August 7, 1996 3:00 PM PDT

Antitrust questions won't go away

Gary Reback is once again the most hated man in Redmond, Washington.

The Justice Department has investigated Microsoft three times in the past three years on antitrust grounds, and now Netscape Communications and its high-profile antitrust lawyer--Reback--want a new look at Microsoft's business practices.

"We believe your effort to limit consumer choice by artificially restricting your product's functionality (whether through technical or licensing means) violates antitrust laws," the lawyer wrote in a letter fired to the software giant's headquarters. "In any case, if you want to flaunt your contempt for consumers in this way, you will have to do it without Netscape's cooperation."

But the tenacious attorney needs to make this case before the federal government to inflict any serious pain on Microsoft. What kind of reception he will get remains an open question.

The assistant attorney general who led earlier investigations of Microsoft, Anne Bingaman, recently announced she would leave the department by November 15, and observers in and out of Washington wonder whether her successor will prove as aggressive.

A department spokeswoman declined to comment on whether the government would respond to Reback's informal request for a new Microsoft probe, saying only that "we have had an ongoing investigation into the software industry." She stressed that Bingaman's departure would have no effect on the antitrust division's vigorous enforcement of the law.

The earlier antitrust investigations did little to lessen Microsoft's dominance in the software industry, but not for lack of trying:
--In July 1994, Justice opened an investigation into how Microsoft charged computer manufacturers for its Windows operating system. The dispute centered on Microsoft's practice of charging PC manufacturers a fee for each machine they shipped, even if a particular PC was delivered preloaded with an OS from a Microsoft competitor. The probe ended in Microsoft signing a consent decree, agreeing to charge PC makers only for machines that came bundled with its operating systems.
--In April 1995, the antitrust division filed suit to block Microsoft's acquisition of personal finance software powerhouse Intuit. The department sided with Netscape--again led by Reback--in maintaining that the merger would give Microsoft a monopoly in the personal finance software market, leading to higher prices and less innovation. Although the case never made it to court, a month later Microsoft and Intuit announced that they were scrapping the deal.
--Last summer, federal attorneys looked into Microsoft's bundling of software for the Microsoft Network, the company's online service, into Windows 95. The Justice Department took no action on the bundling issue, which other online services said would give MSN an unfair advantage in drawing subscribers to its information and other services. The issue waned as competitors and MSN shifted focus and concentrated on making content available to the Web instead.

Now, however, Microsoft's efforts to establish its Internet Explorer as the leading browser may rekindle the debate over the company's dominance of the PC software market. The company has announced deals with several Internet service providers, including Netcom and AT&T, to bundle access software into Windows 95 in exchange for those companies adopting Explorer as a default or featured browser in their Internet services.

Netscape, for one, is worried that it can't compete with an offer to bundle access in the most popular computer OS and that the deals will undercut its current dominance of the browser market. That's why it has unleashed its secret weapon: Reback.

 

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