Senator targets Windows XP

July 24, 2001: 12:52 p.m. ET

New York's Schumer calls new operating system 'anticompetitive'
By Staff Writer Richard Richtmyer

NEW YORK (CNNfn) - Calling Microsoft's soon-to-be-released Windows XP operating system anticompetitive, a Democratic member of the Senate Judiciary Committee asked the U.S. Justice Department Tuesday to include the new product in its antitrust settlement negotiations with the world's largest software maker.

Sen. Charles Schumer of New York also asked Microsoft to delay the release of Windows XP, currently set for Oct. 25, and urged the state attorneys general involved in the case to seek a court order blocking the release until the anticompetitive questions are addressed.

Schumer said he believes two New York state-based companies, Eastman Kodak and AOL Time Warner, would be unfairly hurt by the new operating system, which integrates features such as instant messaging, streaming media and digital photography capabilities. AOL Time Warner is the parent company of CNNfn.

The senator's comments come as Microsoft, the Justice Department and 18 states consider their next legal moves after a federal appeals court handed down its decision in the landmark antitrust case late last month.

On June 28, the U.S. Court of Appeals for the District of Columbia overturned a lower court's order that Microsoft be broken into two companies and remanded other parts of the judge's order to the U.S. District Court in Washington for consideration by a different judge.

However, the appeals court affirmed the lower court's finding that Microsoft held a monopoly in the computer operating system market and maintained that monopoly power illegally. It left open the question of whether Microsoft acted illegally when it tied its Web browser to its dominant Windows operating system, ordering the lower court to reexamine that issue.


Click here for CNNfn.com's special report: Microsoft on trial

The Justice Department has asked the appeals court to speed the delivery of the case back to the U.S. District Court in Washington, which currently is expected to take it up on August 12. Microsoft has asked the appeals court for rehearing on the browser tying issue and has indicated it may seek a Supreme Court review of the case.

Some legal experts have interpreted Microsoft's legal jockeying as part of a strategy aimed at delaying the enforcement of any anti-enforcement penalties until after the release of Windows XP.

In a press conference Tuesday morning, Schumer urged government officials to take swift action preventing Windows XP, in its current form, from being distributed.

"If we wait too long, Windows XP will be out, and smaller companies that don't have the leverage or financing of Microsoft will be forced into years of litigation that alone could drive them out of business," Schumer said.

"You can't just un-ring a bell," he added.

At the behest of Kodak, which is based in Rochester, N.Y., Schumer said he took a close look at the digital imaging capabilities of Windows XP, which he said "is hard wired to prefer Microsoft applications over Kodak's."

"All customers, even those who specifically install the Kodak software applications, are presented with the Microsoft application, scanner and camera wizard, meaning additional steps are necessary for those consumers to access the Kodak software," Schumer said. "Even worse, Windows XP steers consumers electing to process digital pictures to a Microsoft-approved vendor and hinders them from accepting Kodak's digital processing site."


	U.S. Sen. Charles Schumer, D-NY, says Microsoft plans to use Windows XP to thwart competition

Schumer said he then spoke with other companies, such as New York City-based AOL Time Warner, and began to see a similar pattern. He said he believes Microsoft's broader strategy with Windows XP is to use the operating system as a tool through which it can unfairly displace competing computer software with its own.

"Simply put, Microsoft plans to use XP to take over digital photography, instant messaging, media players and a host of other applications," he said. "What Microsoft has discovered is that whatever they can bundle with Windows, which everyone uses, will likely become the dominant product in its field. It's déjà vu all over again."

"Microsoft was sued for doing this with [Internet] Explorer and driving Netscape to the brink of extinction. Now they're doing it with digital photography and in many other applications like media players," Schumer added.

Microsoft said Schumer's concerns are unwarranted and AOL Time Warner's and Kodak's complaints do not merit Congressional hearings. "Contrary to AOL's self-interested lobbying, Windows XP is designed to enable user choice and partner opportunity," said company spokesman Vivek Varma.

"Windows XP is designed to bring more choice and options to consumers, not fewer, in stark contrast to AOL Time Warner's closed, proprietary strategy," Varma added.

Varma also pointed out that Microsoft repeatedly has expressed its willingness to work with the government to resolve the remaining issues in the case.

A spokesman for Judiciary Committee Chairman Patrick Leahy (D-Vt.) said Microsoft's business practices will be one part of a broader hearing in September on the subject of how to promote competition on the Internet.

At least two of the state attorneys general involved in the case – Richard Blumenthal of Connecticut and Tom Miller of Iowa – have said they're concerned about Microsoft's plans for Windows XP.

Schumer said has spoken with the New York State Attorney General Eliot Spitzer, asking him to seek a court order temporarily barring Microsoft from selling Windows XP unless Microsoft agrees to make "significant changes" to the product, either as part of a broad-based settlement or on their own initiative.

"The stakes are enormously high for our economy and for consumers," the senator said.

Shares of Microsoft (MSFT: up $0.09 to $67.18, Research, Estimates) edged down slightly in early afternoon Nasdaq trade.

-- CNNfn's Steve Young contributed to this report