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Nader opens campaign against MS

Microsoft's dominance of the personal computer market is just the beginning of its ambitious efforts, says attorney Gary Reback.

5 min read
WASHINGTON--Some of Microsoft's (MSFT) harshest critics and biggest competitors gathered here today for an extraordinary conference called by the world's best-known consumer advocate, accusing the software giant of reaching into a well-worn bag of "dirty tricks" to designed to dominate the personal computer market.

The long list of speakers included Ralph Nader himself, attorney and longtime Microsoft foe Gary Reback, Sun Microsystems CEO Scott McNealy, former Federal Trade Commissioner Christine Varney, and Roberta Katz, general counsel for Netscape Communications.

Nader said that he also had invited Bill Gates but that the Ralph Nader Microsoft chairman declined. In addition, the consumer group leader said other companies declined to attend out of fear that Microsoft would retaliate.

"This company gives new meaning to the word vengeance," Nader said. "There are companies slated for extinction by Microsoft and they won't come to the conference. They were terrified, and I never seen anything like it."

The two-day conference was held to examine the business practices of Microsoft at a time when the company is falling under increasing pressure and scrutiny from federal antitrust regulators. The Justice Department is investigating Microsoft on a number of fronts, including possible violations of a 1995 consent decree governing licensing practices involving its Windows operating system and the Internet Explorer Web browser.

In addition, while other consumer groups have targeted the company, Nader's influence and international recognition has taken concerns about Microsoft to new heights outside the Microscope on Microsoft high-technology world. This is important, Reback noted, because the computer market is far more influential than most people realize, not just because of its size but also because of its global reach and its relevance to other markets, including media and electronic commerce.

"Last year alone...the sales of hardware and software dwarfed all of telecommunications, cable, and other communications combined," he added. "This is an enormously important part of the economy, and it's increasing in importance as time goes on."

Reback, who represented Netscape in its own antitrust complaints against the company, said Microsoft's plans to integrate Internet Explorer into Windows are typical of the company's "dirty tricks." The company has a history of using coercive licensing agreements, withholding key information, and engineering incompatibility into its products in its effort to dominate the PC market, he said.

He noted that the real threat Microsoft poses is that it will use its power in operating systems to dominate other markets now that revenue growth in its core business is waning.

The Justice Department contends that the browser and operating system are separate products and that Microsoft is using its Windows dominance to leverage Explorer unfairly with computer manufacturers. Microsoft insists that the products are being integrated into one, making the government's charges irrelevant.

Regardless of the finer legal points, Microsoft's influence on the technology industry has clearly shaken many companies large and small. The unusual conference called by Nader seemed to bring out equally uncharacteristic responses from some of Microsoft's most predictable critics.

McNealy, known throughout the industry for his unabashed and acerbic attacks on Microsoft, appeared surprisingly earnest and subdued.

"This is an impossible speech to give," he said. "I can't help myself. You put a microphone in front of me, and I'll probably invent some wisecrack that will be tomorrow's headline. But it will probably deflect from the real issues that are here today on table."

His went on: "I'm certainly not here because I grew up in Detroit idolizing Ralph Nader," said McNealy, the son of a General Motors executive, taking a playful swipe at his host's reputation for attacking auto safety records of American cars. "I'm here to talk about a market economy that's built around choice--freedom of choice as opposed to freedom from choice."

Yet Microsoft's sphere of influence also encompasses some supporters who believe that the company is being unfairly singled out for its success. A group of users and vendors held their own press conference in the same hotel to object to today's gathering, many wearing buttons proclaiming, "Ralph Nader doesn't speak for me."

"We think that Ralph Nader is out of touch," said Charles Kelly, president of the Worldwide Association of NT User Groups, which represents about 180,000 mostly computer professionals. "We think that companies within the law should be free to do business as they choose. The consumer has the ultimate veto. If they don?t buy the product the company goes under."

Redmond had a response of its own, issuing a letter accusing Nader of convening a "kangaroo court" judged by a jury made up entirely of Microsoft detractors. (See related story)

To that, Nader countered: "It's the rather conventional nonresponse you would expect from Microsoft. I'm really more amused than angered. Its techniques are almost sophomoric."

Nader defended his organization of the conference, saying that "there needs to be people who are on the outside of the arch of [Microsoft's] influence."

"The whole business of software is abstract. How Microsoft uses its power needs to be made concrete," Nader said after the conference. "You notice there were a lot of metaphors used in there today. You can see the picture come into focus."

Today, Microsoft requires content providers like America Online to adhere to licensing terms that don't allow it to use, promote, or even mention competing browsers, according to Reback, who said that Microsoft's acquisitions have even influenced content relating to the software giant itself.

"The world's biggest-selling encyclopedia is now written by Microsoft. What difference does it make to you if the single provider of enabling technology can use its control over the portal to control content?"

To illustrate the effect of such a situation, Reback displayed two biographies of Gates--one from before Microsoft purchased Funk & Wagnal's encyclopedias for its Encarta electronic encyclopedia, and one from after. In the latter version, a sentence about Gates's emphasis on winning in a competitive environment was supplanted with one that said he is well known for his charitable donations.

Reback's proposed remedy to Microsoft's possible dominance was to require that its restrictive controls on original equipment manufacturers (OEMs) through licensing agreements and nondisclosure agreements be struck down. He also suggested that the company should be forced to make all its operating system information available to companies at the same time, rather than disclosing such information to its own applications division and partners first, as it does now.

"I believe that Microsoft will use control of the Windows standard to lock content providers into a similar biased standard," Reback said. "This means that within the near future--three or five years--the producers of ER or Seinfeld are going to broadcast a stream of audio and video in a format owned and controlled by Microsoft.

"It will be irrelevant to Microsoft whether that stream reaches the consumer through satellites owned by Gates through his investment in Teledesic, or through television controlled by Microsoft through their passive investments in cable, or through the computer, the desktop of which is controlled by Microsoft through its monopoly of the operating system," he added. "In each and every case, Microsoft will be the gatekeeper. It will own the pipes...the platforms, and the standard."