DEPARTMENT OF JUSTICE
PRESS CONFERENCE
"MICROSOFT"
Monday, May 18, 1998
950 Pennsylvania Avenue, N.W.
Conference Room B
Washington, D.C.
12:02 p.m.
STATEMENT OF HON. JANET RENO, ATTORNEY GENERAL OF THE
UNITED STATES OF AMERICA
Attorney General Reno: The high technology
revolution of the past two decades is one of America's
greatest success stories.
The revolutionaries who are embittered, people with
bold ideas, they possess something else as well: A fair
chance to develop those ideas into products that can
compete in the marketplace.
And for more than a century, strong antitrust laws
have protected ordinary Americans by ensuring real
competition. Today, we are taking another step to keep
our marketplace competitive.
The Justice Department has charged Microsoft with
engaging in anti-competitive and exclusionary practices
designed to maintain its monopoly in personal computer
operating systems, and attempting to extend that monopoly
to Internet browser software.
The Department alleges in its complaint that
Microsoft has engaged in a series of anti-competitive
practices, including misusing its Windows operating system
monopoly by requiring computer manufacturers, as a
condition of getting Windows, to adopt a uniform boot-up
or first-screen sequence that promotes Microsoft's
products; secondly, by attempting to persuade NetScape, an
Internet browser software competitor, not to compete with
Microsoft and instead divide up the browser market; by
engaging in exclusionary contracts with providers of
Internet and online services and Internet content
providers; and by forcing computer manufacturers to
purchase and install Microsoft's Internet browser as a
condition of getting its Windows operating system.
In short, Microsoft used its monopoly power to
develop a choke-hold on the browser software needed to
access the Internet.
Microsoft's actions have stifled competition in the
operating system and browser markets. But most
importantly, it has restricted the choices available for
consumers in America and around the world.
Today's action is intended to ensure that consumers
and computer makers have the right to choose which
software they want installed on their personal computers,
and not have that software chosen for them. It is also
designed to preserve competition and promote innovation in
the computer software industry.
The Department also filed today a motion seeking a
preliminary injunction. The injunction seeks to end
Microsoft's practice of forcing Windows 98 purchasers to
take Microsoft's Internet browser as well, so that
consumers can have a real choice. If Microsoft insists on
including its browser on Windows 98, it should also
include NetScape's browser. Computer manufacturers would
have the option of deleting either browser.
If Microsoft does not want to include NetScape, it
must unbundle its own browser and let it compete in the
free market on its merits.
Secondly, the motion would seek to require Microsoft
to give computer manufacturers the right to install their
own first screen at the conclusion of the initial boot-up
sequence, the first screen on which they can promote any
products they wish; require Microsoft to give computer
manufacturers additional options for installing browser
software on new computers; and finally, forbid Microsoft
from enforcing contractual provisions that require
providers of Internet and online services and Internet
content providers to limit their distribution and
promotions of competing browsers.
The Internet is already revolutionizing
communications, commerce and the flow of information
around the world. No firm should be permitted to use its
monopoly power to keep out competitors or to spurn
innovations.
Without antitrust laws, the innovators of today would
be shut out of the marketplace. Competition will dry up
along with the incentive to innovate.
Microsoft has an excellent record of innovation. But
we want to make sure that the field is open to the next
Microsoft, to the next great innovator who can help
improve our lives and our economy if they are given the
opportunity.
I am pleased to be joined today by Joel Klein, the
Assistant Attorney General in charge of the Department's
Antitrust Division; Iowa State Attorney General Tom
Miller, the Chair of the Antitrust Committee of the
National Association of Attorneys General; New York
Attorney General Dennis Vacco; and Connecticut Attorney
General Richard Blumenthal, who are representing the 20
States and the District of Columbia who have also filed
suit against Microsoft.
The Justice Department and the States have worked
very hard to coordinate their investigations of this
matter, and the American consumers have been well-served
as a result.
I would now like to ask Joel Klein up.
STATEMENT OF JOEL KLEIN, ASSISTANT ATTORNEY GENERAL OF THE
UNITED STATES OF AMERICA
Mr. Klein: Thank you, Madam Attorney General.
The lawsuit we have filed today seeks to put an end
to Microsoft's unlawful campaign to eliminate competition,
deter innovation, and restrict consumer choice.
In essence, what Microsoft has been doing, a wide
variety of illegal business practices, is leveraging its
Windows monopoly operating system to force its other
software products on consumers.
This is like having someone with a monopoly in CD
players forcing consumers to take its CDs in order to get
the machine. We believe that most Americans prefer to
choose their own CDs and, for that matter, their own
software products as well.
The specific details of Microsoft's scheme are set
out at length in the court papers we have filed today.
But to put it in a nutshell, what the evidence shows is
that Microsoft, from Bill Gates on down, quickly realized
that NetScape's Internet browser, called The Navigator,
posed a real threat to Microsoft's Windows monopoly.
To deal with that threat, Microsoft first went to
NetScape and proposed that rather than compete with each
other, the two companies should enter an illegal
conspiracy agreement to divide up the market.
Now, when NetScape rejected that offer, Microsoft
then went about using its Windows monopoly to, in
Microsoft's own words -- and I quote -- "cut off
NetScape's air supply."
Microsoft accomplished this largely by locking up the
two major distribution channels for Internet browsers. In
particular, what it did was: First, it leveraged its
Windows monopoly to force its browser onto all new
computers.
And, second, it entered into anti-competitive
contracts with all of the major Internet and online
services companies, companies like America Online.
At the same time, Microsoft severely restricted
NetScape's ability to gain access to these critical
distribution channels.
Now, the evidence we gathered during our extensive
investigation demonstrates that Microsoft's use of these
predatory and exclusionary devices and practices was not
designed to help consumers, but rather to make sure that
Microsoft could crush its competition.
As one key Microsoft executive candidly stated -- and
I quote -- "It seems clear that it will be very hard to
increase our browser market share on the merits of our
browser alone. It will be more important to leverage
Windows to make people use our browser instead of
Navigator."
Now, that last point bears emphasis and re-emphasis,
because it reflects not only what Microsoft said or what
it did, as the evidence makes clear, Microsoft is
unwilling to compete fairly and on the merits; rather, it
prefers to leverage its Windows monopoly "to make people
use its browser."
The antitrust laws take a very different view of the
way the marketplace should work. Those laws are based on
the belief that instead of having a monopolist make people
use a product, people should be free to choose for
themselves what products they want to use.
In order to protect consumer choice, then, and to
preserve the existing competition, we have today moved for
a preliminary injunction in Federal District Court in
Washington, D.C.
First, we will seek an order providing that if
Microsoft insists on including its browser with Windows
98, it must also include NetScape's browser.
Now, if Microsoft would prefer not to include
NetScape, all it needs to do is unbundle its own browser
and let it compete on the merits.
But to allow Microsoft and Microsoft alone to bundle
its browser with its monopoly operating system could well
cause irreversible harm to competition, by letting
Microsoft unlawfully achieve a second monopoly in the
Internet browser market during the time it would take to
fully litigate this lawsuit.
At the same time, we believe that computer
manufacturers should not be forced to carry products that
they do not want. And so our proposed injunction allows
them to remove Microsoft's browser, NetScape's browser or
both and, of course, to include any other browser of their
choosing. This will ensure equality and real choice
during the pendency of this lawsuit.
In addition the preliminary injunction also seeks to
remove the competitive shackles that Microsoft has placed
on computer manufacturers.
At present, Microsoft is using its monopoly power to
ensure that all PCS are, in reality, Microsoft PCS. It
does this largely by controlling the first screen that
consumers see when their computers boot-up. And so today,
as a result of Microsoft's exercise of monopoly power,
that screen is virtually identical, regardless of whether
your computer is made by Compaq, Gateway, Hewlett Packard,
or any other company.
Bill Gates himself recognized the key competitive
significance of this Microsoft restriction of computer
manufacturers.
Indeed, shortly before the restriction was imposed by
Microsoft several years ago, Mr. Gates directly expressed
his serious concern, stating that the computer-makers
were, "coming up with offerings that get displayed on
their machines in a far more prominent way than our
products are displayed."
And he went on to say that these offerings by the
computer manufacturers, among other things, were
"interfering with the very, very important goal of winning
Internet browser share for Microsoft."
To restore those competitive options, which Microsoft
subsequently eliminated from the market, the preliminary
injunction will allow computer manufacturers to control
the first screen of their own computers so they can decide
what software products they will feature and promote.
This will increase competition, increase consumer choice
and stimulate innovation in the software market.
Finally, we will seek an immediate end to all of the
Microsoft exclusionary agreements with online service
providers, Internet service providers, and Internet
content providers.
Microsoft claims that it is has amended these
contracts to make them legal, but it has not. Microsoft
cannot be allowed to use its monopoly power to force these
companies to promote Microsoft's products. Free choice,
free choice is what these companies are entitled to, and
what will best serve consumers.
I should also note here that, while today's lawsuit
focuses on certain critical issues relating to browser
technology and the likely effect of Windows 98 in that
competitive arena, our investigation into other Microsoft
business practices and products will continue.
In closing, let me be absolutely clear: Nothing we
are doing here will or should prevent Microsoft from
innovating or competing on the merits.
What cannot be tolerated and what the antitrust laws
forbid is the barrage of illegal, anti-competitive
practices that Microsoft uses to destroy its rivals and to
avoid competition on the merits. That and that alone is
what this lawsuit is all about.
It is now my pleasure to introduce Tom Miller, the
Attorney General from Iowa, who is chair of the National
Association of Attorneys General Antitrust Committee.
Tom.
STATEMENT OF THOMAS MILLER, ATTORNEY GENERAL, IOWA,
CHAIR, NATIONAL ASSOCIATION OF ATTORNEYS GENERAL
ANTITRUST COMMITTEE
Mr. Miller: Thank you, Joel.
There is a basic principle here, the principle of law
that says that if you have a monopoly in one product, you
cannot leverage or use that to sell other products. The
other products have to rise or fall on their merits, not
on the leverage provided by the monopoly product.
I think everybody agrees with that, everybody from
Judge Bork to Senator Hatch to Senator Kennedy. It is a
basic principle.
And while others believe in it, it falls to us at the
State level, and Joel, and General Reno at the national
level, it falls to us to enforce it. We are the law
enforcement officials that need to enforce that principle.
And that is what we are doing today, 20 States and the
District of Columbia filing one joint action in the
District of Columbia to assert that the law will be
enforced when it comes to the software industry.
The case is directly about the browser, but the
browser is only one example of the basic principle. The
basic principle extends throughout the software industry
and throughout America.
In the browser, as has been suggested, the basic
allegations are that Microsoft could not win the browser
battle, were hovering around 5 percent and decided they
need some -- needed some help, according to the complaint.
The help was first these agreements, these
restrictive agreements with all of the other players in
this process. And that still was not quite enough,
according to the petition.
So they moved to bundling, to tie it right directly
to Windows. And it had some effect. They went from 5
percent to 30 percent of the market to about 42 percent of
the market in about a year and a half.
But that is why we have to step in, to enforce the
law and to seek the preliminary order, to stabilize the
situation, while this litigation is pending.
The reason for this is, too, very fundamental, that
if one company can monopolize an industry and then expand
upon that monopoly, ultimately consumers lose. Prices go
up; quality goes down. In an industry where innovation
is, innovation suffers.
There is a chilling effect on the rest of the
industry in terms of innovation, because a major player
can come in and take your product away at any time. And
there is a chilling effect for the giant, too. They do
not -- are not challenged as much. Innovation suffers.
That is why the United States Supreme Court said it
probably best when they talked about the principles that
we are talking about today. They said the Sherman Act is
the Magna Carta of the free enterprise system in the
United States of America.
I believe the Attorney Generals have a rich history
of multi-state enforcement activities dating back at least
21 years. We found there is strength in numbers when we
get together, like the 20 States have here today.
And it is usually about consumers, either consumers
in the antitrust area, consumers in the consumer
protection area, or consumers in a related area. That is
who we represent, the 20 States. We represent the
consumers of America, and our job is to fight for them.
I want to acknowledge the enormous work that was done
by Joel Klein and the Justice Department and the great
cooperation that we have had on this litigation. I
believe particularly over the last few days, the crucial
days, that it has been a textbook example, a model of how
the Federal Government and the State Governments should
work together.
And I want to acknowledge the great efforts by the
States, by the other States, Texas and Massachusetts, for
really pioneering this, 12 States for being in the working
group and, most of all, New York. New York, to date, has
provided the most work among our efforts. And they are
the lead counsel going forward.
They will -- you will continue to do a
disproportionate amount of work, and we thank you for
that.
I thank all of the States for joining, and I thank
the Federal Government for being such a great partner in
this very important project.
Mr. Klein: Now, I would like to introduce the
Attorney General of the State of New York, Dennis Vacco.
STATEMENT OF DENNIS VACCO, ATTORNEY GENERAL, NEW YORK
Mr. Vacco: Thank you, Joel.
General Reno, Joel Klein, Dick Blumenthal and Tom
Miller, it is a pleasure to be here today with the group
of you as we bring this consumer case on behalf of the
American consumer.
While we bring this case couched in antitrust law,
what this case really is all about -- or these two
separate lawsuits filed together is really all about is
whether or not consumers and business people will have a
real choice, a real opportunity to choose the preferred
on-ramps to the information superhighway.
This case is also about innovation and startup
companies. It is about whether a young entrepreneur
working in a loft in Manhattan's Silicon Alley or a
teenager experimenting on a laptop in a garage will still
have the incentive to develop software that will
revolutionize the next generation of technology, just as
Bill Gates and Microsoft had the chance to do nearly 20
years ago.
It is about leveling the playing field in one of the
most influential and dominant industries of our time, and
whether one company will be allowed to control and
dominate the bridge between consumers and information as
we enter the 21st Century.
Anti-competitive activity usually leads to higher
prices, lower quality and fewer choices, to say nothing of
stifling innovation. Indeed, it is worth noting that in
the past few years, as computer prices have fallen at the
shelf -- as you go into outlets across America to buy your
PCS, you will find that computers, indeed, are cheaper --
all the while that the cost of Microsoft's software has
gone up.
Anti-competitive activity in the software industry is
harmful to the vitality of a broad range of businesses,
including the PC manufacturers or the OEMs as we refer to
them, but also includes a risk for the Internet service
providers, software developers, and content providers and
ultimately, in our collective estimation, will harm
consumers and restrict their choice.
In this lawsuit that was filed this morning in
District Court on behalf of the States, the States charge
that Microsoft's current monopolistic hold on key parts of
the business -- on key parts of its business is already
inhibiting the development of software and is also
inhibiting consumer choice.
Our lawsuit differs in one substantial sense from the
lawsuit brought by the Department of Justice in that in
addition to the browser wars that we allude to in our
lawsuit, we also claim that Microsoft has used its
monopoly to leverage its Office Suite products as well,
through contracts and agreements with the OEMs.
We contend that Microsoft has increasingly adopted
outrageous business practices that are impeding
competition in the technology marketplace, snuffing out
some of the smaller innovators and reducing the choices
available for the computer-using public.
I have been somewhat disturbed over the past several
days, through the course of the weekend, in news reports
about the negotiations, disturbed about Microsoft's public
comments as they have attempted to characterize our
actions as over-reaching.
It is really Microsoft who is acting like an
Orwellian big brother by controlling the range of products
available to consumers across America.
As State Attorney -- as State Attorneys General, we
have a responsibility to fight for businesses and to fight
for their freedom to innovate without fear or unfair and
illegal anti-competitive action by any other company.
Nearly 100 years ago, in a case that established the
precedent for modern-day antitrust action, President
Roosevelt saw the need to control and limit the ability of
large corporations to monopolize and dominate industries
to the detriment of consumers and competing businesses.
President Roosevelt's calls for antitrust laws came in the
midst of the industrial revolution.
Today's action, as we stand united, the United States
Department of Justice and 20 States, comes in the midst of
a technological revolution.
Roosevelt said at the time that both the biggest
corporation and the richest man like the humblest private
citizen must be held to obey the law in order to ensure
protection of the law for all.
Some of these same arguments -- some of the same
arguments that were posed against President Roosevelt's
efforts are again being raised today at the end of the
20th Century, and the President's response then is still
appropriate today: We do no man an injustice when we
require him to obey the law.
Thank you.
Mr. Klein: Thank you, Dennis.
Now, we will hear from the Attorney General of the
State of Connecticut, Richard Blumenthal.
STATEMENT OF RICHARD BLUMENTHAL, ATTORNEY GENERAL,
CONNECTICUT
Mr. Blumenthal: Thank you, Joel, Madam Attorney
General, ladies and gentlemen.
We are here today to make sure that there is indeed a
free and open market offering consumers a wide array of
choices at the best prices with the best quality and to
make sure that competitors and innovators have a level
playing field.
And in a real sense, these lawsuits are about
innovation. Innovators and inventors now and in the
future will be chilled and blocked if these predatory
practices on the part of Microsoft continue.
Our action today seeks to stop Microsoft from
stifling innovation and shortchanging consumers. A free
market unrestrained by Microsoft's dominance and dictates
is vital to new ideas and investment.
And untying new products, enabling them to compete on
their own merits is necessary to unblock access to the
market. All of those ideas are important and vital and
well established as principle.
But what we are saying to Bill Gates, in a very real
sense, is: Stop your 800-pound gorilla from blocking
access to the Internet information superhighway. And if
you want that gorilla to be left alone, as you say, simply
leave alone your competitors and consumers from the
unlawful restraints that have been imposed on them.
Today is really D-Day for American consumers and
customers, but it is also Independence Day for America's
inventors, dreamers, entrepreneurs, who are devising and
developing new products, who want to bring them to market
and build their own companies, much in the way that
Microsoft was built; so that instead of applying for jobs
at Microsoft and selling their products through Microsoft,
they can do it their own way, and bring those products to
market and develop their own companies free of the
unlawful restraints that Microsoft is now imposing and
that threaten to throttle the market as a whole for
software.
Let me say in closing that today's actions really are
the result of a remarkable partnership, one unprecedented
in my experience as Attorney General, involving the
Federal Government and the States.
The States and the Federal Government overwhelmingly
share common ground despite the differences that may be
perceived in our including the Office Suite claim and our
somewhat different claim for relief. The States have done
their own work and their own investigation, but we have
worked truly in partnership with the Federal Government.
And finally, about the States, let no one mistake the
fact that there is a remarkable -- a truly remarkably
diverse spectrum of ideology and party and background in
the Attorneys General who are joining these lawsuits.
The Attorneys General involved here span party lines,
geographical distinctions and ideological differences; and
we truly have operated together to assure that there is
real choice for consumers.
The objective here is to make sure that no company
can exercise monopolistic dominance over the gateway to
Internet commerce, because a company that can control
Internet commerce ultimately can control commerce itself,
in travel and industry, business and news, and
entertainment.
And the objective here really in two words, very
simply, is real choice.
Thank you.
Mr. Klein: Thank you, Dick.
We will take your questions, but one short statement:
I want to thank the Attorney General for her support, her
guidance, her leadership on this matter.
And I know I speak for all of the Attorneys General
behind me and those who support this action: We have been
blessed with enormously talented staffs who have done
remarkable investigative work and who represent the best
in terms of both the legal profession and in terms of
public service.
For our part, my principal deputy, Doug Melimed
(phonetic), Rebecca Dick, our Director of Enforcement, and
Jeff Vladner (phonetic), our special counsel for
information technology, who have served remarkably and
indefatigably; and most of all, Phil Malone and the staff
in San Francisco have worked in the highest traditions of
public service and professionalism. It is an honor to be
associated with them and to stand here today.
Thank you.
Question from Audience: Assistant Attorney General,
you say that the general public turns on their computer
screen and everything that they see is Microsoft.
Ideally, what do you want the American public to see when
they turn on their new computer at home?
Mr. Klein: To see all of the possible options that
the various computer-makers could make available to them.
We have some history with this because we know in the past
before these restrictions were put on them, they would
distinguish their screens, make available other options.
And so the people then could buy different products,
get different screens that suit their particular needs and
particular desires. And that is the vision we have. That
increases choice, increases competition.
Question from Audience: Sir, Microsoft says that its
Windows operating system and Internet Explorer is one
product. How do you counter that argument?
Mr. Klein: Well, it is just wrong. Their own
documents make clear time and time again -- let us just
start with them -- that they are concerned about Internet
browser share. They aggregate share not just in terms of
the Windows platform, but in terms of the Mac, Solaris and
other product forms.
And what they have said, all of this detailed in
its -- in our complaint, is that browser share, browser
market share is our number one priority. What all of this
shows is what is quite obvious and quite clear, is that
the browser represented a threat to the Microsoft
operating system. And browser share was necessary to beat
back that threat.
Go ahead.
Question from Audience: I know this is a civil
action. But is there a criminal investigation underway
against Microsoft?
Mr. Klein: No, there is not.
Question from Audience: Mr. Klein?
Mr. Klein: Yes.
Question from Audience: Why did you stop short of
asking for enjoinment of the product? And practically
speaking, how soon can you, you think, get relief from the
Courts to get the changes made at least on first --
Mr. Klein: Yes, I think that is an important
question. We stopped short of asking for enjoining the
product precisely because we believe in creating options,
not restricting them. That is our enforcement philosophy
and that is critical.
We believe we can get the necessary relief in time
frames that will preserve competition and give people a
fair chance to compete on the merits. That is what we
intend to do. We will move immediately for a hearing on
our preliminary injunction.
Question from Audience: Do you think you can do it
within weeks?
Mr. Klein: Well, again, the timing is going to be up
to the judge. But we are prepared to move immediately
with respect to the injunction.
Question from Audience: Do you have a --
Mr. Miller: Joel, if I can -- if I can just expand
on this: This is something we talked about a lot in this
case. And the clear consensus was again: What do
consumers want, and what do consumers need?
We did not want to disrupt the flow of commerce or
consumer options; so that is not -- why we did not block
it. We have tried to finely tune the request for relief
so that things can continue, but before very long consumer
choice can be maximized. That is our star. That is what
we always look at.
Question from Audience: Can you explain how this is
good for consumers if on the one hand a computer-maker can
now without your legal action today install NetScape if it
wants to, but your other option is to allow a computer-maker to take something off what is on Windows, which is
the Internet browser? So you are actually getting --
giving a consumer less. How -- how is this good for
consumers?
Mr. Klein: There is no way that we are giving
consumers less. The computer manufacturers will put on
what they believe consumers want. I know that because
computer manufacturers are in a highly competitive market,
and if one computer manufacturer does not give consumers
what they want, another one surely will. We know what the
margins are in that industry.
How this is good is because competition on the
merits -- we have 100 years experience with it -- will
lead to innovation, will lead to lower prices and better
products.
And the image that a number of people have talked
about is absolutely critical. People who have new ideas,
new software products, new threats to the operating
system, need to believe that they can be the next
generation of Microsoft, and that their products are not,
in the words of one of Microsoft's chief executives,
should not be kept off of the market because he said, you
know, looking at the odds, they probably will not succeed.
We want to send exactly the opposite message. We
want to know anybody who has the chance, got the
ingenuity, got the talent and got the skill, you can come
to play because you can win.
Question from Audience: If you get what you want,
preliminary injunction, regarding the bundling of NetScape
and Explorer, will -- is it possible that Explorer could
still work better than the Navigator since it is an
integrated product?
Mr. Klein: We believe that the technology can be
handled properly, and the opportunity to compete on the
merits will be there.
Go ahead.
Question from Audience: How much of the Government's
case was based on internal memos and e-mail documentation
that was turned over by Microsoft in the CIDs? I mean,
how significant were the internal company documents to
your case?
Mr. Klein: They were an important but by no means
the only part of this. We have extensive investigative
materials growing out of our interviews and our
depositions and our document request throughout the entire
software industry, at all of the various levels. And the
details of that information are contained in the complaint
and in the preliminary injunction that we filed today and
the background evidence that has also been included.
Question from Audience: Will -- will your
preliminary injunction seek to stop or alter the software
after it leaves the factory? Microsoft is shipping their
stuff today. So will you try to stop it before it arrives
at the store?
Mr. Klein: We will -- we will not try to stop the
distribution of software. At this point, we will try to
create remedies that will give computer manufacturers and
ultimately consumers a choice.
Question from Audience: So -- so they can ship --
Question from Audience: You want -- you want the
software to just be uninstalled like before with Windows
95 and during the first preliminary injunction where you
had that uninstall system, so the browser does not pop up;
or do you want the codes stripped out of Windows 98?
Mr. Klein: Well, right now in order to maintain the
competitive balance, we have asked for two things: One,
immediately to be able to have people uninstall. And that
remedy has received -- has been adopted by one significant
computer manufacturer in the interim.
Second, we want to ensure that both codes are
available on the machine in terms of opportunities so that
software writers and others who are concerned about
creating an alternative platform will be able to write to
the NetScape code as well.
Question from Audience: What is the difference in
the claims for relief between Justice and the States'
lawsuits?
Mr. Klein: As I understand it, there is the
additional claim that the States have raised with respect
to the Office Suite. And the second point is that the
States in terms of requiring Microsoft to create options
have sought an injunction that would. in addition to
NetScape, allow or require or carriage of a third browser
as well.
Is that correct?
Mr. Vacco: If I could just expand upon that, in our
complaint we allege that in the context of the Office
Suite, they used their monopolistic power through their
licensing agreements with the OEMs, essentially, to force
the OEMs to install the Office Suite and all of the
functions that come along with Office Suite.
They made it simply cheaper for the OEMs that were
willing to use the Office Suite in terms of their -- their
royalties. That was the inducement to get them to do so.
The -- the distinguishing feature in the preliminary
injunction is that in addition to NetScape -- well, first,
we are asking for an unbundling. That is our first
request, to simply unbundle.
Question from Audience: Unbundle the Office Suites?
Mr. Vacco: No. We are asking to unbundle the
browser, the net -- the Internet Explorer from the basic
operating system software, to unbundle it.
In the alternative, we are then asking for them to
include NetScape and one other Internet browser.
Question from Audience: How daunting is it to go up
against a company that has much more money that the
Department's annual budget? And secondly, has this gotten
personal between you and Bill Gates?
Mr. Klein: It absolutely has not gotten personal.
And I think the nature of law enforcement is that it is
the merits of the claims, not the size of the teams, that
will decide it. And I am confident about the merits of
our claims.
Question from Audience: We understand from people on
the other side that you left the room rather early on
Friday. And there was a feeling in their camp that this
meant that you did not think that there was going to be
much point in you being there, because you did not think
there was much to negotiate.
Mr. Klein: Well, that is absolutely incorrect. I
put together the finest negotiating team, but I had other
obligations and other commitments. I was constantly,
continually in contact with all of our people.
And let me say this, so that everyone understands,
our job and the States' job when we went into this was to
restore competitive conditions, to make sure that
consumers had options, that competitors and innovators had
a chance to bring market -- to bring products to market
and compete on the merits.
What we said to Microsoft is we would look at a range
of remedies that could achieve those outcomes. We did not
have a fixed view on that. And we were prepared to
negotiate.
What was clear to us is that remedies that would make
the market open so that products could compete on the
merits and consumers could choose were not going --
Question from Audience: In your view --
Mr. Klein: -- to be available --
Question from Audience: -- did they make a genuine
attempt to settle the case?
Mr. Klein: I am not going to characterize their
attempt. But what they put on the table would not have,
by any means, protected consumers and eliminated the anti-competitive practices that are the focus of the complaint.
Question from Audience: Your -- your comments about
attempting to divvy up the market with Navigator are quite
interesting. Could you tell us how they tried to do that?
Was there a high-noon kind of meeting with Bill Gates and
the --
Mr. Klein: Again, I think the best reference to this
is in the complaint where it is described. But
essentially, it was a meeting at NetScape where early on
in the process, they tried to create a market division so
that there would not be head-to-head competition, but
basically, as they say in the computer industry, NetScape
would stay in its space and Microsoft would stay in the
Windows space.
Question from Audience: Is that under --
Question from Audience: (Inaudible) criminally
illegal under antitrust laws, isn't that correct, and did
you consider that?
Mr. Klein: Well, the agreement was not entered into
because NetScape refused. And so in those circumstances,
the agreement -- the efforts speak for themselves. But
there was no agreement fortunately, because there was no
acquiescence.
Question from Audience: Well, there was not either
in U.S. versus American Airlines, as well, which held that
there was collusion, and --
Mr. Klein: Well, I think that that was a civil
enforcement action.
Question from Audience: Okay. So you have to have
an agreement from NetScape's half -- half in order to --
Mr. Klein: For us -- our prosecutions depend on the
actual horizontal --
Question from Audience: If you and the States
prevail in court, what makes you think PC makers will
avail of these choices to actually give choice to
consumers?
There has not been a mad rush for PC makers to avail
of the browser icon blocking temporary settlement you got
for 95. And industry analysts say that companies are
afraid of doing anything that might damage their
relationship with Microsoft.
Why do you think PC makers would be willing to do --
to take this option if you do get it?
Mr. Klein: Well, I think first of all there has been
a PC maker that has availed itself of the option in the
last go-around.
Question from Audience: There was?
Mr. Klein: Second of all -- I think for competitive
reasons that matter is currently under seal.
Second of all, in terms of the basic question, we are
of course concerned about any threats, covert or overt,
any intimidation, any pressure, anything that might be
brought to bear on PC manufacturers, computer
manufacturers. We will seek relief to ensure that there
will be no such retaliation, threat, or otherwise.
We believe that PC manufacturers want to compete
robustly and that they are operating on -- in a highly
competitive market, and the ability to distinguish
product, to create new options for consumers is something
that we look forward to and welcome.
In the end, though, as long as they are exercising
their independent business judgment and their free choice,
we are not trying to tilt the playing field in the
direction of any competitor.
Mr. Blumenthal: If I may say one thing?
Mr. Klein: Sure.
Mr. Blumenthal: The States very specifically in our
claim for relief make reference to the threat of
retaliation and discrimination and seeks specific measures
to prevent retaliation or discrimination, because we know
from our investigation that there is an overlay of fear
and anxiety on the part of many of the computer makers
that has led them, in fact, to make public statements that
perhaps they would not have but for some of the implied or
overt threats that have been made to them.
And so we feel that it is one of the central parts of
our immediate claim for relief that there be protection
against threats or retaliation or discrimination.
Question from Audience: Mr. Blumenthal, who is the
competitor you are trying to protect here? Are you trying
to protect future innovation and competition in the
abstract; or is there some competitor you are trying to
protect right now, or competition you are trying to
protect right now, namely NetScape? And don't they have
60 percent of the market?
Mr. Blumenthal: We are not trying to protect any
single competitor, any more than Microsoft is trying to
achieve a free market. Our objective is not to protect
any single competitor in software or any other part of
this industry.
It is to provide a level playing field and choices
for consumers, unencumbered by the kinds of exclusionary
tactics that Microsoft has exploited by virtue of its
dominate position and its leveraging and tying practices.
Question from Audience: But isn't this theoretical?
Aren't you saying -- aren't you saying in a sense, "Trust
us. If we win, there will be more innovation"?
Mr. Blumenthal: We are not asking anyone to trust
the United States Government. We are not trying to --
[Laughter.]
Mr. Blumenthal: Or the States, and most especially
the State of Connecticut.
[Laughter.]
Mr. Blumenthal: We are not asking any consumer to
trust any government. In fact, we are not trying to
meddle or muck up the free market. We are not trying to
cage or shackle Microsoft any more than we are any other
competitor. We are trying to provide now and in the
future real protection against monopolistic dominance.
And the kinds of practices that prevent the free
market really from working in that is the reason why,
across the ideological spectrum, people are supporting
this kind of action, which does not condemn success in any
product or on the part of any company, but simply the use
of dominance in the market and monopolistic power to
extend and preserve the market share that that product
has.
Question from Audience: Mr. Klein, could you -- in
your announcement or in your release, you said that you
are also looking into other Microsoft practices and
products.
Can you elaborate on that at all? Can you say
whether you are looking into the Windows NT operating
system which is going to be coming out next year, and any
problems with that?
Mr. Klein: I think, as you know, when we have an
ongoing investigation, we do not comment about it. It
would be unfair to the parties. So in this circumstance,
we will not comment on the substance of any of --
Question from Audience: Mr. Klein --
Question from Audience: Is there --
Mr. Klein: -- the issues that we are looking into.
Question from Audience: Is there any way that the
Windows NT system could be affected by this particular
lawsuit, then?
Mr. Klein: Again, I think we -- in terms of any
ongoing investigations, I think those will remain quiet.
This one focuses on the browser market and Windows 98.
Question from Audience: A multi-part question if I
may: I was told, I think, by good sources that Bill Gates
made the first-boot offer to you Wednesday night, and that
it was withdrawn by Friday morning that, in effect, the
talks never really began. Can you comment on that?
Mr. Klein: I do not negotiate in public. I believe
those negotiations are matters between the parties. As
far as I am concerned, the key point was there were
several ways to remedy the anti-competitive effects and
create options. None of those ways were put on the table
and so, therefore, we had no choice.
Please let me make one point. First of all, the
market shares that you are talking about are not what the
evidence will support. Second of all, the effect of these
anti-competitive practices on the market shares is very
critical.
These are markets which can tip. You can move this
market to a single dominant and ultimately like an
operating system, a monopoly player.
So perceptions which Microsoft's documents will
itself reflect, as articulated in the complaint,
perceptions about dominance, the role of product bundling
in terms of perceptions about dominance, and the ability
to tip a market, are all things that are immediately in
play here.
Second, on long-term innovation, let me make clear:
It was Microsoft's chief operating officer who said in an
interview that if somebody were to try to bring a product
to market that Microsoft could bundle with its operating
system, what their odds were, he flatly said: You know,
you ought to stay out of the market because your odds are
not very good.
If that is the message, that is it for innovation.
Question from Audience: Mr. Klein, in terms of a
consumer, I am trying to understand what you are alleging
here.
Are you -- are you all saying that the situation is
such that in the future it could have an adverse impact
economically on the consumer, or are you saying that there
is already damage that has occurred, and do you have a
number of any sort on that?
Mr. Klein: No. There is damage that is occurring
now and will occur in the future. The damage that is
occurring now in particular, is consumers are being denied
options; products are being forced through the stream of
commerce.
And ultimately that could lead not just to specific
consumers not getting the benefits of competition but
ultimately to a second monopoly which is something we are
certainly very concerned about.
On a larger scale, we are concerned about innovation
and what can be and should be one of the most vibrant
industries in America today. The software industry and
the potential of that industry is really limitless, and we
want to make sure monopoly power does not put a lid on it.
In the back.
Question from Audience: Are you at all concerned
that this could turn into a 13-year court quagmire like
the IBM case, and that any remedy might come too late for
a fast-moving industry?
Mr. Klein: I believe the preliminary relief that we
are seeking here will be timely and efficacious. And I
believe that the courts and the United States Department
of Justice and the State Attorneys General will be able to
move efficiently and effectively in dealing with these
problems.
Question from Audience: I understand that the States
are seeking a slightly different remedy with the Office
Suite. Why is it going to take 22 governmental entities
to bring this case to achieve the same thing?
Mr. Klein: Well, I --
Question from Audience: Is that --
Mr. Klein: I think that reflects the --
Question from Audience: You can only unbundle it
once, can't you? In which case, is there a little bit of
coat-tailing going on?
Mr. Klein: No. But I think that -- what that
reflects is the pervasive concern about these practices.
These are not just practices that are having a national
impact, but obviously have an impact, as Dennis Vacco
said, on Silicon Alley as well as Silicon Valley. And I
think that is what it reflects is real injury to consumers
on a wide scale, multi-jurisdictional basis.
Mr. Miller: If I can just add to that: As I
suggested before, the States have a rich history of multi-State enforcement activities. And what we have found over
two decades is that when the States band together, we can
use our resources in a very effective way.
We can make decisions that represent cross sections
of America, and that the multi-State vehicle is one
important way for defending and protecting consumers
throughout the nation on this issue and other issues. And
that is why we find that there is strength in numbers.
Mr. Klein: We will take one in the back there.
Question from Audience: Yes. Mr. Klein, what do you
define as the boot-up screen, and why do you view the
ability to change it as so important? Particularly -- and
if you succeed, will this affect the display screens that
other products have like -- like NetScape itself when it
first loads, it has a screen showing its own logo.
Mr. Klein: This has to do with the operating system
monopoly that Microsoft has. The relief is specific to
that.
Why I think it is important is precisely the reasons
I quoted from Mr. Gates in his e-mail that laid to the
imposition of this restriction. And that is, computer
manufacturers were actually featuring and promoting other
products than Microsoft products. And this is a critical
distribution facility; that is, the personal computer.
And here you are, whether you are Compaq or whether
you are Hewlett Packard, whatever, you basically want to
be able to say, "How can I bring new, interesting and
challenging opportunities to consumers?" All of that is
good for consumers. And what -- Microsoft said, "You can
do it our way."
We just as soon put the power back in the hands of
the computer manufacturers.