The New York Times
January 5, 1999

Intuit's Chief Urges Division of Microsoft

Calls for Restrictions on Using Windows to Promote Other Products


WASHINGTON -- A senior computer industry executive, testifying in Federal court Monday, urged the judge to divide or limit the Microsoft Corporation so that the company could not use its market-dominating Windows operating system to promote its other products.

"It seems to me reasonable for the court to make a distinction between operating systems and other applications," said William H. Harris, the chief executive of Intuit Inc., which makes Quicken, the market-leading personal finance software. "To the extent that the operating system is an essential service," one that consumers have no choice but to use, "such market power should not be used to leverage into other markets," he added.

Harris, the second-to-last Government witness, took the stand today after a two-week holiday break. He is arguably the most senior industry executive to testify and the first to promote specific remedies, or penalties, should the court find that Microsoft engaged in illegal monopolistic practices.

Though he did not say so specifically, Harris's prescription sounded like a call to break up Microsoft. "Without such a broad remedy," he said in written testimony, "Microsoft's ability to control consumer access will continue to increase."

That testimony apparently took Microsoft by surprise. A company lawyer, John Warden, opened his cross-examination of Harris this morning by chastising him for offering this testimony without giving Microsoft any warning. Then Warden asked him whose idea the discussion of possible remedies had been -- his or the Government's.

"It was my idea," Harris said. "In the context of discussing the importance of the operating system to the industry" he added, it was only natural "to look for actions, or solutions."

If Microsoft is found to have violated antitrust laws, the Justice Department will propose remedies to the judge, leading to a new round of courtroom arguments. Warden intimated today that Harris's suggestion would lead to Government regulation of the industry.

"Are you suggesting that we bring back the people on the Interstate Commerce Commission and make them the Interstate Operating System Commission?" Warden asked.

No, Harris said. Then Warden asked him: "You modify your software in response to technological advances in the industry don't you? Microsoft should have the same ability, shouldn't it?"

Yes, Harris answered, but he added that there was a distinction between Quicken and Windows. Unlike Quicken, he said, "the operating system is an essential service that customers must avail themselves of." He added that Microsoft's power was growing because the company was beginning to use Windows as a "choke point" for access to the Internet.

One measure of whether a company holds an illegal monopoly is whether it can raise prices without fear of competition because there is no comparable product available to consumers.

The Government and Microsoft's competitors have frequently pointed out that unlike Windows, the prices of other computer products have fallen markedly.

The cost of Windows has gone up, but "Microsoft has added many new features and functionality to Windows," Warden said. "You agree with that, don't you?"

Harris responded: "Yes I do -- just as every other software vendor, including Quicken, has added features and functionality to their applications over the years. That's a normal part of the software business." Nonetheless, he added, Quicken's price has declined.

A good part of Harris's testimony dealt with the exclusionary contract Microsoft forced Intuit to sign so that Microsoft would include a link to Quicken's Web site on the "channel bar." That is an advertising box that used to appear automatically on the opening screen of Windows but is now optional.

The contract forbade Intuit to deal with the Netscape Communications Corporation, maker of the principal competing Web browser.

Warden defended the contract but also pointed out that Microsoft had canceled the restrictive provisions in April, a few weeks before the Government's antitrust suit was filed.

Warden also argued that Intuit had chosen to include Microsoft's Web browser with Intuit products instead of Netscape's because Microsoft's was technically superior, not because of any pressure from Microsoft.