August 19, 1997 11:00 AM PDT

DOJ scrutinizes Microsoft buyouts

The Justice Department is probing Microsoft (MSFT) for its acquisitions and investments in the video streaming market, as well its stake in Apple Computer.

Although Microsoft's $150 million investment in Apple does not require an antitrust filing, the agency still can review such investments for possible antitrust effects, an agency spokeswoman said. "We're looking at these transactions," she said.

As reported last night by CNET's NEWS.COM, Microsoft spokesman Mike Murray said he is not aware of any such review of the Apple-Microsoft deal. Apple has not been notified about the review either, according to an Apple spokeswoman.

Murray said Microsoft received "a request for information" involving its recent acquisition of VXtreme, as well as an earlier deal to buy a 10 percent stake in Progressive Networks. (The Justice Department also is reviewing an earlier video streaming deal involving VDOnet.) But Murray cautioned: "Just because they are reviewing [these deals] doesn't mean there are any anticompetitive issues."

Progressive Networks, which makes RealAudio and RealVideo software, also received a request for information in the case.

Microsoft said it will cooperate fully with the "non-public inquiry." "We are confident that the Justice Department will conclude that competition is robust once it reviews all the facts," said William Neukom, Microsoft's senior vice president of law and corporate affairs. Besides Microsoft, Oracle, Silicon Graphics, IBM, and Sun Microsystems have announced streaming products, the company said.

Microsoft's business practices have come to the Justice Department's attention before, but this review marks the first since it launched a bold acquisition and investment strategy into more consumer-driven businesses this year, including a $1 billion investment in cable television giant Comcast, a 5 percent investment in VDOnet, and the $150 million investment in Apple. The investment strategy has come under fire by many competitors of Microsoft.

The Progressive deal, in which Microsoft holds a minority, nonvoting interest, gives the software giant the technology and market penetration it needs to push its technology as a standard for the streaming multimedia industry, analysts said. By defining a standard, the company can neutralize competitors, analysts say.

Last month, the Federal Trade Commission rejected the request by three senators to reopen an independent antitrust investigation of Microsoft's business practices. The senators felt the Justice Department's ongoing antitrust investigation was proceeding too slowly.

The senators were acting on allegations that the Redmond, Washington, company was not abiding by a 1994 consent decree that blocked it from using its Windows operating system to leverage the shipment of other Microsoft software. Microsoft executives denied any such breach.

In May, NetAction, an Internet-based consumer advocacy rights group, opened a campaign to "mobilize cyberspace consumers to demand stronger enforcement of antitrust laws to prevent monopolies." It primarily targeted Microsoft.

 

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