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EDITIONS
Tuesday, 5 January, 1999, 17:57 GMT
USA versus Microsoft: the case resumes
Bill Gates frowning
Microsoft is expected to open its case next week
by independent computer industry analyst Graham Lea

As the USA versus Microsoft case moves into its 10th week, the Department of Justice appears to be better placed to win the case in the District Court, although political considerations in the Court of Appeals or Supreme Court might well overturn such a decision.

Microsoft
Even if the DoJ does ultimately prevail, the difficulty will be to devise remedies that would provide effective relief against Microsoft's present and future business practices in an industry that moves too fast for conventional legal processes to be an effective deterrent to any illegal anticompetitive practices.

It is now expected that the DoJ will complete the presentation of its case this week. Two witnesses are being heard: Mr William Harris, the CEO of Intuit which is best known for its Quicken finance product, and Professor Franklin Fisher, an economist.

Microsoft will probably open its case next week with MIT economist Richard Schmalansee. The procedure will be the same as for the DoJ's witnesses: written testimony will be submitted to save time, and then there will be cross-examination by the DoJ and redirect examination by Microsoft.

In a dramatic move last week, the DoJ filed a strongly-worded response to Microsoft's Representation to the Court that Microsoft had not interfered with working of Professor Felten's prototype program that was designed to show that it was possible to remove IE browsing capability from Windows 98, contrary to what Microsoft maintained.

In the document, the DoJ asked Judge Jackson to allow it to depose Microsoft VP Jim Allchin again because of discrepancies between his evidence and what Microsoft had claimed in its Representation, which the DoJ described as "little more than a Microsoft press release, improperly captioned as a pleading . . . containing erroneous and misleading attempts to introduce facts' through unsworn testimony' of Microsoft's counsel".

Intuit logo
Intuit: Microsoft tried to buy it for five years
Microsoft filed another Motion asking the Court to strike parts of the written testimony of Intuit CEO William Harris as it contained inter alia "hearsay statements, immaterial discussions of events not at issue in the case".

Microsoft particularly disliked what Mr Harris had to say about a project code-named WinATM which was intended to be bundled with Windows and to be based on Money, a Microsoft product competitive with Intuit's Quicken.

Pete Kight, the CEO of the CheckFree Corporation, whom Microsoft had approached to participate in the project, told Mr Harris about the approach because he was a member of CheckFree's board, which hardly makes the matter one of hearsay.

Intuit was also concerned at steps being taken by Microsoft, with its Active Desktop, to prevent Intuit's software from working with Netscape's Navigator browser.
Intuit found that to have its logo on Microsoft's Active Desktop, Bill Gates insisted that Intuit would have to forego any business relationship with Netscape.
Since Intuit judged it to be very important for Intuit to be present on Microsoft's Windows "choke point", Mr Harris reluctantly decided that Intuit would have to agree to this, as well as to deploy Microsoft technologies such as Channel Definition Format, Dynamic HTML, and Active X which would make it impossible for content developed using these technologies to be seen with any browser other than Internet Explorer.

Intuit was also concerned that Microsoft's Start Page would be used to direct users to Microsoft web sites rather than competitive web sites such as Intuit's.

So far as any remedy was concerned, Intuit wanted the operating system neutrality whereby exclusive or discriminatory behaviour by Microsoft towards competitors would not be allowed, so denying Microsoft the ability to use windows as a choke point.

Mr Harris concluded his written testimony by saying that he had "genuine respect" for Microsoft and its employees, who made "good products". But in view of what he had said earlier about Microsoft, these remarks must be seen as an attempt to ameliorate the effect of his earlier analysis of Microsoft s business practices.

Because Intuit has stopped developing for non-Windows platforms, it is now totally reliant on Microsoft to provide key information and facilities for Intuit's products.

In fact, Intuit has helped Microsoft to consolidate its Windows monopoly by stopping support for Intuit's products for the MacOS or Unix operating systems.

Although Intuit continues to have a dominant position in the personal finance market (with a market share of around 80 per cent), it is clearly uncomfortable to be so reliant on a competitor to provide operating system facilities.

Microsoft claimed that Intuit is trying to advance its own business interests in Mr Harris' testimony, and that Intuit chose Internet Explorer because Netscape did not offer a component architecture.

Microsoft tried unsuccessfully for five years to acquire Intuit, and finally gave up when a 1994 $1.5bn offer (which rose to $2.3bn because Microsoft's share price went up) was blocked by the DoJ because it would have considerably lessened competition in the marketplace. Microsoft had to pay Intuit a $46.25 termination fee.

Intuit provides a very rare example of a Microsoft competitor that has successfully continued to be the leader in its sector, despite fierce competition with Microsoft. Microsoft claims that Intuit is now worth $3.5bn.


Graham Lea is a leading computer industry analyst specialising in Microsoft who will be following the case for News Online - his views do not represent those of the BBC.

Links to more Microsoft stories are at the foot of the page.


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