Calling it a clear case of protecting consumers from a corporate monopoly, the Department of Justice and attorneys general from 20 states said today they will file a multi-pronged antitrust suit against Microsoft.
In bringing the suit, which became inevitable following the collapse of eleventh-hour negotiations over the weekend, US Attorney General Janet Reno and US Assistant Attorney General Joel Klein spelled out specific instances in which they allege Microsoft "cut off the air supply" of its competitors and broke the law by engaging in anti-competitive and exclusionary practices. Those tactics, they charged, were designed to maintain Microsoft's Windows monopoly, and extend that monopoly into Internet browser software and other areas.
"Today's action is intended to ensure that consumers and computer-makers have the right to choose which software they want installed on their personal computers, and not have that software chosen for them," said Reno. "It is also designed to preserve competition and promote innovation in the computer software industry."
The Justice Department will also seek a preliminary injunction in federal district court to force Microsoft to either unbundle the Internet Explorer browser from Windows 98 or else include Netscape's Communicator browser. As an alternative, Microsoft could offer consumers the choice of purchasing a version of the OS that does not include Internet Explorer. The new OS was scheduled to ship on 25 June.
Klein said that computer manufacturers should also be given the opportunity to strip out Explorer, Communicator, or both browsers, from machines they sell. The injunction seeks to allow manufacturers the ability to show anything they choose on the "boot up screen" on personal computers. Currently, the Windows start-up screen is the first thing consumers see.
"Microsoft has engaged in a series of anti-competitive practices, including misusing its Windows operating system monopoly by requiring computer manufacturers, as a condition of getting Windows, to adopt a uniform boot-up first screen sequence that promoted Microsoft products," said Klein.
He added that Justice will seek an immediate end to all of the Microsoft exclusionary agreements with online service providers, Internet service providers, and Internet content providers. Klein said that Microsoft claimed to have amended these contracts to make them legal, but has not actually done so.
Advancing the states' arguments today were New York Attorney General Denis Vacco, who will lead the states' suit; Iowa's Tom Miller, the chairman of the antitrust committee of the National Association of Attorneys General; and Connecticut's Richard Blumenthal.
When a company is allowed to expand its monopoly position in one area to gain monopoly power in another area, consumers suffer, the states argued.
Vacco said that an important consequence of Microsoft's monopoly power is that as computer prices have gone down for consumers, the price of Microsoft software has actually gone up.
In addition to accusing Microsoft of using its operating-system monopoly to force its way into the browser market, Vacco said the states' suit will also charge that Microsoft has leveraged its dominance unfairly to ensure the dominance of its Office software suite.
Contrary to Redmond's arguments that the government has been behaving like an overbearing ogre, Vacco said, "It is Microsoft that has been acting like an Orwellian Big Brother."
Said Connecticut's Blumenthal: "We're saying to Bill Gates: 'Stop your 800-pound gorilla from blocking access to the information superhighway.'"
Klein enumerated what he described as Microsoft's aggressive tactics, including strongarming Netscape, which Klein said that Microsoft identified as the real threat to its Windows monopoly very early on.
"Microsoft first went to Netscape and proposed that, rather than compete with each other, the two companies should enter an illegal conspiracy agreement to divide up the market," said Klein. "When Netscape rejected that offer, Microsoft then went about using its Windows monopoly to, in Microsoft's own words, 'cut off Netscape's air supply.'"
Klein said that Microsoft did this by locking up the two main channels of browser distribution: It forced its browser onto all new computers, and entered into anti-competitive contracts with all of the major Internet and online services, including America Online, while restricting Netscape's ability to get into those channels.
"Microsoft used its monopoly power to develop a chokehold on the browser software needed to access the Internet," Klein said. "Microsoft has restricted the choices available for consumers in America and around the world."
Klein also aimed directly at Microsoft's prime defensive argument -- the the government was crushing innovation in the software arena.
"Nothing we are doing will or should prevent Microsoft from competing on [the basis of] merit," Klein said. "What cannot be tolerated is the barrage of illegal and anti-competitive practices that Microsoft uses to destroy its rivals -- that, and that alone, is what this lawsuit is about."
"We want to make sure the field is open to the next Microsoft, the next great innovator, who could help improve our lives if they are given the opportunity," said Reno.
The charges come in the wake of a week's worth of intensive negotiations between Microsoft and the government which collapsed Saturday. The majority of those discussions hinged on how far Microsoft would go in changing the start-up screen.
Microsoft said it quit the settlement talks Saturday because the government was insisting it ship Windows 98 with Communicator, a move that a Microsoft spokesman said "Would be a lot like asking Coca-Cola to ship three Pepsis with every six-pack."
President Clinton said Monday that an antitrust case against Microsoft could have a significant impact on the US economy.
But he said he had confidence in the way the Justice Department was handling its investigation of the company, headed by billionaire Bill Gates, for allegedly abusing its dominant market position.
"Based on what I know today, I have confidence in the way the antitrust division has handled it," Clinton told a news conference after a US-European Union summit in London.
"This is not just an open-and-shut case of one party suing somebody else. This is something that could have a significant impact on our economy," Clinton said.
Microsoft's stock was off over $3 at $86.13 in busy trading, giving up gains made last week when the company and the government announced they were in settlement negotiations.
Microsoft is expected to react to today's news at a press conference later today.
Reuters contributed to this report
