Originally created 05/18/98

Courtroom collision looms for Microsoft



WASHINGTON -- The long-awaited courtroom collision between the government and Microsoft appeared imminent Sunday, with the Justice Department and at least 20 states set to file antitrust suits Monday that could change how consumers buy and use most computers.

With negotiations stalled, the world's most powerful software company has said it will go ahead and ship on Monday to computer makers the latest upgrade of its flagship software, Windows 98. The company had planned to ship the package on Friday, but agreed last week to delay its release until Monday, pending the outcome of talks.

Eleventh-hour negotiations collapsed Saturday over what Microsoft described as the government's "unreasonable demands," including a condition that the company put a copy of rival Netscape Communications Corp.'s Internet browser in every copy of Windows, the operating system used to run virtually all desktop computers.

"I do sometimes shake my head and wonder why this is happening. I just don't understand," Microsoft Chairman Bill Gates told Time Magazine. "We worked hard to settle. I wish we had been able to. I'll seize every opportunity to do so."

One government official said Sunday that Microsoft "absolutely refused any meaningful concessions at the end of the day."

The Justice Department and the states believe Microsoft is using its market dominance with Windows to illegally stifle competition in other parts of the computer industry, especially the fiercely competitive market for Internet browsers, the software people use to view information on the World Wide Web.

Two government officials involved in the negotiations said independently Sunday that Microsoft withdrew a major concession it had made earlier in the week, which would have given computer makers more freedom in choosing the screen that consumers see when they first turn on the computer.

"The Microsoft negotiators said Bill Gates had rethought it and now said that Bill Gates wouldn't discuss it," one government official said. "That was the tenor of the talks.... It was the total refusal on Microsoft's part to yield meaningfully. There was no question that they agreed to do some things and then reneged."

Microsoft acknowledged it made several offers throughout the negotiations but said it withdrew each one only after government lawyers rejected them.

"These negotiations were definitely a one-way street. We negotiated for 10 days and made offer after offer after offer, but the government never budged an inch," Microsoft spokesman Mark Murray said.

"We don't think a lawsuit helps anyone, and it isn't a good use of taxpayer dollars," he added. "But in the end, it became clear that the government was simply asking for steps that were completely unreasonable."

Also during the negotiations, Microsoft bitterly resented a suggestion that it ship a copy of rival Netscape's browser in every copy of Windows it sells. One source familiar with the talks said that when the government made that demand, Microsoft's stunned lead attorney, William Neukom, repeated it aloud to make sure he had heard it right.

Reasoning that its own browser is tightly integrated with the latest versions of Windows, Microsoft requires computer makers to install it as part of the operating system. The government defines that restriction, under the federal Sherman Act, as "tying" the products, and says it therefore asked Microsoft to include other browsers, including Netscape's.

Under antitrust law, a requirement that manufacturers include a competitor's product is usually reserved for cases in which a monopoly owns the sole method of distribution, such as a vital pipeline or electrical lines.

"It's indefensible that the government would try to force Microsoft and computer makers to give Netscape a free ride on every copy of our Windows operating system," Microsoft's Murray said. "Netscape clearly has a myriad of ways to distribute its product to customers. We don't think there's any basis in law to make such an unreasonable demand."