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  Justice Dept. Again Scrutinizing Microsoft

By Elizabeth Corcoran
Washington Post Staff Writer
Friday, June 9, 1995; Page C01

The Justice Department's antitrust division is looking into how an electronic network that Microsoft Corp. plans to launch in August might affect the on-line industry.

America Online Inc. in Vienna, CompuServe Inc. and Prodigy Services Co., the country's three leading commercial on-line services, received requests for information from the Justice Department earlier this week, company representatives said. The Justice Department asked the companies to respond on an unusually tight deadline: ideally, by today.

"We have a lot of this information assembled," said Kent Stuckey, general counsel for CompuServe. "The request is actually a continuation of a dialogue that had been going on for some time. I expect we could respond pretty promptly."

This is the third time the Justice Department has looked at the business practices of Microsoft, the world's largest personal computer software company.

Last summer, after an almost five-year government investigation, Microsoft agreed to change how it licenses its DOS and Windows operating system software. That settlement has yet to be approved by a judge. In April, the department filed suit against Microsoft's plans to acquire Intuit Inc., the country's biggest provider of personal finance software, causing Microsoft to drop the deal.

Yesterday the department would not confirm the precise nature of its inquiry into the network. "We're looking at the possibility of anti-competitive practices in the computer software industry," said Gina Talamona, a spokeswoman for the department.

Greg Shaw, a spokesman for Microsoft, said the company couldn't comment on whether there was an investigation going on. Even so, he said, "It's not any secret that several of our competitors are lobbying the Justice Department to look at the Microsoft Network."

On-line services allow people to link their computers over phone lines to send and receive electronic mail, read news and purchase goods.

At issue for Microsoft's on-line competitors is whether the company's dominance of the market for operating system software would give it an unfair advantage as it moves into the new realm of on-line services.

Late last year, the company said it planned to weave the software consumers will need for reaching the network into the next version of its operating system software, Windows 95. Microsoft has said it intends to officially release Windows 95 – and so, the Microsoft Network – on Aug. 24.

Integrating the software for reaching the Microsoft Network into the operating system means that by simply clicking, or activating, a symbol that will pop up on their screens, Windows 95 users will be able to reach the Microsoft Network.

That tight marriage has irritated other on-line companies, which say they work hard to get the software needed to reach their networks into the hands of consumers. Many on-line companies give away this software for free. They include the software with magazines or send computer users copies through the mail. The on-line companies also make deals with computer hardware makers so that they will load the software for their networks onto new machines before customers take them home.

Microsoft executives have argued that putting its software into the operating system is no different than sending a disk through the mail or cutting a deal with a hardware maker.

Still, analysts estimate that Microsoft may sell as many as 20 million copies of Windows 95 within the first three months of its release. If just a fraction of purchasers sign up to use the Microsoft Network, Microsoft would vault ahead of 10-year-old America Online in a matter of months. America Online has 2.5 million subscribers.

The Justice Department has heard the concerns about the on-line companies before. When the government began looking at Microsoft's proposed takeover of Intuit, the on-line companies submitted papers outlining their concerns about the Microsoft Network.

Shaw said that Microsoft believes its network will increase competition in the on-line services market.

The on-line companies say they are willing to compete against the Microsoft Network, provided the software for reaching it is not wrapped in Windows 95. "I think there are some pretty compelling reasons" to address the issue, CompuServe's Stuckey contended.

© Copyright 1998 The Washington Post Company

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