Microsoft Menace


10 min read
CNET News.com Newsmakers
September 5, 1996, Gary Reback
Microsoft Menace
By Margie Wylie and Nick Wingfield
Staff Writers, CNET NEWS.COM

Gary Reback looks a little weary this morning.

Two years after he first won the spotlight by convincing Judge Daniel Sporkin to reexamine the Justice Department's settlement with Microsoft, Reback's black hair is salted with gray and the boyish roundness of his face has turned lean. It's no wonder. Reback is a man with a mission to single-handedly reign in Microsoft.

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For those who question the purity of Microsoft's motives, the antitrust and intellectual property attorney has become David to the Goliath of Redmond, Washington. Not only did the upstart throw a monkey wrench in the Department of Justice settlement by writing a last-minute brief, but Reback was also key in persuading the DOJ to reject Microsoft's bid to buy Intuit.

Now he's written a long letter to the DOJ saying that Microsoft is skunking competition in the Internet arena with its Internet Explorer, just as it did in operating systems. Nothing has come of that yet, but Reback said he expects hearings when Congress reconvenes this year.

If he's a hero to smaller software companies, to Microsoft, Reback is a media-manipulating menace. He admits he fights a lot of his battles in the court of public opinion through the media and doesn't think it unfair. Single-minded and as intense as an accomplished politician, Reback remained "on message," turning even personal questions back to the matter at hand: Microsoft's world domination.

NEWS.COM: Isn't Netscape's technology itself compelling enough to gain a toehold in this new market? Why take this legal route?
Reback: I think you have to remember that all of this began when Microsoft sent Netscape a letter demanding that it stop advertising the fact that Netscape's products are cheaper and better than Microsoft's products when used in conjunction with other Microsoft products. There are a lot of people in the Internet software space that make great products, but if Microsoft is able to squeeze them out through illegal means, then I think there's going to have to be a legal remedy to that.

NEXT: Why Netscape is different from Microsoft

Gary Reback

Age: 47

Self-image: "country lawyer"

Occupation: Thorn in the side of Microsoft

Claims to fame: Sunk Microsoft's Intuit acquisition
Scuttled its Justice Dept. settlement

Latest conquest: Browser wars on behalf of Netscape

CNET News.com Newsmakers
September 5, 1996, Gary Reback
Why Netscape is different from Microsoft

Netscape, by its own estimates, has 85 percent of the browser market, which they acquired in part by giving away their software. Is there any irony in the fact that they're accusing Microsoft of anticompetitive practices?
No, I don't think so. Bill Gates has been quoted as saying that he wakes up in the middle of the night worried about his browser share. Is Bill Gates really concerned about a particular application that sells for $50? No. His concern is that the browser represents a partial substitute for the Windows operating system. If people write applications for the browser and begin to use it as a substitute for Windows, all of the sudden Bill Gates's revenue stream drops precipitously. Microsoft is sitting on top of one of the world's greatest monopolies of all time, and they're going to do damn near anything they can to keep the forces of technology and the normal forces of the free market from eroding that monopoly. That includes intentionally crippling their own technology; squeezing OEMs not to carry competitors' products; paying middlemen like the Wall Street Journal to disadvantage users of Netscape; and bundling, tying, and leveraging. It's the fundamental Microsoft monopoly in operating systems that Netscape challenges, and that's what really keeps Bill Gates up at night.

Microsoft would argue the definition of an operating system isn't static. It seems this thing that we run applications on is evolving to maybe be a browser in a year. Is there anything inherently wrong with Microsoft saying another function of the operating system is Web serving or browsing?
How far would you like to carry this? Can they say that a function of the operating system is relational database software? Can they say it's word processing? That's been their position all along, and they've put out of business one market after another. You've talked about how much competition there is on the Internet. How much competition is there for productivity applications? Do we have competition for word processing anymore? No. Microsoft engaged in this illegal behavior and ran the competitors out of the market.

Marc Andreessen says Netscape doesn't create proprietary extensions to HTML or other aspects of their browser; they innovate. But there are those people who accuse Netscape of doing the same thing that you accuse Microsoft of doing, such as, for example, withholding source code for Java scripts and plug-ins.
The argument that you've raised is one that Microsoft has raised, but generally speaking in the software industry, it really doesn't carry much weight. Netscape, for example, runs on 16 platforms; Microsoft runs on Microsoft. That's Microsoft's view of the world; that will always be their view of the world.

AT&T, because it was a monopoly, was able to create a very compatible, interoperable infrastructure. Hasn't Microsoft succeeded in doing the same thing with the desktop operating system?
Certainly, to some extent. The question is whether the efficiencies that they've achieved are worth the competitive damage that they've inflicted on society. Couldn't we achieve the same degree of innovation if we required Microsoft to publish its APIs on a timely basis? There's no reason why a dozen companies couldn't make a product that would seamlessly integrate with the operating system, and I think consumers would benefit enormously if that were the case.

Doesn't the failure of the Microsoft Network in the face of the Internet show that even Microsoft is subject to the whims of the market?
It's true that the technologies move rapidly, but should we therefore permit someone to monopolize the basic technology on the theory that perhaps over time their position might naturally be eroded? I mean, after all, the dinosaurs died in 300 or 400 million years. IBM had a monopoly for, what, 25 years? When there's a monopoly, people suffer. Consumers don't get the benefit of the best products. I don't think that it would be fair for us to think that we should just wait and let the free market take care of this problem when it would take a long time to do it.

So in your view, where do we draw the line?
If Microsoft wants to make better Web servers or better browsers, do it on a fair-and-square basis, and people buy it, so be it. But if they make better products because people in their operating system group give secret information to the people in their browser group and they get a head start, or secret information to the people in their Web server group and they get a head start, that's not fair. That's not the American way, and that's not what's best for the consumer.

As Microsoft expands in this media realm, do you see other new opportunities for yourself?
I think that there is a real issue here about whether a company that has a monopoly in something so fundamental as desktop operating systems should be expanding into the media in this way. I think that that's going to be debated very hard over the next year.

NEXT: Playing to the audience

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CNET News.com Newsmakers
September 5, 1996, Gary Reback
Playing to the audience

In the past, it seems you've played out a lot of the case against Microsoft in the media. Will that continue in Netscape's case?
Well, certainly a portion of it is going to be played out through the media because it's very important that people understand these issues and discuss them. It's far more important that they be discussed on programs like this than they be discussed in courts, because I think once people understand that their choices are being restricted in an artificial way, they're going to be very upset and demand changes.

So how do you answer Microsoft's charge that you're just a publicity hound?
I don't answer that charge. The kinds of allegations we've made about Microsoft's conduct have now been confirmed in the press. Those charges are independently verifiable. I'm not really the issue here. The issue here is Microsoft's conduct. I have no control over consumers, but Microsoft, through its monopoly of the desktop operating system, has enormous potential to harm consumers. So that's where our focus really ought to be: not on me, but on Microsoft.

Is the fact that Microsoft is sort of this great American success story an impediment to stopping them?
Well, I look at Microsoft and I say, "Bill Gates benefited enormously when he was in his 20s because there was an open market and free competition." Shouldn't Marc Andreessen have that shot? Shouldn't other people who are coming along have that same shot? Microsoft has certainly been successful, but the truth is the entire American software industry has been successful. The American software industry dominates the international landscape. I would say between 40 and 60 percent of all of my clients' business is done overseas. So if you look at the balance of payments, the American software industry is sort of keeping us afloat. If any one company came to dominate that industry, I think that edge would be lost.

Is Bill Gates the problem at Microsoft? Would things be different if he weren't at the helm?
I don't know the answer to that. I don't know Bill well enough to make that kind of assessment. Obviously, he has also surrounded himself with very intense people, and I have to say in many respects that's good. I think the concern at the moment, though, is that there is a broad feeling that they think that Microsoft can flout consumer choice; that they might be bigger than the government; that they can do essentially whatever they want to do and the government won't step in.

So I don't see the issue as being one of whether Bill Gates continues to be at the helm. I hope he continues to be at the helm. I see the issue as being one of whether the government is going to step in and have a role here. In those situations where the government has stepped in, Gates backed off. Take Intuit, for example. When the government said they were going to challenge that, he took his marbles and went back up to Redmond. If the government stood up a little bit here, there would be a lot more competition and a lot less monopoly.

NEXT: What drives Gary Reback

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CNET News.com Newsmakers
September 5, 1996, Gary Reback
What drives Gary Reback

Is there a Reback's Law, a bromide, or a saying that you live by?
As a litigator I sort of live by the notion of fear and loathing to my adversary, but in this context I live by the notion of free and open competition for the consumer. That's what drives me every day. This is really philosophical for me. I don't own stock in the companies that we've been talking about. I certainly make a good living, but not the kind of living that Bill Gates and his friends make.

People often ask me why am I so committed to all this. I tell them that I've listened to Bill and I hear what he wants to do, and I don't believe in it. I don't think it's good. I don't think it's good for one person or company to have that kind of power. It's almost religious with me. I think that there needs to be free and open competition, and I think it's important that people stand up for that concept.

When you're a lawyer, lots of times you have to defend causes you don't believe in, frankly. Lots of times you might get up in the morning wondering whether you're making a contribution to society or not. I have no doubt about that. I think that I'm doing something that's beneficial for a lot of people, not just for me. I feel good about my practice and this practice generally, and I think it's one of the most interesting types of practices that a lawyer could possibly have.

With (retiring Assistant Attorney General) Anne Bingaman, who led the charge against Microsoft gone, and after the last huge investigation led to nothing, is there anyone left at the Justice Department really willing to take on Microsoft?
In speeches that Joel Klein has made, he has indicated a far more sensitive recognition of some of these problems than Bingaman ever did. I also think there might be a role for the Federal Trade Commission in the future. The Federal Trade Commission in the past few months has had important hearings about the software industry, and just published a very impressive report in which they talk about the fact that companies that control interface specifications need to be really closely scrutinized by the government, lest they run competitors out of the market and out of all adjacent markets. So I think they get it too.

I think we're going to see, over the coming weeks and months, an increased government role. I've also begun to hear people on Capitol Hill suggesting that there might be hearings at the beginning of the year, and those are suggestions that have been made to me. We've made no effort. We haven't had the time, frankly, to talk to anybody in Congress about these problems. But there is a genuine grass-roots outpouring of concern that I think has reached Senators and Congressmen and women as they've been back from break, and from what we're hearing, people are beginning to focus on that. So yes, I think there's going to be something out of the government. Will it come in time? I think that is the key question.

I mean, after all, the government did go after Microsoft and got them to plead no contest to the (consent) decree in the operating system market, but by then it was too late. There wasn't any competition left. The government understands now that they did what they did too late, but the question is, can they get it together and move in timely fashion? I don't know the answer to that.