Newsgroups: comp.os.os2.advocacy,comp.os.ms-windows.advocacy
From: stevew@actrix.gen.nz (Steve Withers)
Subject: WiReD on MS and the DOJ
Message-ID: <CopowG.CC2@actrix.gen.nz>
Date: Sat, 23 Apr 1994 12:19:27 GMT

                                                                                
 WIRED 2.04                                                                     
 Oh No, Mr. Bill!                                                               
 ****************                                                               
                                                                                
 The Inside Story of the US Governments' Antitrust Case Against Microsoft       
                                                                                
 By Wendy Goldman                                                               
                                                                                
                                                                                
 Anne Bingaman had just crossed around Janet Reno's desk, flung her arms        
 about the attorney general, and squeezed. She had Reno in the grip of one      
 of her famous bear hugs. The rest of the staff stood in awe and kept a         
 polite distance. These were  towering figures: the Justice giantesses.         
 Reno is nearly 6'2", but some in the room noticed that antitrust titan         
 Bingaman somehow managed to envelope her.                                      
                                                                                
 It was a December morning at the DOJ. The staff meeting had begun as           
 usual: at 8 am every Tuesday. All the bigwigs were present, and no one was     
 overly surprised to see Anne Bingaman - known to be direct, demonstrative,     
 and aggressive - being so  familiar with the attorney general.                 
                                                                                
 That's not to say that Reno and Bingaman always agreed. Well into the          
 meeting, Bingaman engaged in a heated argument with her mentor - about a       
 certain ambiguous ethical rule. "Janet didn't expect to get an argument        
 from anyone but Anne," said one  staffer present at the meeting. Bingaman      
 wanted her staff to be able to cut through the bureaucracy. In short, she      
 wanted action. And Bingaman was usually one to get it. She had only            
 recently set in motion a major reorganization of the antitrust  division,      
 one that would see the unit emerging from the long slumber that began in       
 the '80s, when, after the AT&T breakup, the Reagan administration              
 essentially pulled the plug on antitrust enforcement.                          
                                                                                
 As Bingaman and Reno wrangled on this December morning, the groundwork was     
 being laid for a federal antitrust injunction against Microsoft Corp.          
 After a long and meandering investigation that had begun back in 1989 at       
 the Federal Trade Commission,  Bingaman was about to give Microsoft            
 Chairman Bill Gates one of her famous bear hugs - this time in the form of     
 an antitrust suit.                                                             
                                                                                
 Mitchell Kapor, founder of Lotus Development Corp. and now chair of the        
 Electronic Frontier Foundation, once said that Bill Gates wants nothing        
 more than to be the Rockefeller of the Information Age. If that's true,        
 Anne Bingaman just might be his  trust-busting Teddy Roosevelt.                
                                                                                
 By March or April of 1994, sources close to the case said, Bingaman's          
 antitrust deputies will call Bill Gates into their DC offices under the        
 threat of a very public, and very viable, antitrust lawsuit. There they        
 will give Gates a chance to nip the  case in the bud by signing a consent      
 order that would force Microsoft to stop a range of alleged predatory          
 practices. If he refuses (and Bill does not have a track record of bowing      
 to government pressure), the Microsoft case may well join AT&T and  IBM in     
 the antitrust hall of fame.                                                    
                                                                                
 According to government sources and documents, Washington attorneys, and       
 witnesses close to the case, Bingaman's staff has found substantial            
 evidence suggesting that Microsoft has violated the Sherman and Clayton        
 acts, the most basic of antitrust  laws. (Most sources interviewed for         
 this story would not go on the record.)                                        
                                                                                
 Toward the end of January 1994, sources said, DOJ insiders were scurrying      
 to have the case ready to file by early April, just before the                 
 much-vaunted annual spring meeting of the antitrust section of the             
 American Bar Association in Washington.                                        
                                                                                
 (Historically, the Supreme Court has timed its rare antitrust opinions         
 right before this early spring antitrust powwow. "When the Supreme Court       
 has an antitrust case they always try and get it announced the week before     
 so the bar can kind of chew on  it at this spring meeting. The DOJ wants       
 to do the same," said a Washington attorney working on the Microsoft case.)    
                                                                                
 Bingaman had just hired Sam "Ziggy" Miller, a trial lawyer from the San        
 Francisco law firm of Morrison & Foerster, specifically to head up             
 litigation for the Microsoft case. While the case could be filed anywhere      
 in the US, sources said it would  most likely be filed in the US District      
 Court for the Northern District of California, the jurisdiction including      
 Silicon Valley and most convenient to the numerous parties that would be       
 called as witnesses.                                                           
                                                                                
 A public announcement of the first major monopoly case in more than a          
 decade - right before the prestigious ABA event - would be sure to have        
 the nation buzzing, and Bingaman would be recognized for heralding in a        
 new era in antitrust enforcement.  While declining to comment on the           
 specifics of the case, Andrew Berg, an attorney who represents Lotus           
 Development Corp., acknowledged that "more and more people have been put       
 on the case, as the evidence has proved to be substantial. We hope to see      
 some action in early spring."                                                  
                                                                                
 After years of testimony and thousands of pages of evidence, an entire         
 industry is perched in anticipation of the DOJ's action. The outcome of        
 the case would have the potential to affect not only Microsoft's behavior      
 in emerging markets, but also  the future viability of smaller digital         
 players in the marketplace, and the variety and cost of computer products      
 available to consumers. Moreover, the case promises to set a standard by       
 which future antitrust cases in high-tech industries would be  weighed.        
                                                                                
 Either by forcing Microsoft to sign a consent order, or through a              
 successful law-suit, the case could dramatically alter the competitive         
 landscape.                                                                     
                                                                                
 "(Microsoft) uses the OS as the locomotive to pull a whole train of            
 products through the market," said Bill Bluestein, director at Forrester       
 Research Inc., a Cambridge, Massachusetts, market research firm. "What         
 this will do is weaken Microsoft's  ability to set the standard in the         
 industry. They'll have to truly compete... It would end a lot of the funny     
 business that people allege Microsoft engages in."                             
                                                                                
 Bingaman's relationship with Reno will be critical to the antitrust            
 chief's ability to accomplish her goals. Indeed, the financial and             
 philosophical support of both the attorney general and the Clinton             
 administration has proven essential to the  emergence of what promises to      
 be the most important antitrust case since the breakup of AT&T in the mid      
 '80s.                                                                          
                                                                                
 The remedies sought in the Microsoft case, however, would be vastly            
 different from those in the landmark AT&T case. Largely because of the         
 government's experience with the drawn-out antitrust suits against AT&T        
 and IBM (the former successful, the  latter not), so-called "structural"       
 cases which attempt to breakup a company would still be avoided like the       
 plague. "The DOJ almost has a genetic memory of these cases, which             
 consumed enormous time and resources, and so stays clear of remedies that      
 point to a split-up," said Robert Pitofsky, a key Clinton antitrust            
 advisor who served on the president's transition team. (The epic IBM case      
 severely distracted the computer giant as it battled the Justice               
 Department from 1969 to 1982.)                                                 
                                                                                
 Instead, the case against Microsoft would be approached with surgical          
 precision, focusing on relief through very specific changes in the             
 company's software licensing policies and other business practices deemed      
 to be anti-competitive. If a consent  order is finalized, Microsoft would      
 soon afterwards have to file a compliance report stating what it has done      
 to comply, and it probably would have to submit annual reports thereafter.     
 Should an order be signed, its particulars will be enforced by a  DOJ          
 regulator, who will have the right to review any and all Microsoft             
 practices relating to the decree. Any violation of that decree would           
 constitute contempt of court, resulting in fines, and, in extreme cases,       
 jail time for Microsoft officers.  And nothing is ever straightforward -       
 if Gates refuses to sign and the DOJ files its case, it is probable that       
 Microsoft will request a summary judgment throwing it out.                     
                                                                                
 But attorneys close to the case say that tactic won't fly. "This is a          
 clean, tryable case," said an attorney working on the case who asked to        
 remain anonymous. "Justice does not want to get involved in another land       
 war in Asia with the computer  industry. The only group that was stung by      
 the IBM case more than IBM was Justice. This Microsoft suit will not be a      
 repeat of IBM."                                                                
                                                                                
                                                                                
 The Case                                                                       
                                                                                
 Bingaman stuck her neck out last August when she made the unprecedented        
 and very public move of taking over the Federal Trade Commission's             
 deadlocked case against Microsoft. (The case had deadlocked twice because      
 of the recusal of one of the FTC's voting commissioners.) The antitrust        
 chief would not be risking such a high-profile case if she did not feel        
 there was substantial evidence of illegal conduct, her colleagues said.        
                                                                                
 What has Microsoft done to merit being the subject of the first serious        
 monopolization case in more than a decade? Having a monopoly in and of         
 itself is not illegal, and some lobbyists on Microsoft's behalf protested      
 that the government was merely  taking potshots at a global star. Indeed,      
 antitrust law spells out that a monopolist may not be doing anything wrong     
 if, having obtained market power by legitimate means, it maintains its         
 power by possessing superior skill, foresight, and reasonable  industrial      
 practices.                                                                     
                                                                                
 Monopolization is illegal if it can be proved that a company has a             
 specific "intent" to monopolize and a "dangerous probability" of success;      
 or if a monopoly has already been achieved and has been maintained through     
 anti-competitive or predatory  conduct. According to DOJ sources,              
 Bingaman's staff felt it did not have to go far afield to prove that the       
 most basic of antitrust violations had been committed. Microsoft, of           
 course, feels differently. "Microsoft has not engaged in any conduct  that     
 is even arguably in violation of the antitrust laws and intends to defend      
 itself vigorously against any claim to the contrary," said William Neukom,     
 senior vice president of law and corporate affairs, in a statement             
 prepared for this story.                                                       
                                                                                
 "Microsoft does not agree that it is 'in a position of immense power' in       
 the software industry," Neukom continued, quoting one of WIRED's               
 questions. "In our experience, such assertions typically are made by           
 disgruntled competitors who are angry  because Microsoft competes              
 forcefully against them in developing and marketing quality software           
 products. Microsoft's responsibility, however, is to keep its customers        
 happy. Our efforts in that regard may have an opposite effect on               
 Microsoft's  competitors."                                                     
                                                                                
 Perhaps, but long-standing antitrust law clearly prohibits                     
 anti-competitive conduct, and it spells out particular behavior that           
 constitutes restraint of trade. The Sherman and Clayton Acts, enacted in       
 1890 and 1914, respectively, prohibit conspiracy  to monopolize, illegal       
 "tying" of product sales (between operating systems and applications, in       
 Microsoft's case), and "exclusive dealing" that locks competitors out of a     
 marketplace ("per processor" licensing schemes, in Microsoft's case).          
                                                                                
 In legal documents presented to the DOJ, Washington attorneys representing     
 Microsoft's competitors argue that the long-term viability in the              
 operating-systems market requires that entrants be allowed to reach what       
 in antitrust terms is called  "minimum viable scale," or, as the               
 competitors put it, "a minimum market share threshold necessary both to        
 sustain required ongoing investment and to recover the significant sunk        
 cost of entry."                                                                
                                                                                
 As long as entrants are kept below that threshold, the attorneys argue,        
 their ability to survive and compete is greatly hindered. With full            
 understanding of this, Microsoft - according to its competitors - has          
 engaged in a systematic campaign of  anti-competitive practices to prevent     
 competing operating systems from reaching that threshold.                      
                                                                                
 Industry software developers have also provided evidence to the DOJ, under     
 subpoena, that Microsoft's monopoly power in operating systems, and the        
 related interface specifications for those operating systems, gives it         
 control over a "technological  bottleneck" through which nearly all the        
 other participants in the entire PC hardware and software industry must        
 pass.                                                                          
                                                                                
 "If the government takes appropriate action, what will result is greater       
 competition in the market resulting in lower prices and a broader set of       
 products for the consumer," said David Bradford, chief counsel for Novell      
 Inc.                                                                           
                                                                                
 The DOJ's formal charges against Microsoft will comprise a long laundry        
 list of behavior in both the operating systems and application software        
 markets, sources said. Competitors such as Lotus, Novell, Borland,             
 Taligent, Sun Microsystems, and  WordPerfect have, in sworn testimony to       
 DOJ investigators, charged Microsoft with exclusive dealing, predatory         
 pricing, a range of "tying" schemes, predatory disparagement of                
 competitors, monopoly leveraging, and predatory preannouncement of             
 products.                                                                      
                                                                                
 In the applications software market, the key areas of the alleged              
 anti-competitive conduct include misleading application software               
 competitors about future operating system strategies; controlling              
 technology standards to benefit Microsoft's  application products and          
 injure competitors; unfair access to technical information by internal         
 Microsoft application developers; and anti-competitive sales, marketing,       
 and promotional activities.                                                    
                                                                                
 Should Microsoft sign the consent or lose in court, it would face a number     
 of dramatic modifications to its business practices. Among them is the         
 implementation of a "Chinese Wall" that would guarantee that any               
 information not disclosed to the  industry would also not be disclosed to      
 Microsoft's internal developers.                                               
                                                                                
 "The rule would be whatever you tell your own developers you'd have to         
 tell everyone else," said Bob Metcalfe, publisher of Infoworld and             
 inventor of the Ethernet networking technology.                                
                                                                                
 Forrester Research's Bluestein points out that with every new operating        
 system release, Microsoft has an advantage since its developers have had       
 information far in advance of everyone else in the industry. A case in         
 point is Microsoft's current  plans for its forthcoming operating system,      
 code-named "Chicago" and due later this year.                                  
                                                                                
 In addition to "screwing up application developers if the release of           
 information about Chicago isn't timely," Metcalfe said Microsoft is also       
 holding the fate of operating system suppliers like IBM and Apple in its       
 hands. "With Chicago, Microsoft is  angling to shake loose OS/2," Metcalfe     
 said. One of OS/2's major selling points is its compatibility with             
 Windows, he said. If future versions of OS/2 are incompatible with             
 Chicago, its sales will suffer dramatically. The same logic applies to         
 Pink,  the forthcoming OS from Taligent (the joint Apple/IBM company           
 charged with creating a next-generation object-oriented OS).                   
                                                                                
                                                                                
 Exclusive Dealing                                                              
                                                                                
 Microsoft's competitors interpreted the company's long-standing practice       
 of "per processor" licensing as an "exclusive dealing" scheme. Basically,      
 in order to receive a volume discount on operating systems such as DOS and     
 Windows, computer makers  must agree to pay software royalties to              
 Microsoft for every computer they ship, regardless of whether the computer     
 is sold with any Microsoft software. Competitors argued to the DOJ that        
 the result of this licensing practice is the closure of  markets to            
 would-be operating system innovators such as Taligent, Novell, and Sun         
 Microsystems. As opposed to offering volume pricing, with a range of           
 discounts being offered based on different volume levels, Microsoft's "per     
 processor" licenses are  an all or nothing deal, computer makers               
 confirmed. You can sign up and pay royalties on every computer shipped, or     
 you can buy the operating system one copy at a time, for considerably more.    
                                                                                
 "In order to consider an alternative operating system, a computer maker        
 would have to be willing to pay twice for it," said a Zenith Data Systems      
 source. "Everyone is already locked into paying royalties to Microsoft. If     
 a better product came along,  even if we wanted to use it, we couldn't."       
                                                                                
 "The way Microsoft licenses MS-DOS and Windows to original equipment           
 manufacturers is the most efficient and cost-effective method we have          
 found thus far for making our operating system technology broadly              
 available to computer users at low prices,"  Neukom retorts. "Microsoft        
 believes that its licensing practices are entirely legal and in no sense       
 anti-competitive."                                                             
                                                                                
 In addition to challenging Microsoft's "per processor" licensing policies,     
 the DOJ plans to address a variety of alleged "tying" schemes.                 
 "Technological tying" was said to give Microsoft's own internal                
 applications developers advantages that  independent developers do not         
 have in terms of access to information  about forthcoming operating system     
 software and technology. Under the category of "information tying,"            
 computer makers were allegedly threatened that they would not receive          
 critical information on future product releases if they did not agree to       
 pre-load both DOS and Windows on their computers, for example.                 
                                                                                
 Microsoft also allegedly tied sales of its application software to             
 operating system sales, sometimes offering discounts to those who agreed       
 to bundle applications software on their computers. It also allegedly gave     
 itself beneficial "hooks" over  other developers by tying technology           
 included in its operating systems, called undocumented calls, to code used     
 secretly by its own application software and utility software developers.      
                                                                                
 "Microsoft is now in the process of defending its undocumented calls as        
 'trade secrets,'" said Gary Clow, president of Stac Electronics, whose         
 company is engaged in an unrelated patent infringement suit against            
 Microsoft. "This contradicts its  earlier statements that it does not use      
 undocumented code that others in the industry do not have access to."          
                                                                                
 "Microsoft does not engage in tying, nor has it done so in the past,"          
 counters Microsoft counsel Neukom.                                             
                                                                                
 Also high on the DOJ's list of Microsoft's alleged wrongdoings: "predatory     
 disparagement" of competitors' products; creation of an appearance of the      
 "incompatibility" of competing products when none exist (allegations           
 include hooks in Microsoft's  operating systems that throw up misleading       
 "error" messages on the screen when a user is running competing                
 applications software); and alleged practice of "nonlinear pricing."           
                                                                                
 The Clayton Act restricts companies from engaging in predatory pricing         
 that drives competitors out of the market by selling products below the        
 cost of production. In late 1993, Microsoft competitor Novell and its          
 attorneys had, under civil  investigative demand, provided the DOJ with        
 evidence of Microsoft's tying sales of its operating systems to sales of       
 its lackluster Windows for Workgroups software. Microsoft was allegedly        
 attempting to coerce original equipment manufacturers into  pre-loading        
 Windows for Workgroups on their computers along with Microsoft DOS in          
 exchange for a sharp price reduction in royalties. In some cases, Windows      
 for Workgroups was being offered at a lower price than Windows.                
                                                                                
 "Microsoft's practices are those of a classical monopolist bent on             
 preserving and extending its market power by unlawful means," documents        
 submitted to the DOJ by Novell state.                                          
                                                                                
 "The record compiled to date shows serious harm to competition and             
 consumers flowing from these practices," added Novell Chairman and CEO Ray     
 Noorda, who has his own competitive ax to grind, but was one of the few        
 CEOs willing to go on the record.  "Microsoft has been abusing this market     
 for years," he said, adding that if a consent order was reached that           
 forced Microsoft to stop certain of its practices, "that would be a baby       
 step in the right direction. The industry has already been  irrevocably        
 damaged."                                                                      
                                                                                
 Their allegations are clear: By squeezing off distribution at the original     
 equipment manufacturers channel through predatory licensing schemes, and       
 by squeezing out competition through predatory tying schemes, Microsoft        
 was essentially locking up  the operating system market and, by extension,     
 the application market as well.                                                
                                                                                
 Another high-level executive at a well-known software company put it this      
 way: "We were raped by Microsoft. Bill Gates did it personally.                
 Introducing Gates to the president of a small company is like introducing      
 Mike Tyson to a virgin. This has to  be stopped."                              
                                                                                
                                                                                
 Behind the Scenes                                                              
                                                                                
 Changes at the antitrust division, bolstered by the financial and              
 philosophical support of Reno and the Clinton administration, proved key       
 to the Microsoft complaint moving forward again. When Bingaman was named       
 by Bill Clinton last spring as the  nation's top antitrust cop, she knew       
 that a major overhaul of the division was in order. Picking up the             
 Microsoft case served to show the world what she was made of. The woman        
 whom The New York Times called "the most seasoned of pols," wife of a          
 two-term Democratic senator, got the ball rolling - and fast. Some at the      
 DOJ could barely believe their eyes. Feathers were being ruffled, but          
 things were getting done.                                                      
                                                                                
 Almost immediately upon her arrival at the DOJ, Bingaman made a lightning      
 tour around town, surfacing in Congressional offices as well as making the     
 rounds at the Office of Management and Budget. She gave graphic                
 presentations, bolstered by blow-up  charts. She was making her point          
 well: The economy had more than quadrupled, but the size of the antitrust      
 division had stayed the same since WWII.                                       
                                                                                
 As Bill Gates was meandering about the Comdex show in Las Vegas last           
 November - having client dinners, giving his yearly speech to thousands of     
 worshippers, and boogying at the Paladium and the Shark Club - Bingaman        
 and her staff at the antitrust  unit were rejoicing: They'd recently won       
 $4.7 million from Congress to beef up the joint. The trustbusters were         
 back in business.                                                              
                                                                                
 But Bingaman was horrified when the staff presented her with a briefing        
 book showing the antitrust unit's organizational chart and decision tree.      
 The number of boxes that a case had to go through before a decision could      
 be made was astounding.  Bingaman undertook a major reorganization,            
 effectively squashing a vertical reporting structure that had kept the top     
 people uninformed.                                                             
                                                                                
 "The new structure cuts down on wasted work," said Bingaman, in an             
 interview with WIRED. "The problems were chain of command and vertical         
 review." (Along with her staff, Bingaman declined to comment on the            
 specifics of the Microsoft probe.)                                             
                                                                                
 Bingaman's reorganization created a new merger deputy position - filled by     
 former section chief Steven Sunshine - enabled regulatory deputy Robert        
 Litan to devote most of his efforts to Microsoft and other nonmerger           
 cases. That is to say, Microsoft  was his baby.                                
                                                                                
 Litan had known Bingaman for ten years. The two had worked together at a       
 Washington law firm. He held both a law degree and a PhD in economics.         
 Prior to his arrival at the DOJ, Litan spent most of his time as an            
 economist at the Brookings  Institution, having scaled back his law            
 practice at Powell Goldstein to part time.                                     
                                                                                
 The other deputy assistant attorney generals who have played a critical        
 role in the Microsoft case were Richard Gilbert and Diane Wood. They           
 helped Litan evaluate the economic and global impact, respectively, of         
 pursuing a federal injunction against  Microsoft. Gilbert, the economics       
 deputy, was a technology buff and an expert in industrial organization and     
 intellectual property issues. Diane Wood, a University of Chicago law          
 professor, became deputy international affairs at the antitrust division       
 in September.                                                                  
                                                                                
 Bingaman had put together a team to take on big antitrust cases, and she       
 was encouraging them to do so. Microsoft became their first major prey.        
 The staff was seeking to enlarge its complaint to include violations that      
 affected the applications  software market in addition to the operating        
 system market - the core of the stalled FTC complaint.                         
                                                                                
 "I think the truth is, antitrust enforcement is strongly supported on the      
 Hill," Bingaman said. "Big segments of the American people support it, and     
 the business community generally does."                                        
                                                                                
 Contrary to some reports in the press that her aggressive enforcement          
 mission ran counter to Gore's information policy, Bingaman was well            
 supported by the White House. "I'll tell you the truth. I've never had a       
 problem with the White House at all in  any of this. This is a figment of      
 the press' [imagination] to me," Bingaman said.                                
                                                                                
 At the same time, Attorney General Reno had the power to put a stop to any     
 investigation or case at the antitrust division that she felt was              
 inappropriate. Reno, in fact, was giving Bingaman all the resources she        
 needed to succeed, including $1  million out of her own discretionary          
 budget. And with the $4.7 million windfall from Congress, by early             
 December Bingaman was preparing to hire about 30 new attorneys, 60             
 attorney assistants, and a slew of economists. A good portion of these         
 resources would be used on the Microsoft case.                                 
                                                                                
                                                                                
 The Probable Outcome                                                           
                                                                                
 Back in early December, Robert Litan and section chief Richard Rosen, who      
 was overseeing the group of lawyers doing all the legwork on Microsoft,        
 were envisioning the case in court.                                            
                                                                                
 The DOJ would not seek monetary damages from Microsoft, contrary to some       
 speculation in the press. Instead, an injunction in federal court would be     
 sought that would order Microsoft to stop certain behavior in the              
 marketplace. Litan, Gilbert, and  the others were well aware that if the       
 case went to court - that is, if Microsoft refused to sign a consent           
 decree - the company would be taking a big risk. Besides having to air its     
 laundry in public, if Microsoft lost, the case could pave the way  for a       
 slew of private lawsuits.                                                      
                                                                                
 "We are not in the business of attacking concentration for its own sake or     
 impeding innovation for God-knows-what reason," Gilbert said. "It's very       
 much a question of: Are there combinations or practices where we have good     
 reason to believe they're  interfering with innovation or delivering goods     
 at the best prices? If we think that's going on, we'll challenge it."          
                                                                                
 Basically, competitors want a level playing field. If Microsoft wants to       
 disclose information, then it should disclose to all, they argue. And if       
 it chooses to keep certain operating system information as a "trade            
 secret," then that information  should also be kept secret from its own        
 internal application developers.                                               
                                                                                
 Microsoft's competitors fear that if the Justice Department does not force     
 Microsoft to change its behavior in the marketplace, Microsoft will            
 "leverage" its monopoly position for an advantage in new markets spawned       
 by the convergence of digital  technologies. There will be new                 
 applications required for interactive television, for example, and Gates       
 is already lining up control of that platform by putting Microsoft             
 operating systems at the heart of set-top boxes and other new devices          
 through  alliances with TCI, Sega, and others. If Microsoft's licensing        
 policies along the digital superhighway are the same as in the computer        
 industry, competitors have plenty to fear.                                     
                                                                                
 Meanwhile, the staff is prepared for the following scenario: Litan calls       
 Microsoft chief counsel Bill Neukom and Chairman Bill Gates into his           
 office and informs them that the division is preparing to sue. They're         
 offered a detailed consent order to  sign. If Microsoft refuses to sign,       
 within three weeks a lawsuit would be filed by the DOJ in federal court.       
 The case could take years to get to trial.                                     
                                                                                
 If a consent agreement is reached, some negotiation on its terms is to be      
 expected. Attorneys however, have been perusing the details of something       
 called the Tunney Act (officially the Anti-trust Procedures and Penalty        
 Act, approved in 1974) to make  sure that the results would not merely be      
 symbolic. The Tunney Act states that the public will have a chance to          
 comment on any consent decree sought by the Department of Justice.             
 Basically, Tunney throws any consent order into the public forum.              
                                                                                
 As of late January, Washington antitrust pundits were betting that             
 Microsoft would sign a consent order. "Gates would have to be nuts if he       
 didn't," said one Washington attorney.                                         
                                                                                
 So what really happens if Gates signs? What is this whole case about,          
 anyway? Won't Microsoft continue to dominate the market? In the short          
 term, the answer is yes, but a "level playing field" would do much to          
 allow competitors like Taligent and  even unknowns - future Microsofts -       
 into the game. The result could be more competing operating systems, and a     
 broader range of quality applications software as well.                        
                                                                                
 "If you essentially disable Microsoft from using its licensing provision       
 to keep out competitors of DOS and DOS follow-ons, you're going to have        
 more and more competitors of DOS," said a lawyer with intimate knowledge       
 of the case. "Instead of just  DOS with its huge share of the market, if       
 you've got three or four operating systems each having 25 or 30 percent of     
 the market, you're going to provide a lot more incentive for those people      
 to predisclose or disclose interface operations to  everybody." The            
 reason: The OS that talks to everyone wins. That's Taligent's strategy,        
 and OS/2's as well.                                                            
                                                                                
 Microsoft could refuse to sign, go to court, and win. Or the investigation     
 could end up a political casualty, dismissed before it ever begins -           
 always a possibility in fickle Washington. That's certainly the hope of        
 Microsoft counsel Neukom. "We  cannot comment on why the Department of         
 Justice decided to begin its own investigation of Microsoft," he states.       
 "You should bear in mind, however, that the Department of Justice quite        
 frequently concludes following an investigation that claims of                 
 anti-competitive conduct are baseless."                                        
                                                                                
 Of course, there are plenty of people in Washington and elsewhere who          
 would like the government to get out of the way and let markets take care      
 of themselves. Washington insiders warn that when the DOJ publicly unveils     
 its intentions, a political  maelstrom may be unleashed. Microsoft is          
 already lobbying folks at the Commerce Department, claiming that the case      
 would seriously harm the economy (What's good for Microsoft is good for        
 the USA...). However, high-level DOJ sources say the solid  foundation of      
 the case - born of the legal strength of the case and the relationship         
 between Reno and Bingaman - is expected to withstand whatever political        
 pressure may be brought to bear at the last moment.                            
                                                                                
 "I don't think (squelching the case) would really serve the economy            
 because we really do need to be concerned that antitrust allows innovation     
 to proceed as rapidly as possible," Gilbert said. "Which sometimes means       
 being concerned about certain  types of agglomerations of power."              
                                                                                
 "There will be positive results out of all of this," said Deputy Assistant     
 Attorney General Litan about Bingaman's reinvigoration of the antitrust        
 division. "Janet Reno has very much delegated antitrust [decisions] to         
 Anne. The extraordinary  circumstance is if Anne would not get what she        
 wanted."                                                                       
                                                                                
 "I expect to see Bill Gates in my office very soon," he said.                  
                                                                                
                                    * * *                                       
                                                                                
 Wendy Goldman Rohm is the author of a forthcoming book on Microsoft's          
 antitrust struggle, to be published later this year by John Wiley & Sons,      
 New York. She also is a correspondent for several international                
 publications. She welcomes contact at +1  (708) 869 3140, or Compuserve:       
 73423,621.                                                                     
                                                                                
                                                                                
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-- 
Steve Withers / Wellington, New Zealand
stevew@actrix.gen.nz  (all night)
witherss@delphi.com (weekly)
swithers@vnet.ibm.com (all day)  One of these days I'll have to get a life.
