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In Justice's own words ...
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October 20, 1997: 5:09 p.m. ET
Justice Dept.'s press conference on its move against Microsoft
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NEW YORK (CNNfn) - The U.S. Justice Department on Monday accused software giant Microsoft Corp. of breaking a 1995 consent decree.
Speaking at a press conference in Washington, U.S. Attorney General Janet Reno and Assistant Attorney General for Antitrust Joel Klein alleged anti-competitive behavior on the part of Microsoft for requiring computer manufactures that license Windows 95 to also install its Internet Explorer browser on their computers.
Following is a transcript of that press conference.
JANET RENO, ATTORNEY GENERAL: Forcing PC manufacturers to take one Microsoft (MSFT ) 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. Microsoft is unlawfully taking advantage of its Windows monopoly to protect and extend that monopoly and to undermine consumer choice. The Department of Justice will not tolerate that kind of conduct.
We have asked the court, thus, for the following:
-- To stop Microsoft from requiring PC manufacturers to accept Internet Explorer as a condition of receiving Windows 95.
-- To require Microsoft to notify consumers of PCs that have Windows 95 that they are not required to use Internet Explorer, that they are free to use any compatible Internet browser and to give consumers simple instructions about how to remove the Internet Explorer icon from their PC desktop, if they choose.
-- To impose a $1 million a day fine on Microsoft if it continues to violate the court order.
-- And to strike down broad portions of non-disclosure agreements that may deter companies with which Microsoft does business from coming forward voluntarily to provide information about Microsoft to the department. This point is so important. Anyone should feel free to come talk to the department -- without Microsoft's knowledge and without any fear of reprisal, whatsoever. We will not let Microsoft, or anyone else, infringe on that fundamental right.
This administration has taken great efforts to encourage and spur technological innovation, promote competition, and make sure that consumers have the ability to choose among competing products. Today's action shows that we won't tolerate any coercion by dominant companies in any way that distorts competition.
Joel Klein, the assistant attorney general of the antitrust division will now say a few words.
JOEL KLEIN, ASSISTANT ATTORNEY GENERAL: Thank you, madam attorney general, and thank you for your leadership and support in this matter as in so many other matters.
Good afternoon. I'd like to start by emphasizing that today's action is not only about enforcing a court order. It's also about vindicating a very important principle in antitrust.
What Microsoft is doing here is requiring PC manufacturers -- and through them, consumers -- in America to take the Microsoft version of the browser in order to get Windows 95. Now, Microsoft and only Microsoft, is able to do that because it alone, has a monopoly on the underlying operating system software.
This kind of product forcing is an abuse of monopoly power and we will seek to put an end to it. In fact, it's a very serious abuse that we're talking about here.
Browsers are potentially the kind of product that could erode Microsoft's operating system monopoly because browsers take computing beyond the desktop where Microsoft rules and into the world of the Internet where no one is dominant.
So it's not surprising that Microsoft understood and perceived this threat immediately. In the words that Microsoft's chairman and CEO, Bill Gates ... said to his executive committee, and I'm quoting, "Netscape is a new competitor. Their browser is dominant, allowing them to determine which network extensions will catch on. They are pursuing a multi-platform strategy in order to commoditize, to commoditize the underlying operating system."
Now, that was put a little more bluntly and succinctly by a Microsoft vice president who said, and I quote, "This is not about browsers. Our competitors are trying to create an alternative platform to Windows." Close quote.
In response to this threat, Microsoft began aggressively marketing its own browser, instructing its marketing people that they should, quote, "worry about the browser share as much as Bill Gates does because we will lose the Internet platform battle if we do not have a significant user-installed base. The industry would simply ignore our standards. At your level, that is at the manager level, if you let customers deploy Netscape Navigator, you lose the leadership on the desktop. "
As a general matter, of course, we think a strong competitive response is a good thing. But while trying to play catch-up here, Microsoft went over the line when it chose to use its monopoly power in Windows to coerce computer manufacturers to also take its browser. And let me emphasize, as far as we're concerned, Microsoft is free to compete and compete aggressively. But not, unlawfully.
We're not taking sides in a browser war, nor are we seeking to determine the extent to which browsers will displace the existing operating system. Consumers -- America's consumers -- should decide those matters. But they shouldn't be required to do so in an environment where only one competitor is taking unfair advantage of an existing monopoly.
There are two other points that I'd like to mention briefly. First, although we've decided to act on this specific matter today, I want to emphasize we are continuing our ongoing investigation into several Microsoft practices. This has been, and will remain, a very active, thorough and wide-ranging inquiry. And I know that you will respect the fact that because it's an ongoing matter, I will not be able to comment further about it at this time.
Second, I want to follow up briefly on one of the aspects of the relief that the attorney general mentioned. As she said, Microsoft has required non-disclosure agreements that would appear to prevent companies that are doing business with Microsoft from disclosing information even to the government. Indeed, some of these agreements actually provide that if subpoenaed by the government or by a court, you have to notify Microsoft before complying with the subpoena.
Microsoft has subsequently assured us that it won't interpret these agreements to apply to information given to the Department of Justice, and we have so informed witnesses during our investigation.
But since we have no way of knowing whether these agreements have deterred people from voluntarily coming forward with information, and we've heard that this might be the case, we want to clear the air once and for all. And so we're asking the court to order Microsoft to tell everyone who has signed or who in the future, will sign, that non-disclosure agreement, that it doesn't apply to the government, period. We won't allow anyone to interfere with the people's right to provide information to their government.
That will complete our prepared remarks in view of the attorney general's other commitments. I understand that she will now have to leave. Thank you again, madam attorney general.
I will be happy to take your questions now.
REPORTER: What about the price of the Microsoft, the Internet Explorer. There have been complaints from Netscape that Microsoft's giving away the Explorer for free was damaging to Netscape. Are you - this is not included.
KLEIN: It's not included in this time. As I said, we have an ongoing investigation.
REPORTER: Within the context, the $1 million a day fine. How large is that? Is that unprecedented? Is that typical? Or, do we know?
KLEIN: That is, for us, unprecedented, I believe, and certainly far larger than ordinary fines. It, of course, would only apply were the court to order Microsoft to comply and it continued its violation.
REPORTER: What prompted you to act now as far as continuing other aspects of the investigation. What prompted you to deal with this specific piece right now?
KLEIN: I think several things did. I think we concluded our work with respect to this. The consent decree violation, we felt, had been clearly established and we were ready to proceed. There are other events that are going on in the industry right now, and we thought it was important that people understood that the basic principle that we're seeking to enforce today, we will seek to protect and enforce.
But that is not to say that there are other matters which are currently under investigation which might not, in the future, lead to other actions. I don't want to prejudice that or anticipate it at this time.
REPORTER: Doesn't the basic problem still remain, the fact that Microsoft has the monopoly on the operating system, and they can continue, legally or not, to sort of pressure computer makers to go along to a particular browser?
KLEIN: Well, if we're vindicated on this, they won't be able to pressure them into taking the browsers on condition of getting the underlying operating system software, which is where they have the monopoly. That is the exact purpose of our action today.
REPORTER: What about Microsoft's plans to include the browser as part of future versions of Windows. Windows 98, actually, includes the browsers, as part of the core software.
KLEIN: Well, of course, Windows 98 now, is a work-in-progress. We are aware of those issues and those are certainly among the matters that we will continue to look at.
REPORTER: A bundling of the software is not in this order, considered a violation of the same order?
KLEIN: This order - what is clear is, they have been selling these products. These are two products. And even though they bundle them in one sense -- that is to say, they require you to take them together -- we're absolutely clear. We think the evidence will show unmistakably that these are two separate products. Indeed, everybody knows, you have an operating system, you have a browser. So, at this point, and that's true of Windows, of IE 3.0. That's true of IE 4.0. Indeed, IE 4.0, as you may be aware -- they actually have the operating system on one disk and the browser on an entirely separate disk.
REPORTER: In this case, Microsoft's browser is essentially free. They're not charging people for it. Does that, is there a problem with proving consumer harm where, I mean, people aren't having to pay money for this. It's not raising the price of the PC, per se?
KLEIN: Let's start with the computer manufacturer. The price to the computer manufacturer is very great, because the manufacturer has to give up its opportunity as to whether or not to place the browser on the desktop. That is a real cost.
Second, in terms of consumers, there are consumers, I am sure, who take a machine and take the browser that is given to them, and those consumers are obviously being force-fed a product through the Microsoft channel. That's exactly what we want to prevent.
But we don't want to prevent a competitive battle. That could be in the interest of consumers. We just want to make sure that this forcing is stopped, and stopped immediately.
REPORTER: So giving it away is not a problem, necessarily.
KLEIN: As I said, that is a matter that is ongoing. I would note, of course, that the questions about giving away a browser raise very, very different questions in terms of predation theory and so forth.
REPORTER: On the principle of antitrust that is being pursued under. Is it time?
KLEIN: Well, in the current context, we have a consent decree. And so we're pursuing it under the consent decree. But essentially, this is a kind of monopoly forcing notion and it has dimensions of what you say is a tie. But right now, we're under the specific language of the consent decree.
REPORTER: You mentioned some talks with Microsoft in which you went back and forth. Did you talk with them about this and what was their reaction to your stand on it?
KLEIN: Microsoft -- we have fully discussed this matter with them, have advised them that we were going to pursue the matter in federal court today. They have a different view of the consent decree and I don't think that I should attempt to characterize their views.
REPORTER: Do they feel that the consent decree even applies to Windows 95?
KLEIN: I think, Bob, in fairness, I should not attempt to characterize their views.
REPORTER: Can you just elaborate on what specifically in the consent decree is violated.
KLEIN: Yes. 4E1 of the consent decree which prohibits Microsoft from conditioning the terms of a license of a covered product, which I think Windows 95 is on the licensing of another product, which the browser is.
REPORTER: What happens next? When do you expect the court to make its rule.
KLEIN: Well, I think they'll be probably under the local rules. Microsoft has maybe some 10 or 11 days to file a reply, and obviously after, the court will set whatever schedule it deems appropriate. We would like to see that matter move expeditiously.
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