U.S. sues Microsoft, seeks $1 mil per day

The federal government has launched another salvo in the Web browser wars.

At a press conference Monday in Washington, Attorney General Janet Reno said Microsoft’s practice of demanding that computer makers license Internet Explorer as a condition for licensing Windows 95 is a violation of a 1995 consent decree between Microsoft and the Justice Department.

Reno also announced that she is seeking an unprecedented $1 million per day fine if Microsoft continues to force computer companies to bundle Explorer with Windows 95.

“Microsoft is unlawfully taking advantage of its Windows monopoly to protect and extend that monopoly and to undermine consumer choice,” Reno said.

In addition to asking the court to impose the $1 million per day fine, the Justice Dept. is asking that Microsoft issue a statement telling consumers that Windows 95 can work with Web browsers other than Internet Explorer. Justice also wants the court to force Microsoft to release “simple instructions about how to remove the Internet Explorer icon from the PC desktop.”

Microsoft insisted Monday that it had committed no violations of its 1995 agreement with the Justice Department.

“This action is unfortunate and misguided,” Microsoft spokesman Mark Murray said. According to Murray, the consent decree “specifically allows Microsoft to integrate new features into the operating system.”

Industry observers pointed out that a large part of Microsoft’s strategy depends on the link between its Windows 95 operating system and its Internet Explorer browser.

“Microsoft cannot go backwards and disengage the Web from the operating system because so much of their functionality depends on their active desktop finding things on both the Web and the desktop in a seamless way,” said Kathey Hale, a principle analyst at Dataquest, a Silicon Valley research firm. “Nobody really knows how to exactly define at what point Microsoft is not just extending its operating system, but actually smothering the rest of the world.”

In a highly unusual request, the Justice Department wants the courts to make it clear that the non-disclosure agreements that Microsoft has signed with computer companies do not supersede government subpoenas.

The Justice Department’s top antitrust enforcer, Joel Klein, said Monday that there had been some cases in which companies have claimed that their agreement with Microsoft required them to notify the software giant before complying with government investigators.

The Justice Department action is good news to Netscape, the market leader and only real rival to Microsoft in the Web browser field. Netscape’s stock rose $4.31 to end at $39.25 on Nasdaq, while Microsoft’s fell to $131 on the news, before rebounding to end at $132.65, up 38ยข per share, also on Nasdaq.

Silicon Valley is typically divided in the ongoing struggle for the Web marketplace.

“How you feel about this depends on whether you’re a Hatfield or a McCoy,” said Fred Davis, president of the Computer Institute, a San Francisco-based think tank. “A lot of people are in the Microsoft orbit and make their money through their connection with them.”

But industry players whose fortunes are more closely linked to Microsoft competitors, such as Sun Microsystems and Netscape, hailed the Justice Department rulings against Microsoft.

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