Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, July 17, 1994 TAG: 9407170051
SECTION: NATIONAL/INTERNATIONAL PAGE: A1 EDITION: METRO
SOURCE: Los Angeles Times
DATELINE: WASHINGTON LENGTH: Medium
Industry experts and government lawyers predicted that the settlement will increase competition and spur innovation in the software industry and will lower prices for consumers. Its main beneficiaries will be other software makers, such as IBM and Novell, who will get new openings to sell their products to computer makers.
The settlement also marks the first time U.S. officials have coordinated an antitrust accord with the European Union. As a result, Microsoft must abide by the new restrictions on both sides of the Atlantic.
"Microsoft is an American success story, but there is no excuse for any company to try to cement its success through unlawful means," said Assistant Attorney General Anne K. Bingaman, who heads the antitrust division of the Justice Department.
Since 1990, federal antitrust lawyers have been investigating complaints that Microsoft has used its near-monopoly power in the software industry to force its products onto computer makers. Last year, it was estimated that Microsoft's programs ran 80 percent of the world's 150 million computers.
Many in the computer industry feared that Microsoft's dominance - based on its near-monopoly on the operating software that controls the basic functions of a personal computer - was irreparably damaging even large competitors while driving smaller software firms out of business altogether.
Without admitting any wrongdoing, Microsoft officials said they agreed to a settlement Friday night to head off a threatened antitrust lawsuit that could have kept the company tied up in court for years.
The agreement, which took effect immediately, bars Microsoft from enforcing licensing agreements that used volume pricing of its MS-DOS and Windows operating system software to block out competitors.
MS-DOS and Windows are usually installed by the computer manufacturer, and Microsoft gained a competitive advantage by giving computer manufacturers - such as IBM, Compaq and Dell - volume discounts on software. In exchange, the manufacturers signed licensing agreements to pay Microsoft a fee for MS-DOS and Windows on each computer sold, regardless of whether that software actually was installed.
Government lawyers contended that these agreements locked out competitors.
"Microsoft has used its monopoly power, in effect, to levy a `tax' on PC manufacturers who would otherwise like to offer an alternative system," Bingaman said. This is the kind of "restraint of trade" that violates the antitrust laws, according to the Justice Department complaint.
Lawyers for Microsoft called these agreements incentives to use their programs.
Saturday, Microsoft officials said they have operated "in a perfectly legal fashion," but nonetheless agreed to make a "few reasonable accommodations" to end the federal investigation.
Microsoft has flourished by providing "good technology at low prices," not because it has locked out its competitors, said Bill Neukom, the company's vice president for law and corporate affairs.
Neukom also doubted that consumers would see much impact from the settlement because the operating system accounts for only 1 percent to 2 percent of the cost of personal computers, he said.
Additional provisions of the settlement are intended to enable software companies to compete more effectively with Microsoft. The company will no longer be able to impose broad restrictions that make it difficult for software developers to create new applications such as word-processing programs and spreadsheets that are compatible with MS-DOS and Windows.
by CNB