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Microsoft faces new charges
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December 17, 1997: 8:03 p.m. ET
Justice Department files contempt charges; states mull separate action
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NEW YORK (CNNfn) - Microsoft Corp.'s legal woes intensified Wednesday when the Justice Dept. filed contempt charges against the software giant and a number of states said they are mulling an antitrust action against the company.
In legal documents filed late Wednesday in Washington, the Justice Dept. asked a federal judge to hold Microsoft in "civil contempt" for violating a court order that barred the company from tying Windows 95 to its Internet Explorer Web browser.
As part of its motion in an escalating legal battle, the Justice Dept. asked U.S. District Court Judge Thomas Penfield Jackson to compel Microsoft to give computer makers "a meaningful option of licensing Windows 95 without the browser."
Officials asked the court to force Microsoft not to engage in any retaliatory action against computer makers who might choose a competitor's product and asked the court to force Microsoft to provide them with any new operating system or Internet products or upgrades at least 30 days before they hit the market so officials could ensure the company is not violating the order.
Officials also sought $1 million a day fine for violation of the order and urged the judge to act swiftly.
A similar request to levy a fine was denied earlier this month by Judge Jackson. Microsoft has until Friday to respond to the new charges.
'Making a mockery' of the injunction
In a news conference Wednesday a senior Justice Dept. official said Microsoft has basically given consumers two choices: taking out Internet Explorer code from the latest revision of Windows 95, which would result in a system that would not function, or be forced to use an operating system that's more than two years old and not viable.
"This makes a mockery of the injunction. Microsoft has construed the order to include exactly what the court tried to enjoin," he said.
"Microsoft has gone from tying its products to tying the hands of its vendors," said Assistant Attorney General Joel Klein. "The more Microsoft continues this practice the more consumers are harmed."
Justice disputed Microsoft's contention that removing the Explorer code from the current version of Windows 95 would result in a non-functioning system.
"We think it's quite clear everything will work. Essentially, if you buy [a new] machine, you can go ahead and uninstall it. If it's doable by individuals, it's obviously doable at the [manufacturer] level. It's a very simple process. If Microsoft wanted to comply with the order, it could," the Justice Dept. said.
Following the news conference, Brad Chase, vice president of Microsoft's applications and Internet client group, told CNNfn the company was surprised by the Justice Dept.'s actions, although it will continue to abide by the court order.
In a statement released late Wednesday, David A. Heiner, a senior corporate attorney at Microsoft, said as far as Internet Explorer 4.0 is concerned, the company has adhered to the government's orders.
"Computer manufacturers are free to install Internet Explorer 4.0 [which provides the latest enhancements to Windows 95, including a new user interface] or not, as they choose," he said.
In compliance with the preliminary injunction issued Dec. 11, Microsoft said it has told computer makers they are free to independently decide whether or not to install Internet Explorer 4.0.
The company also said it has told computer makers that they are free to not install Internet Explorer 3.0, although Microsoft said it is vital to the operation of the latest release of Windows 95. The latest version, commonly known as OSR 2, is only available on systems shipped directly from hardware makers.
"This is not a contractual bundling case. Although the division may ardently wish the facts were otherwise, Internet Explorer 3.0 is an integral part of Windows 95. Microsoft can lift the general [and perfectly sensible] license requirement that computer manufacturers install Windows 95 in its entirety, but that does not mean that it will ever be feasible for computer makers to delete important parts of a complex product that was designed, developed and tested as an integrated whole."
Earlier this week, Justice accused Microsoft of failing to honor Jackson's order which barred the company from forcing personal computer makers to load its browser on to their machines as a condition for offering Windows 95.
On Tuesday, Microsoft asked an appeals court to expedite its review of the decision, charging a lengthy review process could hurt the company, PC makers and consumers.
The Justice Dept.'s move is the latest in a series of increasing legal pressures on the Redmond, Wash.-based software firm.
Last week, nine state attorneys general met secretly in Chicago to discuss a possible coordinated antitrust action against Microsoft.
The states involved were New York, California, Texas, Illinois, Minnesota, Florida, Wisconsin, Connecticut and Massachusetts.
The three-day meeting was led by New York Attorney General Dennis Vacco.
Vacco said the decision to take up the matter was done independently of the investigation currently under way by the Justice Dept.
"We have been in contact with the federal government. I think it's more appropriate to characterize this as an independent states initiative that is on a parallel course right now, but somewhat independent from what the Justice Dept. is pursuing," he told CNNfn.
Vacco said the states are dedicating more resources to the probe in an effort to accelerate their investigation. (210K WAV) or (210K AIFF)
Connecticut Attorney General Richard Blumenthal told Reuters the group is talking frequently and soon will decide on a course of action.
"I think action by the states is close to a certainty," he said.
Microsoft spokesman Mark Murray told CNNfn none of the attorneys general except Texas had contacted the company.
"We have not had the opportunity to share any information with the attorneys general. We welcome a private meeting with them," he said.
Murray countered statements by Vacco and others who accused the company of attempting to dominate the Internet.
"We believe the Internet is bigger than any one company or industry. No company is going to control more than a fraction of it," he said.
Murray also said software is one of the most dynamic industries and is open to many competitors. He said Microsoft (MSFT) controls only 4 percent of the overall industry.
-- by staff and wire reports
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