Microsoft probe grows
USA Today - 06/15/98- Updated 10:15 AM ET
The Justice Department is investigating whether Microsoft is leveraging
its near-monopoly Windows software for desktop personal computers to
get a leg up in perhaps the fastest-growing computer market: hand-held
PCs.
Microsoft is offering a coupon for a free copy of Windows 98 - its new
operating system for desktop PCs - to customers who buy a palm-sized
PC powered by Microsoft's Windows CE software by June 30.
Windows 98 is an upgrade of Windows 95, which runs 90% of desktop
PCs. Antitrust law frowns on using a monopoly product to gain
advantages in new markets, and on predatory pricing, or selling a product
below cost to lock out rivals.
Justice and 20 states last month filed an antitrust case charging Microsoft
with leveraging Windows 98 to gain advantage in Internet software.
Lawyers familiar with the matter say Justice is now looking at
Microsoft's efforts to muscle its way into software for corporate
networks, hand-held PCs and cable boxes. Justice officials would not
comment.
The software giant's latest offer "could raise questions," says Bob Litan,
a former Justice lawyer at the Brookings Institution, a think tank.
"They're constantly using their existing power as a leverage tool to create
a new market" in other products, says Ed Black, president of the
Computer and Communications Industry Association.
But Microsoft's Jim Cullinan says, "This is just a good promotion that
offers incentives for people interested in getting a palm-sized computer to
get another great product."
Windows 98 sells for $85 to $109. Palm PCs cost $300 to $500, including
Microsoft's $25 Windows CE software.
Courts generally let companies package new products with dominant
products in the "first few months" of a new product introduction, says
William Kovacic of George Mason University Law School. But he adds,
"If I were a monopolist I'd be worried."
Microsoft has just entered the exploding market for palm PCs, which
offer Web browsing, e-mail, and other features. 3Com, the dominant
player, has sold 1 million of its PalmPilots which use its own software.
But Microsoft-powered models could grab as much as 85% of the
market in five years, says analyst Rob Enderle of Giga Information
Group. Consumers, he says, will be drawn by its compatibility with
Windows-based desktop PCs.
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