Microsoft antitrust inquiries, concerns widen

Though Microsoft the latest skirmish in the current US Department of Justice lawsuit concerning the bundling of the Internet Explorer browser with Windows 95, it appears to be fighting a growing battle focused on more general competitive and antitrust concerns. The growing antitrust issues are underscored by a set of competition principles and guidelines issued last week by trade group Software Publishers Association, and widening efforts on the part of the Department of Justice DOJ to examine broad antitrust issues that go beyond the scope of the current lawsuit against Microsoft -- examining, for example, its relations with Internet content providers.

Though Microsoft the latest skirmish in the current US Department of Justice lawsuit concerning the bundling of the Internet Explorer browser with Windows 95, it appears to be fighting a growing battle focused on more general competitive and antitrust concerns.

The growing antitrust issues are underscored by a set of competition principles and guidelines issued last week by trade group Software Publishers Association, and widening efforts on the part of the Department of Justice DOJ to examine broad antitrust issues that go beyond the scope of the current lawsuit against Microsoft -- examining, for example, its relations with Internet content providers.

Microsoft scored one victory last week, when a US federal appeals court stopped, at least temporarily, a special master from getting involved in the DOJ's antitrust case against Microsoft.

The US Court of Appeals in the District of Columbia halted Harvard Law School professor Lawrence Lessig's work as special master -- or special advisor -- in the case. District Judge Thomas Jackson had appointed Lessig to collect evidence on the government's charges. Last month, Jackson rejected a motion by Microsoft to remove Lessig from the case. Microsoft contends that Lessig is biased, and that in appointing Lessig, Judge Jackson erred on procedural grounds.

The current DOJ antitrust efforts against Microsoft began in October 1997, when the agency asked the district court to find Microsoft in contempt for violating a 1995 consent decree. The decree allows Microsoft to integrate software into its Windows operating system, but not to force companies to license Windows on condition that they also accept a second, separate product.

But while the consent-decree case inches forward, the DOJ is also examining broader issues. For example, it has issued civil investigative demands (CIDs) – the equivalent of subpoenas – requesting information from third-party content providers listed on Microsoft’s Active Desktop, according to content providers and DOJ sources.

Microsoft requires PC manufacturers who license Windows to display Microsoft's content provider partners on their desktop screens. The Active Desktop feature provides links to a dozen media partners. The partners include content giants such as Time Warner Inc., Walt Disney Co. and Dow Jones & Co. Not all the companies have received CIDs or subpoenas – for example, a Dow Jones spokeswoman today said the company has not received one – but several, including Wired Digital, have.

A Wired Digital spokesman today said the company received a CID in December, but declined to comment on what it requested.

The thrust of the inquiry into the content providers is to determine whether, by forcing manufacturers to accept third-party icons on the Active Desktop, Microsoft is trying to use its Windows hegemony in the operating systems world to dominate the public gateway to the Web, according to DOJ and content-provider sources.

Officially, the DOJ will not confirm specific companies to which it has issued subpoenas or CIDs. However, DOJ officials do say they are continuing to examine broad antitrust issues regarding Microsoft.

“We have an ongoing investigation to determine whether Microsoft is acting illegally to preserve or extend its monopoly in PC operating systems,” said DOJ spokesman Michael Gordon.

The broader DOJ inquiry is beyond the scope of the narrowly focused current lawsuit, which zeroes in on whether Microsoft violated the 1995 consent decree. Economists note that a broad antitrust case would be much harder to win than a more narrowly focused case. However, it appears that there is a groundswell of concern on the part of software companies and regulators at the state level concerning antitrust matters.

For example, after more than two months of analysis and consultation with its members, the Software Publisher Association (SPA) this week issued a set of industry competition principles, clearly spurred by Microsoft antirust concerns.

SPA President Ken Wasch said the principles are a "preliminary" view, and were put together after a survey of SPA members showed the companies had concerns about competition in the industry.

The principles were also written up after Assistant Attorney General Joel Klein, head of the DOJ Antitrust Division, spoke before the SPA government affairs committee, urging it to become engaged with the DOJ on competition issues and to help it understand industry dynamics, according to the SPA.

The principles include topics such as: maximizing innovation and dynamic competition for the benefit of consumers; nondiscriminatory licensing of interface specifications to third party software developers; leveraging an operating system into the sale of products and services; disadvantaging competing software products; and discriminatory access to Internet content.

In issuing the guidelines, Wasch was careful to say in a statement: "The principles are not intended to prescribe remedies that might be applied by federal and state antitrust enforcers to any particular company or set of circumstances."

Nevertheless they roused the ire of some pro-Microsoft members.

In a joint statement four SPA members took issue with the association's decision to develop the guidelines.

"Chili!Soft does not support the SPA's new-found role and its attack on Microsoft," said Mickey Friedman, vice president of marketing for Chili!Soft, a software development firm in Bellevue, Washington. "We do not feel it is appropriate for a neutral organization to take a position in a matter of law and politics,” he said in the statement, adding that Chili!Soft is withdrawing from the SPA.

Chili!Soft, joined by Visio, Sheridan Software Systems,and Mabry Software, noted that the principles were drafted by a committee that included longtime Microsoft archrivals, including Netscape.

However, while Microsoft certainly has a wide variety of supporters speaking out in the face of continuing inquiries into its licensing practices, there is no doubt that these inquiries are widening.

In addition to the DOJ’s ongoing investigations, a total of 11 states conducting investigations into alleged anticompetitive business practices by Microsoft subpoenaed documents from the software giant this week, including documents relating to the company's plans to market Windows 98, in which the Internet Explorer will be further integrated than it is now.

The 11 US states are coordinating their efforts with the DOJ efforts to examine whether Microsoft has leveraged Windows to force Internet Explorer on PC makers and customers.

DOJ sources said this may lead to a broader case against Microsoft than the current lawsuit involving the consent decree. However, they add that much depends on how Microsoft markets the current version of Windows, Windows 95, and how it ends up marketing and licensing Windows 98.

Microsoft has repeatedly said that Windows 98 is on target for release by mid-year.

Meanwhile, the court of appeals will hear oral arguments regarding the special master on April 21. Also on that date, the appeals court will hear arguments regarding the temporary injunction that Judge Jackson had ordered in December, requiring Microsoft to discontinue its practice of requiring computer manufacturers that license Windows 95 to also install Internet Explorer.

On Jan. 22, Microsoft reached a settlement with the DOJ, in which it agreed to remove access to Internet Explorer from Windows for those manufacturers that request it do so – in essence agreeing to temporarily abide by Judge Jackson’s injunction, at least until April 21.

Before the appeals court temporarily halted the special master from working on the consent decree case, the court-appointed adviser was to have reported back to the lower court judge Jackson on May 31. The appeals court hold on the special master, however, does not prevent Jackson from continuing to collect evidence on the case on his own in the meantime.

(Additional reporting by Joy Dietrich)

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