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DOJ seeks Microsoft fine
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October 20, 1997: 5:58 p.m. ET
Microsoft stands in contempt of 1994 consent decree, Justice's Reno says
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NEW YORK (CNNfn) - In its continuing battle with the world's largest software company, the U.S. Justice Department Monday asked a federal court to hold Microsoft Corp. in contempt for alleged anti-competitive behavior in the Internet browser market.
At an afternoon news conference, U.S. Attorney General Janet Reno said the government will ask a federal district court to impose penalties of $1 million-per-day on the Redmond, Wash. -based software giant for allegedly not complying with a 1994 consent decree.
The news overshadowed Microsoft's better-than-expected first-quarter earnings, released after the market closed on Monday.
The unexpected announcement from U.S. Justice Department's antitrust division had an immediate effect on trading in Microsoft's stock.
The stock (MSFT) dipped as much as 5 points immediately following the announcement before closing 1/4 point higher at 132-1/2 in heavy Nasdaq trading.
The agency's antitrust division charged the nation's largest software company violated the consent decree by trying to use its leverage to require PC manufacturers to license and distribute Microsoft's Internet browser, Internet Explorer along with the company's new operating system Windows 95.
"Forcing PC manufacturers to take one Microsoft product as a condition of buying a monopoly product like Windows 95 is not only a violation of the court order but it's plain wrong," Reno said. (156K WAV) (156K AIFF)
The 1994 consent decree was aimed at barring Microsoft from imposing anti-competitive terms in its contracts with computer equipment manufacturers that preinstall Microsoft software.
Microsoft doesn't deny that PC manufacturers are required install its browser as part of licensing the Windows operating system.
However, Microsoft said the consent decree includes a provision that permits the software company to include upgraded functionality such as web-browsing.
Speaking on a conference call, William Neukom, senior vice president for law and corporate affairs, contended the government is misunderstanding the meaning of the provision.
"We are confident that the court will find we are in compliance with the consent decree," Neukom told reporters and analysts.
At issue, analysts said, is whether or not Microsoft's Internet Explorer is an integrated upgrade to the Windows operating system.
"The big question is: 'Where does the operating system begin and where does it end?'" said Neil Herman, analyst at Salomon Brothers.
In addition, the Justice Department will ask the federal court to limit the authority of all non-disclosure agreements that Microsoft requires of its business partners, said Joel Klein, assistant attorney general.
"Since we have no way of knowing whether these agreements have deterred people from voluntarily coming forward with information ... and we've heard this might be the case ... we want to clear the air once and for all," Klein told reporters. (269K WAV) (269K AIFF)
The move is the latest in a series of clashes between Microsoft and the Justice Department.
Microsoft was previously investigated for bundling its online service with its operating system but the probe was later dropped. The software company was also blocked from acquiring personal finance software company, Intuit Inc.
Meanwhile, shares of competing browser company, Netscape Communications Corp. (NSCP), shot 6-7/16 points higher to 41-3/8.
Mountain View, Calif.-based Netscape, which makes the popular Navigator and Communicator browsers, said it was "supportive" of the Justice Department's actions. Netscape holds a commanding share of the browser market but Microsoft has been making inroads into Netscape's share.
Microsoft will have an opportunity to respond to the petition in writing within 11 days. At that time, a judge will decide whether a hearing is needed.
-- Robert Liu
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