DOJ seeks Microsoft fine
Microsoft stands in contempt of 1995
consent decree, Justice's Reno says
October 20, 1997: 5:58 p.m. ET
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Department of
Justice
Microsoft
Netscape
NEW YORK (CNNfn) - In its continuing battle with
the world's largest software company, the U.S.
Justice Department Monday asked a federal court to
hold Microsoft Corp. in contempt for alleged
anti-competitive behavior in the Internet browser
market.
At an afternoon news conference, U.S. Attorney
General Janet Reno said the government will ask a
federal district court to impose penalties of $1
million-per-day on the Redmond, Wash. -based
software giant for allegedly not complying with a
1995 consent decree.
The news overshadowed Microsoft's
better-than-expected first-quarter earnings, released
after the market closed on Monday.
The unexpected announcement from U.S. Justice
Department's antitrust division had an immediate
effect on trading in Microsoft's stock.
The stock (MSFT) dipped as much as 5 points
immediately following the announcement before
closing 1/4 point higher at 132-1/2 in heavy Nasdaq
trading.
The agency's antitrust division charged the nation's
largest software company violated the consent
decree by trying to use its leverage to require PC
manufacturers to license and distribute Microsoft's
Internet browser, Internet Explorer along with the
company's new operating system Windows 95.
"Forcing PC manufacturers to take one Microsoft
product as a condition of buying a monopoly product
like Windows 95 is not only a violation of the court
order but it's plain wrong," Reno said. (156K WAV)
(156K AIFF)
The 1995 consent decree was aimed at barring
Microsoft from imposing anti-competitive terms in its
contracts with computer equipment manufacturers
that preinstall Microsoft software.
Microsoft doesn't deny that PC manufacturers are
required install its browser as part of licensing the
Windows operating system.
However, Microsoft said the consent decree
includes a provision that permits the software
company to include upgraded functionality such as
web-browsing.
Speaking on a conference call, William Neukom,
senior vice president for law and corporate affairs,
contended the government is misunderstanding the
meaning of the provision.
"We are confident that the court will find we are in
compliance with the consent decree," Neukom told
reporters and analysts.
At issue, analysts said, is whether or not
Microsoft's Internet Explorer is an integrated
upgrade to the Windows operating system.
"The big question is: 'Where does the operating
system begin and where does it end?'" said Neil
Herman, analyst at Salomon Brothers.
In addition, the Justice Department will ask the
federal court to limit the authority of all
non-disclosure agreements that Microsoft requires of
its business partners, said Joel Klein, assistant
attorney general.
"Since we have no way of knowing whether these
agreements have deterred people from voluntarily
coming forward with information ... and we've heard
this might be the case ... we want to clear the air
once and for all," Klein told reporters. (269K WAV)
(269K AIFF)
The move is the latest in a series of clashes
between Microsoft and the Justice Department.
Microsoft was previously investigated for bundling
its online service with its operating system but the
probe was later dropped. The software company
was also blocked from acquiring personal finance
software company, Intuit Inc.
Meanwhile, shares of competing browser
company, Netscape Communications Corp.
(NSCP), shot 6-7/16 points higher to 41-3/8.
Mountain View, Calif.-based Netscape, which
makes the popular Navigator and Communicator
browsers, said it was "supportive" of the Justice
Department's actions. Netscape holds a commanding
share of the browser market but Microsoft has been
making inroads into Netscape's share.
Microsoft will have an opportunity to respond to
the petition in writing within 11 days. At that time, a
judge will decide whether a hearing is needed.
-- Robert Liu
U.S. Attorney
General Janet Reno
Asst. Attorney
General Joel Klein
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