FOR IMMEDIATE RELEASE                                          AT
SATURDAY, JULY 16, 1994                            (202) 616-2771
                                               TDD (202) 514-1888


     WASHINGTON, D.C. --  Microsoft, the world's largest and
dominant computer software company, agreed to end its illegal
monopolistic practices after the Department of Justice charged
that the company used unfair contracts that choked off
competition and preserved its monopoly position.
     The company agreed to settle the charges with a consent
decree that will prohibit Microsoft from engaging in these
monopolistic practices in the future.
     Microsoft, which makes the MS-DOS and Windows operating
systems used in more than 120 million personal computers, was
accused of building a barricade of exclusionary and unreasonably
restrictive licensing agreements to deny others an opportunity to
develop and market competing products.
     Attorney General Janet Reno said, "Microsoft's unfair
contracting practices have denied other U.S. companies a fair
chance to compete, deprived consumers of an effective choice
among competing PC operating systems, and slowed innovation. 
Today's settlement levels the playing field and opens the door
for competition."
     "Microsoft is an American success story but there is no
excuse for any company to try to cement its success through
unlawful means, as Microsoft has done with its contracting
practices," said Anne K. Bingaman, Assistant Attorney General in
charge of the Antitrust Division.
     The settlement is the result of close coordination between
the Department of Justice and the competition enforcement
authorities of the European Commission, which has been
investigating Microsoft since mid-1993, and which also initiated
an undertaking containing essentially the same terms.  This
complaint and settlement marks the first coordinated effort of
the two enforcement bodies in initiating and settling an
antitrust enforcement action.
     Bingaman, praised the Commission, noting that, "This
unprecedented, historic cooperative action sends a powerful
message to firms around the world that the antitrust authorities
of the United States and the European Commission are prepared to
move decisively and promptly to pool resources to attack conduct
by multinational firms that violate the antitrust laws of the two
     The civil complaint and consent decree were filed last
night, July 15, in U.S. District Court in Washington, D.C.  The
consent decree, if approved by the court, would settle the suit. 
Until approved, Microsoft has agreed in a stipulation filed with
the court to abide by the terms of the decree.
     The Department alleged that Microsoft used the following
unfair practices:
     Exclusionary Per Processor Licenses--Microsoft makes its 
MS-DOS and Windows technology available on a "per processor"
basis, which requires PC manufacturers to pay a fee to Microsoft
for each computer shipped, whether or not the computer contains
Microsoft operating system software.  The complaint alleges that
this arrangement gives Microsoft an unfair advantage by causing a
manufacturer selling a non-Microsoft operating system to pay at
least two royalties--one to Microsoft and one to its competitor--
thereby making a non-Microsoft unit more expensive.   
     "Microsoft has used its monopoly power, in effect, to levy a
"tax" on PC manufacturers who would otherwise like to offer an
alternative system," said Bingaman.  "As a result, the ability of
rival operating systems to compete has been impeded, innovation
has been slowed and consumer choices have been limited."  She
noted that Microsoft has maintained the price of its operating
systems while the price of other components has fallen
dramatically.  Since 1988, Microsoft's share of the market has
never dropped below 70 percent. 
     Unreasonably Long Licenses--The Department further alleged
that Microsoft's contracts are unreasonably long.  By binding
manufacturers to the purchase of Microsoft products for an
excessive period of time, beyond the lifetime of most operating
system products, the agreements foreclose new entrants from
gaining a sufficient toe-hold in the market.
     Restrictive Non-Disclosure Agreements--The Department also
charged that Microsoft introduced overly restrictive non-
disclosure agreements to unreasonably restrict the ability of
independent software companies to work with developers of non-
Microsoft operating systems.  Microsoft sought the agreements
from companies participating in trial testing of the new version
of Windows, to be released later this year.  The terms of these
agreements preclude applications developers from working with
Microsoft's competitors for an unreasonable amount of time.
     The settlement ends these practices and will help to rectify
the effects of Microsoft's past unlawful conduct.  In particular,
the settlement prohibits Microsoft from:     
     --Entering into per processor licenses.
     --Obligating licensees (manufacturers of personal computers)
to purchase any minimum number of Microsoft's operating systems;
     --Entering into any licenses with terms longer than one year
(although licensees may renew for another year on the same
     --Requiring licensees to pay Microsoft on a "lump sum"
     --Requiring licensees to purchase any other Microsoft
product as a condition for licensing a particular Microsoft
operating system.
     --Requiring developers of applications software to sign
unlawfully restrictive non-disclosure agreements.
     The settlement is effective immediately and will be in
effect for six and a half years.
     Bingaman said "this settlement resolves the competitive
problems created by Microsoft's unlawful conduct quickly and
     Microsoft's main corporate office is in Redmond, Washington.