US court action claims Microsoft `illegal monopoly'

 

Microsoft, the world's largest software company, was yesterday sued by the US government for being an illegal monopoly, in its bitter struggle with Netscape Communications, its Internet software rival.

Backed by 20 states, the government accused Microsoft of a wide range of anti-trust violations in a pattern of predatory business practices over several years. It asked a federal court in Washington for an immediate injunction to change Microsoft contracts with computer makers and Internet service companies.

The move was dismissed by Microsoft's chairman, Mr Bill Gates, as a "a step backwards for consumers, for America and for the personal computer industry".

Mr Gates told a press conference at the company's Redmont, Washington, headquarters he was "disappointed" at the failure of talks with the government and a coalition of 20 states designed to head off court action.

He said the suit was "counterproductive, costly to the consumer and ultimately will be unsuccessful in court".

But the US attorney general, Ms Janet Reno, charged that Microsoft had engaged in "anti-competitive and exclusionary practices" in a bid to maintain and extend its monopoly in the computer operating systems market.

Drawing on evidence from internal Microsoft memos, the US government and 20 states sued the company for planning "an illegal conspiracy" with Netscape to divide up the market in internet browsers, which navigate the world wide web.

When Netscape refused to go along with Microsoft's plan in 1995, the company used its monopoly in Windows operating software to "cut off Netscape's air supply" by blocking its access to the marketplace, the government alleges.

Mr Joel Klein, head of the antitrust division at the US Justice Department, said: "Nothing we are doing here will or should prevent Microsoft from innovating or competing on the merits. What cannot be tolerated - and what the antitrust laws forbid - is the barrage of illegal, anti-competitive practices that Microsoft uses to destroy its rivals and to avoid competition on the merits."

At its heart, the lawsuit, accuses Microsoft of abusing its monopoly in operating software to force other products on to consumers and computer makers.

The government argues Microsoft sought to crush Netscape when it realised that internet software could eventually undermine and replace its Windows operating system.

In a statement, Microsoft said the antitrust suits were "without merit" and vowed to fight them.

Perhaps the most damaging evidence unearthed by the Justice Department is a series of internal memos and emails charting Microsoft's strategy to squeeze out Netscape.

Mr Gates is quoted in an internal email as offering Intuit, the software company, $1 million of business "favours" in exchange for switching from the Netscape browser to Microsoft's.

At a federal court in Washington, the government and states yesterday applied for a preliminary injunction forcing Microsoft to separate its browser from its flagship Windows operating soft ware. If Microsoft refuses, the injunction would force the company to include Netscape's products alongside its own.

The injunction, if granted, would also allow PC manufacturers the freedom to install any software they choose. Microsoft is alleged to have forced its browser on all new computers. Ms Reno said: "Microsoft has an excellent record of innovation. But we want to make sure that the field is open to the next Microsoft."