Public, states not fuming over Microsoft Company doesn't ignite the hostility -- or lawsuits -- that tobacco firms do
By Andrew Zajac and Elisa Williams
Tribune Staff Writers
May 10, 1998
It was easier with tobacco.
In recent months, 40 states have sued tobacco companies seeking multibillion-dollar settlements from businesses a large segment of the public loves to hate. Friday, the State of Minnesota won a $6.1 billion tobacco settlement, dramatically underscoring the benefits of such litigation.
Suing the software behemoth Microsoft Corp., a darling of the fast-revving high-tech economy, is trickier political business.
Representatives of attorneys general from 42 states were on the line last week to discuss filing an antitrust suit in time to block the release of Windows 98, Microsoft's next-generation operating system. The concern is the company is using the dominance of Windows and its built-in Internet browser to crowd out competition for booming markets in software for on-line commerce and communication.
Windows 98 ships to computer-makers on Friday.
How many states actually will take part in any antitrust suit remains unclear. There is a core group of 13 states that have participated in discussions for months; now, according to people who have been in on the talks, between 13 and 25 states are expected to sue.
The shifting number of participants -- and the reluctance of most of them to speak publicly about Microsoft -- reflects the uneasiness elected officials feel about the prospect of going to court in a free-market era against a wildly successful company revered as an icon of the current economic boom.
"I can guarantee you that they're getting e-mail and voice-mail messages saying, 'Keep government regulation out of the marketplace,' " said a state official involved in preparing the suit.
But for all of the wariness of the blunt instrument of government intrusion into commerce, "among the core group of attorneys general, there is a very high degree of consensus and there has been almost from the start," said Connecticut Atty. Gen. Richard Blumenthal.
That core group comprises a curious coalition of traditional liberals, like Blumenthal, middle-of-the-road Republicans like Jim Ryan of Illinois, and even a conservative Republican in Charlie Condon of South Carolina.
Other states involved are New York, Texas, Iowa, Minnesota, Wisconsin, Massachusetts, California, Florida, Ohio and West Virginia
"The extraordinary thing about this group is that it spans the ideological spectrum," said Blumenthal.
Although none of the attorneys general has publicly committed to a suit, it's expected that states will file one against Microsoft next week, at the same time the Department of Justice is expected to bring its second antitrust action against the software-maker.
A suit brought by attorneys general is likely to reflect political sensibilities more than one pursued by federal bureaucrats, according to Richard Gray, an antitrust attorney based in San Jose, Calif.
"They do bring more of a consumer-level focus because attorneys general are all elected and are going be sensitive to their constituents," said Gray, of Bergeson, Eliopoulos, Grady and Gray.
That political sensitivity may persuade some states to stay out of a suit.
"There's not a big bucket of money here like there is in tobacco litigation," Gray said. "And depending on what they try to do, there's a possibility they're going to lose."
Then there's the issue of public awareness. For all of the hype about the Information Age, most people still don't have a home computer, much less Internet access.
Penetration of PCs is at 40 percent, while only about 25 percent of homes have Internet access. An aggressive attorney general runs the risk of spending tax money on a problem constituents don't understand -- and one that appears to run counter to the prevailing laissez-faire business climate.
Microsoft last week sought to exploit this uncertainty by releasing its poll showing that the majority of Americans oppose government action against Microsoft. In Illinois, according to the poll, 67 percent of the sampling thought it would be a "bad use of your tax dollars for your attorney general to bring a lawsuit" against Microsoft.
Microsoft's corporate stature makes it unlikely that states will pile on the way they have with lawsuits against tobacco producers.
"Microsoft has some leverage that the tobacco companies didn't have," said one participant in the attorneys general talks. "That changes the dynamics. It means there won't be 40 states signing up for a suit."
Indeed, Atty. Gen. Blumenthal, of Connecticut, calls Microsoft, "a great company. You can't vilify Microsoft."
But if there's a reluctance to take on a much-admired company run by the world's richest man, Blumenthal and some of his colleagues also see compelling reasons to act.
While the Internet-connected computer isn't yet ubiquitous in American households, it's heading that way, with sub-$1,000 computers bringing more people on-line. In the business world, being wired is now an absolute requirement.
Microsoft controls the operating systems of 90 percent of all desktop computers. More critically, to technologists and antitrust lawyers, the company has used that monopoly on operating systems to quickly leverage a big presence in the market for browsers, the software used to pilot through the Internet.
From no presence at all, Microsoft has zoomed to a roughly 50 percent market share in less than three years. Furthermore, with Windows NT, Microsoft is moving aggressively in the market for operating systems for business computers.
Microsoft and its allies have argued that the computer business is different from all others because it changes so quickly and that Microsoft's ascendance could stall in the click of a mouse.
"I'm from the camp that the capitalistic system can take care of itself," said Platinum Technology Inc. CEO Andrew J. Filipowski, whose Oakbrook Terrace-based company provides software and services to corporate customers.
"They've arrived at this point in time, but they're not infallible," Filipowski said. "All companies go through cycles."
But because there's so little history for guidance, it remains an open question whether stability growing out of Microsoft's dominance fosters innovation, as the company maintains, or chills it by making developers fearful of competing in areas in which Microsoft has a presence.
"That's a tougher issue to shoehorn into antitrust laws, but it's very real," said Gray.
By taking up the cudgel against Microsoft, attorneys general would be guessing it's better for government to step in and provide ground rules for a fledgling industry at the outset than to wait for markets to rule.
Predicted one attorney general: "This will be viewed more in terms of its historical significance instead of its immediate impact on consumers."
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