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Office dropped from antitrust case

Attorneys general from 20 states and D.C. drop claims that the marketing of Microsoft Office is anticompetitive.

    In the latest wrinkle in the antitrust case against Microsoft, attorneys general from 20 states and the District of Columbia have dropped two claims that relate to the marketing of the software giant's office productivity suite and email software.

    The prosecutors today filed an amended complaint dropping claims that Microsoft makes it difficult for computer sellers to license office software made by competitors. The new complaint, filed in U.S. District Court in Washington, D.C., also drops claims that Microsoft illegally is tying its Outlook Express email program to the Windows operating system.

    In addition, the complaint adds allegations contained in a separate lawsuit filed by the Justice Department.

    Microsoft has denied all of the charges contained in both suits, but has been especially critical of those alleging that the way it charges computer makers--also known as original equipment manufacturers or OEMs--for the Office suite violates antitrust laws. The software maker contends that the Justice Department expressly approved of the pricing plan when negotiating a 1995 consent decree, and it also has pointed out that the agency made no mention of Microsoft Office in its own complaint.

    In a statement issued today, however, New York Attorney General Dennis Vacco said the amended complaint was designed to "tighten" the complaint.

    "This allows the states to devote their full resources to preparing for trial on Microsoft's conduct relating to Web browsers and operating systems while continuing their investigation into Microsoft's conduct regarding Office productivity suites," said Vacco, whose office is one of the lead prosecutors in the states' case.

    Vacco added that the states are not abandoning the claim centered around Office. "Subpoenas are being served on Microsoft this week as part of the states' ongoing investigation into office productivity suite issues," Vacco said in the statement.

    A Microsoft spokesman hailed the amended complaint as a victory. "Obviously, this is another very positive development for Microsoft," said Mark Murray. "We've said all along that the states' allegations about Office licensing and Outlook Express were completely unfounded. We're pleased that the states have withdrawn this accusation, but it's troubling that the accusations were ever made in the first place."

    The amended complaint contains new allegations--already laid out in the federal suit--that in June of 1995 Microsoft officers attempted to induce executives at Netscape Communications not to make a Web browser for computers that run on Microsoft operating systems.

    "Following Netscape's refusal to join Microsoft's anticompetitive scheme, Microsoft proceeded with its course of anticompetitive and exclusionary conduct aimed at dominating the Internet and the Internet browser market and ultimately foreclosing and annexing that market to its monopoly operating system market," the amended complaint alleges.

    Microsoft's Murray denied that such a meeting ever took place, adding that "Netscape's accounts of that meeting...get more outrageous every time Netscape tells the story."

    The amendment makes the states' complaint much more consistent with that of the Justice Department. Up until now, the biggest difference between the two lawsuits was the states' contention that the pricing plan Microsoft imposed on OEMs who licensed Windows made it "economically impractical" for them to license office productivity software from anyone other than the software giant.

    State prosecutors alleged that the scheme encouraged OEMs to license Microsoft Office on a "per-system" basis, meaning they would be charged whether or not they actually included Office on a particular machine. The software giant has said that OEMs have the option of licensing Office on a different plan.

    State antitrust enforcers also claimed that the inclusion of Outlook Express in Windows 98 constituted an illegal tying arrangement under the Sherman Act, and they had sought an injunction forcing Microsoft to remove the email software. The company contends that Outlook Express is a part of Internet Explorer, which in turn is integrated into Windows. A recent court of appeals decision agreed with Microsoft that the integration of the browser into Windows likely did not violate antitrust law. (See related coverage)

    In mid-May, the Justice Department and the 21 attorneys general filed two separate suits against Microsoft, claiming that a number of business practices centered around the marketing of its Internet Explorer browser violated the Sherman Act, the federal statute that governs antitrust law. Parties in the case now are preparing to go to trial. The case is scheduled to begin September 8.