Sources Say Microsoft To Be Sued
May. 14, 1998
WASHINGTON (AP) _ In a legal fight that may alter America's high-tech landscape, the Justice Department and at least 18 states are hitting Microsoft Corp. with federal antitrust lawsuits, barring last-minute concessions from the company, sources familiar with the plans said.
The sources said the lawsuits were to be filed today in U.S. District Court in Washington. One person familiar with the states' case said the lawsuits were certain ``unless (Microsoft Chairman) Bill Gates makes an offer.''
The action _ one of the biggest antitrust efforts since the 1984 breakup of AT&T _ culminates a high-profile investigation by the federal government and the states into the business practices of Microsoft, the world's most influential software company. Its Windows products are used on virtually all desktop computers.
The case could have profound implications on the Redmond, Wash.-based company's legal freedom to add new features to Windows, such as the ability of computers to understand speech.
The states are asking a federal court in a 48-page complaint to force Microsoft to relax many of its sales agreements with computer makers, giving them more freedom to install competitors' products over Microsoft's and to customize the versions of Windows they sell, the sources said.
If Microsoft doesn't agree, the states may ask the court to block the latest upgrade to the company's widely used operating system, Windows 98, which is expected to be shipped to computer makers Friday. A research company, International Data Corp. of Framingham, Mass., estimated Wednesday that Microsoft would sell 19.7 million copies during 1998.
The Justice Department and the states contend that Microsoft has wielded its monopoly status to illegally crimp competition, especially in the market for Internet browsers, the software that people use to view information on the World Wide Web.
Microsoft has included its browser free in the latest versions of Windows. That has devastated the market for its biggest competitor, Netscape Communications Corp., which saw its own share of the world's browser use fall from 90 percent to 60 percent _ to about 68 million copies _ in just a few years.
``Certainly a difference between the Microsoft case and the cases of the '80s, (is) the government seems far more willing to listen to competitors complaining,'' said Geraldine Alexis of Chicago, the vice chairwoman of the American Bar Association's antitrust committee and a former Justice Department attorney.
``... I'm not sure in the Microsoft case that we have a government examining what the impact of all this is on consumers. I think they're listening too intently to competitors' complaints,'' she said.
The states that have agreed to sue Microsoft were identified as: California, Connecticut, Florida, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, New York, South Carolina, Utah, West Virginia and Wisconsin, plus the District of Columbia. Other states could join.
One source said the Justice Department ``made it clear they intend to file a parallel action,'' filing a separate lawsuit simultaneously with the states in Washington.
Although the states and the federal government have been investigating many of the same issues, it was unclear how much the Justice Department's complaint would overlap with the case being filed by the states. A Justice spokesman wouldn't talk about the case Wednesday.
The state antitrust case would not seek monetary damages, at least initially, and would not ask Microsoft to re-engineer its software, a source said.
``We can't speculate about what the states may or may not do,'' Microsoft spokesman Mark Murray said late Wednesday. ``We've been working closely with the states. ... We think a lawsuit would be damaging to consumers and to future innovation in the high-tech industry.''
Microsoft's stock price before the market opened today was 86 15/16, up more than one point over Wednesday's opening. The company's shares have fallen 13 percent since closing at 100, an all-time high, just three weeks ago.
The states don't represent a totally united front: Texas, one of the states that led the antitrust investigation, announced earlier this week it would wait weeks before deciding whether to proceed, in part because of intense pressure applied by Texas computer companies.
And Indiana backed out of the case Wednesday _ at least for now _ because its attorney general was uncomfortable with efforts to block Windows 98 and because Microsoft already has relaxed some of its sales agreements.