Penalty urged in Web battle U.S. asks judge to hold Microsoft in contempt in antitrust action

Mockery of ruling alleged

Justice Department seeks advance review of firm's products

December 18, 1997|By NEW YORK TIMES NEWS SERVICE

WASHINGTON -- The federal government accused Microsoft yesterday of violating last week's antitrust ruling, and argued that prosecutors should be given a rarely used authority to review in advance the new products of the software giant.

Escalating a high-stakes legal battle that has broad implications for control over the Internet, the Justice Department accused Microsoft of making a mockery of a federal judge's decision last Thursday requiring the company to stop forcing computer manufacturers to install its Internet browser along with its Windows 95 operating system.

Justice Department officials accused Microsoft of failing to comply by offering three unworkable choices to personal computer makers. Microsoft told manufacturers earlier this week that it would only be able to offer an outdated version of the Windows 95 software without the browser.

The company also said that manufacturers could remove the browser from more recent versions, but it said that would disable the Windows program.

The third choice was to continue selling them together -- the marketing strategy before the order.

The Justice Department said yesterday that, in effect, Microsoft had thumbed its nose at the judge. In a strongly worded motion filed in U.S. District Court, antitrust prosecutors said that Microsoft had given computer makers and consumers a false series of choices in an effort to circumvent Judge Thomas Penfield Jackson's injunction.

"Far from treating the court's order with obedience and respect until properly challenged, Microsoft has cynically acted as if the preliminary injunction permits it to perpetuate the very conditioning the court enjoined," the Justice Department said in court papers.

"Microsoft's naked attempt to defeat the purpose of the court's order and to further its litigation strategy is an affront to the court's authority; the court accordingly should hold Microsoft in civil contempt and act swiftly to bring it into compliance."

The department renewed its request that the court impose a $1 million-a-day fine on Microsoft.

And, in a rare move, it asked the judge to give the government new authority to review any new operating systems or browsers made by Microsoft at least 30 days before their commercial release. Such a review would permit the department to make sure that the company was continuing to comply with the injunction.

Justice Department officials said the advance review was the only way to ensure compliance from a company that had "flouted a court's order." They said the company's lawyers were unable to reach an agreement with the department this week.

In a letter sent to the Justice Department's Antitrust Division yesterday, Microsoft responded that it had complied fully with the court order and that prosecutors were now seeking to impose new and unreasonable demands on the company.

"We believe that the division's suggestion that Microsoft break Windows 95 a bit -- by making it hard or impossible for end-users to find many of the Internet-related features of the product -- is profoundly anti-consumer and could advance no conceivable goal of the antitrust laws," the letter said.

William Neukom, the company's top lawyer, said that the Justice Department was complaining because it had finally realized, as Microsoft had asserted, that it is simply not possible to separate the browser from the current operating system without paralyzing a personal computer.

"The government is getting what it asked for, and what it asked for doesn't work," said Neukom, a senior vice president for law and corporate affairs. "The reason it doesn't work is that this is an integrated product and it performs as an integrated product."

The move yesterday by the Justice Department was the latest in a rapidly evolving battle that began two months ago when the attorney general, Janet Reno, decided to file suit against Microsoft, charging it with leveraging its monopoly on computer operating systems to gain control over the Internet.

Competitors and the Justice Department had complained that the company had forced computer makers who want to use Windows 95 -- the dominant operating system for personal computers -- to also use the company's Web browser, Internet Explorer.

Internet Explorer has steadily gained market share, used by about one-third of the people who navigate the Internet's World Wide Web. This advance has eroded the market share of Net- scape Communications Corp.'s browser, Netscape Navigator.

Microsoft has responded that it is simply enhancing its products and that the government's action will discourage innovation.

Microsoft has said all along that it would appeal the judge's preliminary injunction, which was issued last Friday. But in the interim, it said it would comply by giving manufacturers the choice of offering an older version of Windows 95, disconnecting the browser from newer versions of Windows 95 or offering the two together.

Justice Department lawyers have asked Jackson to reject these options, saying that Microsoft could easily offer the latest version of Windows 95 without the Internet Explorer browser and not disable the operating system. That, they claimed, would give computer makers a "meaningful option of licensing Windows 95 without the browser."

The department asked the judge to order Microsoft to respond to its contempt motion by tomorrow.

The Justice Department's announcement came after the stock market closed. Earlier, shares of Microsoft fell $3.4375, to $135.625, in trading on the Nasdaq market.

Pub Date: 12/18/97

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