US government takes Microsoft suit a step further

The US Department of Justice is moving to broaden its antitrust lawsuit against Microsoft beyond the Windows and Internet Explorer arena, according to sources close to the case. Additional charges may be based on Microsoft's volume licensing practices for its Office desktop applications suite, its strategy for NT, its actions over Java and the bundling of video streaming software with Windows 98.

The US Department of Justice is moving to broaden its antitrust lawsuit against Microsoft beyond the Windows and Internet Explorer arena, according to sources close to the case.

The government's lawsuit, filed May 18, accused the company of leveraging its Windows monopoly to take over the Internet browser market, and seeks to curb what it calls the company's heavy-handed business practices.

According to sources familiar with the case, federal officials are considering additional charges against Microsoft based on the following concerns.

-- Microsoft's volume licensing practices for its Office desktop applications suite are predatory and exclusionary because the company offers computer companies discount rates if they license Office for several different lines of computers. The 20 state attorneys general and Washington D.C. raised the Office pricing issue in their lawsuit; on May 22, US District Judge Thomas Penfield Jackson ordered that case consolidated with the Department of Justice case.

-- Microsoft's strategy for NT mirrors the one it uses to push Windows 98, particularly because of the integration of other server technologies, such as Transaction Server.

-- Sun Microsystems charges that Microsoft has violated its Java license and is attempting to head off the programming language's potential as an operating system that would compete with Windows. Sun has sued Microsoft over the contract.

-- In addition to Internet Explorer, Microsoft is bundling video streaming software and television broadcast technology with Windows.

"The NT things might be harder to prove because Microsoft doesn't have the monopolistic presence there that it does with Windows 95 and 98," said one source familiar with prosecutors' investigations. "If [Department of Justice officials] move forward, that part of it could be tricky."

The source added that it was unclear when the government might expand its case.

Microsoft and the Department of Justice are due in Jackson's court in Washington D.C. on Sept. 8. Meanwhile, the software maker plans an official launch for Windows 98 on June 25, although PC makers will receive the operating system on June 15.

Despite the antitrust case's high profile, Microsoft Chairman Bill Gates insisted that there are more important issues on the minds of corporate CEOs. According to Gates, there was no mention of the lawsuit during a summit he hosted last week in Seattle for more than 120 CEOs.

"The antitrust lawsuit has not come up," Gates said. "We have been talking about the Internet, uses of the Internet, what kind of customer things are going on there, how quickly this is going to happen, examples of companies that have done it very, very well. This is exciting stuff. This is what we work on every day."

However, the case was a prime topic at the Harvard Conference on Internet and Society in Cambridge, Massachusetts, where Microsoft's rivals cheered the government.

"What [Microsoft] is doing is not the least bit subtle. The result of all the `innovation' will be bankruptcy for Netscape," said Oracle CEO Larry Ellison.

Ellison added that Microsoft's business practices are "more blatant than anything [John D.] Rockefeller ever did."

Sun Microsystems CEO Scott McNealy echoed Ellison.

"Choice -- that's what it's all about," McNealy said. "I think the long-term outcome is that you have a choice on your desktop, and I don't mean [a choice of] Windows 95 or Windows 98."

Like Gates, Microsoft Executive Vice President Steve Ballmer professed to be concerned with issues other than the lawsuit.

"I don't really focus on the lawsuit very much," Ballmer said in a cybercast to the Harvard conference.

The U.S. Department of Justice has posted its lawsuit at http://www.usdoj.gov/atr/cases3/micros/1762.htm.

(Nancy Weil is a Boston correspondent for the IDG News Service, an InfoWorld affiliate.)

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