Headed For Battle

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It was a little ironic, and probably a pretty bad omen, that just as the three-day "cooling-off period" between Microsoft and the U.S. Justice Department reached its climax this weekend, the temperature in Washington soared into the 90s and the negotiators were driven out of their conference room in the 60-year-old main Justice building for lack of weekend air conditioning. They beat the heat in the offices of Microsoft's lawyers, Sullivan and Cromwell, but even there cooler heads did not prevail. In a matter of hours, the negotiations collapsed. "The government's theories for the personal computer industry," said Microsoft senior vice president William Neukom afterward in the company's combative official statement, "were not in the interest of PC users and would have set a bad precedent for other technology companies in the PC industry." The DOJ's terse statement merely noted that negotiations had "ended without resolution," and "at this point, the talks are not expected to resume." Except, that is, when they're conducted for keeps in front of a federal judge.

Until the final breakdown Saturday afternoon, it looked for a couple of days last week as if Bill Gates just might have found a way to slip out of this one relatively unscathed. Early Thursday morning, with only hours left before the press conference at which Attorney General Janet Reno and her antitrust chief Joel Klein were to announce one of the largest and most important antitrust cases in American history, Gates demonstrated the cold-blooded brinkmanship for which he is famous: with no time left on the clock, he suddenly made nice. O.K., he told Klein: Let's talk.

So with the future of the computer industry hanging in the balance, the launches of both Windows 98--and parallel antitrust suits by the Federal Government and some 20 states--were delayed until at least Monday to give the lawyers time to either find their way to common legal ground or determine that no such territory exists. By Saturday afternoon, though, it was clear that--probably by early Monday--Reno's press conference would almost surely be taking place after all.

At issue, of course, is the line between what Bill Gates can and cannot legally do with Windows, his de facto operating-system monopoly. Klein's team has spent the past year amassing what the DOJ clearly considers persuasive evidence that the software giant's behavior--from restrictive licensing arrangements with its so-called PC allies to me-only marketing deals with Internet service providers and websites--violates the venerable Sherman Act, the bedrock of U.S. antitrust law. Sherman, in essence, says it's O.K. to achieve a monopoly, but not to use one to wedge your way into other lines of business. Klein calls actions like the nasty one Microsoft is accused of taking against Compaq--threatening its largest PC partner with the revocation of its Windows license if Compaq chose Netscape's Web browser, Navigator, over Microsoft's competing Explorer--clear violations of the law. Gates and his supporters, by contrast, steadfastly insist (cue the Star-Spangled Banner sound track) that every deal they've ever struck is just another example of the company's ongoing effort to give the American consumer more and more "functionality" at lower and lower prices.