoft’s Tokyo offices searching for possible evidence of anti-competitive practices.

Meantime, Gates’ rivals in California’s Silicon Valley have hired more high-powered advocates in Washington - including former Sen. Bob Dole and exWhite House press secretary Jody Powell. The anti-Microsoft coalition includes such major players as Netscape, which markets a rival browser, and Sun Microsystems, which spearheads development of a rival Internet programming language known as Java.

From his campus-like headquarters in Washington state, Gates has responded to these multiple threats by writing an unprecedented letter to his employees, urging them to stick to their guns.

“My goal has always been to create software that improves the quality of people’s lives, so it’s disappointing for me to see the government now trying to put controls on an American success story,” Gates wrote.

But, in the other Washington, it was becoming increasingly clear that the climactic phase of Microsoft’s antitrust saga had only just began.