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From free-market zealot to Microsoft policeman

As Capitol Hill's lightning rod for criticism of Microsoft, Sen. Orrin Hatch (R-Utah) seems slightly out of place.

CNET Newsmakers
March 18, 1998, Orrin Hatch
From free-market zealot to Microsoft policeman
By Dan Goodin
Staff Writer, CNET NEWS.COM

WASHINGTON--As Capitol Hill's lightning rod for criticism of Microsoft, Sen. Orrin Hatch (R-Utah) seems slightly out of place.

Throughout his four terms, the conservative senator has railed against governmental regulation and sung the praises of an unfettered free market. But Hatch draws the line when it comes to the Redmond, Washington, software giant. An attorney before coming to Washington, Hatch argues that Microsoft "is clearly a monopoly...and will have to learn to live by the rules that govern monopolies," and regularly praises the Justice Department for its ongoing legal action against the company that made "operating system" a household term.

Hatch's activist stance on Microsoft has raised a few grumbles among his fellow Republicans, but so far none loud enough to get much notice. For the most part, few of Hatch's colleagues on either side of the congressional aisle have taken much of a stand on allegations that Microsoft uses anticompetitive measures to promote its products. Their indifference--or perhaps ignorance--has left Hatch, who chairs the powerful Senate Judiciary Committee, front-and-center on the issue of whether Microsoft wields monopolistic power.

The latest round of criticism leveled at Microsoft came at a four-and-a-half-hour hearing held by the Judiciary

Committee, dubbed "Market Power and Structural Change in the Software Industry." The session was attended by chief executives Bill Gates of Microsoft, Scott McNealy of Sun Microsystems, Jim Barksdale of Netscape Communications, and Michael Dell of Dell Computer.

The high-profile hearing drew more cameras than any other event in Senate history. It also came with its share of tense moments. One arose when comments seemed to contradict Dell's assertion that customers can, upon request, purchase computers with Netscape Navigator preinstalled. Another came when Hatch asked Gates repeatedly whether Microsoft in any way restricts its partners from promoting Netscape's products. Gates eventually conceded that, in some circumstances, it does.

CNET's NEWS.COM caught up with Hatch in his Senate office two days after the hearing. Exhausted from all the hubbub, he demonstrated a working knowledge of the software industry, and explained why he is devoting so much energy to policing Microsoft.

NEWS.COM: You're known as a senator who adamantly opposes government regulation of private enterprise. Why are you so supportive of the Justice Department policing Microsoft? Isn't that just another example of burdensome government interference?
HATCH: Well, I don't look at the Justice Department's policing of Microsoft as governmental interference. It's whether or not the antitrust laws should be enforced, and whether or not Microsoft is using its control of the desktop operating system to basically annihilate other companies, or put them out of business, or make it impossible for them to do business--and thus stifle competition, innovation, and continued growth in the industry. I don't think the Justice Department is trying to regulate. I think what they're trying to do is enforce antitrust law.

You've participated in a lot of high-profile Senate hearings during your four terms. I don't believe any of those have delved into the often arcane issues that are raised by antitrust laws or the high-technology industry. Was your committee's hearing historical?
It was historical because this is the first major, major hearing involving actual icons of leadership in the field of intellectual property vis-a-vis the Internet, the whole computer industry, and, of course the dissemination of knowledge through the computer communications devices of the high-technology industry.

What is the most significant thing that came out of the hearing?
Well, first I think that the hearing and our discussion leading up to the hearing directly led to Microsoft's decision to stop limiting Internet service providers from distributing Netscape products. So it was a very, very important hearing from that standpoint. This is a significant development that will return consumer choice.

Also, there were certainly more indications that Americans have a right to have laws enforced, and no 
  one has the right to use predatory conduct or 
  anticompetitive practices. Microsoft has put some form of pressure on computer makers not to offer Netscape as a choice, and we saw some indications of that in Mr. Dell's statement to the country, which was, quite frankly, not very credible given what his salespeople have told us. Even if Mr. Dell concedes that Microsoft has given Dell some incentive to give Internet Explorer an advantage over Netscape, I think his testimony kind of indicated that was true.

I think there was strong testimony to the effect that Microsoft clearly is a monopoly. Now, they have a right to be a monopoly--they earned that right. But they don't have a right to exploit the monopoly to reduce competition or to violate any other aspects of antitrust law. I think that [ New Enterprise Associates venture capitalist Stewart Alsop] put his finger on it when he said that Microsoft got where it is today by being tough and scrappy and exploiting its power to the fullest. But now that they do have a monopoly--and I think almost anybody would conclude that they do--they will need to change this culture to learn how to abide by the established limits on the use of monopoly power.

And what is your particular role, and the role of the Senate Judiciary Committee in general, in helping to enforce these rules that you're saying Microsoft as a monopolist must live by?
Well, ours is the role of the Oversight Committee. We have oversight of all antitrust issues in the country, and certainly this is one of the issues that probably is more important than almost any in the country today. It's providing literally tons of jobs, and, of course, has established the United States as the world leader in the high-tech industry. So it's very important that we overview the criticisms that have been coming our way.

Now, we also found, in getting into the Microsoft matter, that there were many companies who were afraid even to comment--afraid even to talk about it--and that started to concern us, too. Part of that comes from the nondisclosure agreements that Microsoft has obtained from its clients, and part of it comes from the fact that they're just worried to death that Microsoft might turn on them and make it more difficult for their businesses to survive.

NEXT: The politics of keeping a giant in check


Age: 63

Claim to fame: Outsider candidate who captured Republican Senate seat in 1976. Ultra conservative chair of the powerful Senate Judiciary Committee.

Education: Bachelors in history from Brigham Young University, 1959;
law degree from the University of Pittsburgh Law School, 1962

Hobbies: Lyricist, known for penning lyrics during boring or long congressional hearings. CD titles include the patriotic Freedom's Light, My God is Love, a collection of inspirational tunes, and the single Many Different Roads, a tribute to Princess Diana and Mother Teresa. Also an avid basketball fan who regularly attends Utah Jazz and University of Utah Utes games.

Verbatim: "I believe we're doing Microsoft a tremendous favor because, by pointing...out the potential violations of law, perhaps Microsoft things that they would not otherwise have done that literally will help them to maintain their market dominance without violating the law."

CNET Newsmakers
March 18, 1998, Orrin Hatch
The politics of keeping a giant in check

I realize there are a number of different Microsoft practices that you're concerned about. What concerns you the most, which practice?
First of all, I want to compliment Microsoft. They've set the standards in the industry. They've developed their desktop dominance because of an intelligent approach to business and because of being scrappy and tough, and I give them a lot of credit for that. But when they go beyond that and start to make it difficult for people to survive, or to compete, or to sell their products, or to have a free and open trade benefit like most everybody else, then I think Microsoft is stepping a little bit beyond. And we now have some indications that that's the case, but I think it's going to be up to the Justice Department to determine whether that is truly the case.

Is there a particular area--content providers, ISPs, OEMs--that you are particularly concerned about?
Well [Gates] indicated that Microsoft has limited Netscape's right to sell its browser by some of the requisites that they've made on competing companies who might be willing to talk about Netscape's browser, or might be willing to sell it or recommend it to people. It's quite apparent that Microsoft may have stepped too far in that particular area, and I thought that Gates's testimony was pretty crucial with regard to that issue.

Your home state of Utah is headquarters to Novell and Caldera and other high-tech companies. Certainly Novell and Caldera are two of Microsoft's most bitter competitors. What do you say to critics who claim that your stance on Microsoft has more to do with pleasing important constituents than with protecting American consumers?
I happen to be a United States senator. Yes, I represent Utah and I want my companies there treated fairly, and certainly I want It's better for us to examine these matters today than 
  to wind up with an Internet Commerce Commission 
  that will have the almighty hand in this area. the antitrust laws abided by. But most of the complaints have come out of Silicon Valley. I think Americans have a right to have laws enforced, and no one has the right to use predatory conduct, or to use anticompetitive practices, or to use antitrust illegal tie-ins, or any number of other devices that some allege Microsoft is using. My impression is that they may have violated the law--that, literally, there has to be some oversight and some national consideration of what needs to be done here.

Now, I believe we're doing Microsoft a tremendous favor because, by pointing out these matters and by pointing out the potential violations of law, perhaps Microsoft can go forward from here and do things that they would not otherwise have done that literally will help them to maintain their market dominance without violating the law. If they continue in the way they are going, many felt that--three, four, five, ten years from now--the government would have to really come down much harder on Microsoft than it's going to come down now. I've also made the point that it's better for us to examine these matters today than to wind up with an Internet Commerce Commission that will have the almighty hand of the federal government in this area. That would stifle our innovation and ability to grow.

Is it true, as at least one Washington pundit has told me, that antitrust enforcement is as much a political act, requiring the support of the American people, as it is a legal act? If so, what is your role in making sure that antitrust laws are enforced?
Well, I'm interested in the legality of the enforcement of antitrust laws. I don't think it's a matter of politics--it shouldn't be a matter of politics. I commend Mr. Gates, I commend Microsoft, for being able to achieve the dominance that it has. On the other hand, only God knows how many competitors have been stifled if there has in fact been anticompetitive conduct or other violations of the antitrust laws. We've had some indications that there have been some violations, and that there are plenty of complaints from the software industry--it wasn't just Sun Microsystems and Netscape. These complaints are coming from all over, not just Utah.

But isn't it true that if the Justice Department and Joel Klein [head of the DOJ's antitrust division] are to really succeed and press on with enforcement of antitrust laws, they're going to need support from people like you?
Well, there's no question that the fact that we're holding these hearings lets the Justice Department know that we feel that what they're doing is credible and worthwhile--and in the best interests of the whole computer industry and the whole software industry in this country.

I commend Joel Klein and the people at Justice for being willing to do what they're doing, because I think they're proving through the litigation thus far that some changes need to be made, that Microsoft needs to make some changes.

NEXT: An ever-vigilant watchdog

CNET Newsmakers
March 18, 1998, Orrin Hatch
An ever-vigilant watchdog

Is there a need, as some have speculated, to modify antitrust laws to accommodate the abbreviated product cycles and other characteristics that are unique to the computer industry?
I don't think so. I think the antitrust laws are broad enough to be able to resolve any difficulties that exist in the computer industry. But there's no question that these are tough issues. They're tough questions, and it takes a certain amount of very, very worthwhile and forthright intelligence to resolve them. Naturally, nobody likes to have the Justice Department coming down on them.

I think that, now that Microsoft is a monopoly, there are certain things and certain constraints and restraints that they should have to live within. They just can't be allowed to run rampant over any other business or to do things that are blatant violations of the antitrust laws--or even subtle violations of the antitrust laws. That's why we have a Justice Department, that's why we have oversight, that's why we have the laws, and no matter how important the company is, no matter how great it is, Microsoft has to abide by the law just like everybody else.

Would you agree with some of the pundits who found Bill Gates to be non-responsive to a number of your questions the other day, and found Michael Dell to be a little bit less than credible on some of the points concerning restrictions on shipping Netscape Navigator?
Well, naturally I disagreed with some of the comments Mr. Gates made--I think that was apparent--but he did make some concessions that were very important in Only God knows how many competitors have been 
  stifled if there have been violations of antitrust laws. that hearing. Also, it's tough to witness before Congress. People naturally sometimes feel a little intimidated, or they feel a little stressed, and it's not easy to testify before a congressional committee, and especially the Judiciary Committee, and especially on antitrust. I allow for a lot of leeway there.

I personally do not believe Microsoft would have changed its ways with regard to the licensing agreement that it had with the ISPs had it not been for that hearing. So that hearing in and of itself was a very forward thing that caused some very interesting and important changes that literally have evened up competition and made competition even more viable in this country. So it was worthwhile doing that.

This last hearing, we'll have to see what happens, but I thought it was an extremely interesting hearing. I thought that Bill Gates by and large did a pretty good job of testifying, but I think he also admitted some things that I think Microsoft's going to have to change.

And how about Michael Dell asserting that there are no restrictions on shipping Netscape Navigator?
Well, he looked a little uncomfortable when we pointed out that we had called his people and they just plain rebutted what he said. I felt that Michael Dell's testimony was basically against Microsoft. He came there to support Microsoft at Mr. Gates's request. Originally, we were only going to have Mr. Gates, Mr. McNealy, and Mr. Barksdale, but Mr. Gates felt that was unfair--that it was two to one against him, so he suggested Mr. Dell and [Doug Burgum, CEO of Great Plains Software], and I said "Fine, glad to do that."

Any plans for a follow up to this hearing, and if so, when and how?
Well we're not going to go away. This is an important issue. We still have a lot of complaints that need to be investigated. We don't have an immediate hearing coming up, but I suspect we'll continue to hold oversight hearings to see where we go in this area and see just what should be done. Naturally, there are a lot of sincere, decent people who feel put-upon, who feel that Microsoft has not been fair, and then again, Microsoft feels like it's being put-upon too, and being penalized because it has been so successful. I can understand that, and certainly will try to always be fair to Microsoft and to the others as well. But our goal here is just to do what's right.

One thing we do want to do is, I felt that Bill Gates had indicated that he could work out an agreement with us, similar to the agreement that they worked out with the Justice Department, to allow people to talk to us, in contradistinction to their nondisclosure agreements or their licensing agreements. And I've agreed that the Committee will guard the trade secrets and the business secrets of the company. So, I'm hopeful that we can work out that particular letter of authorization and then we can go on from there. But we'll just have to see how cooperative Microsoft is on that. Otherwise I suspect we'll have more and more complaints continuing to come in. We'll investigate those complaints and see what we can do.