New York Times

October 19, 1998

 

Antitrust Case Relies Heavily on Events at a 1995 Meeting

By STEVE LOHR

WASHINGTON -- The Government's case against Microsoft is a narrative that revolves around the Netscape Communications Corporation and the Government's leading witness, James L. Barksdale, Netscape's 55-year-old president and chief executive.

MICROSOFT ON TRIAL Government Lays Out Its Case Against Microsoft Odd Rules on Testimony, Strict Rules on Seating Antitrust Case Relies Heavily on Events at a 1995 Meeting

In his 127 pages of written testimony, released this afternoon, Barksdale supplied new details and a first-hand perspective of a disputed meeting between Microsoft and Netscape on June 21, 1995, at Netscape's offices in Mountain View, Calif. At the meeting, the Government contends, Microsoft executives proposed that the two companies divvy up the emerging market for software used to browse the Internet's World Wide Web. Microsoft replies that the prosecutors are misinterpreting a routine business meeting.

A longtime executive who has worked for I.B.M., Federal Express and AT&T, Barksdale described the June 1995 meeting as anything but routine. "I have never been in a meeting in my 35-year business career in which a competitor had so blatantly implied that we would either stop competing with it or the competitor would kill us," Barksdale stated. "In all my years in business, I have never heard nor experienced such an explicit proposal to divide markets."

If the court accepts Barksdale's version of the meeting, it will represent a big victory for the Justice Department and the 20 states suing Microsoft. Judge Thomas Penfield Jackson could rule that the meeting itself -- as a conspiracy to try to curb competition through collusion -- is an antitrust violation.

And the Government's broader case begins with that meeting. After Netscape spurned the offer, the Government contends, Microsoft embarked on a strategy intended to thwart competition in the Internet software market by crushing Netscape, bundling its browser into its Windows operating system and making restrictive deals with personal computer makers, online services and other companies.

Those tactics, the Government says, represented an unfair use of the market power Microsoft has as a result of its monopoly in operating system software for personal computers. Microsoft, the Government adds, used that power to protect its monopoly position and to extend its reach into the fast-growing new markets for Internet software and electronic commerce.

The Government focused on the June 1995 meeting in its antitrust suit, filed in May, and since then additional information about the meeting has been reported. But in his lengthy statement, Barksdale provides, for the first time, a precise account of what he says occurred at the meeting. He quotes what Microsoft executives said and refers to notes taken by another Netscape executive who also attended the meeting, Marc L. Andreessen.

The two companies had held talks for months about cooperating. By the June meeting, Barksdale said, the cooperation Netscape most sought was technical information from Microsoft that would enable Netscape's Navigator browser to run smoothly on top of Microsoft's industry-standard Windows operating system. At the meeting, Barksdale said, the Microsoft team, led by Dan Rosen, proposed that Netscape not market a browser for the Windows 95 operating system, which was shipped two months later. As part of the proposal, Microsoft would also invest in Netscape and take a seat on the Netscape board.

Barksdale asked if Netscape's ability to obtain technical information from Microsoft was conditioned on Netscape's accepting the proposal. Barksdale quotes Rosen as saying, "It certainly isn't independent." Any technical information Netscape was seeking could be obtained, Barksdale quotes a Microsoft executive as saying, "depending on how we walk out of this room today."

If Netscape rejected Microsoft's deal, Barksdale testified, the Microsoft team told Netscape that it could expect the technical information to be delayed for three months -- meaning that the latest version of Netscape's browser would not be ready for the release of Windows 95.

After declining Microsoft's offer, Netscape did not obtain the necessary information until three months later, which Barksdale says was "precisely what Microsoft had threatened at the June 21 meeting."

These allegations concerning technical information are legally significant because they portray Microsoft as using the power from its operating system dominance to reward allies and to punish rivals -- something Microsoft has consistently maintained it does not do.

Andreessen, whose notes on his laptop computer are a vital piece of the Government's evidence, is said by Barksdale to be an "extraordinarily fast typist" -- an aside clearly intended to deflect questions raised by Microsoft's lawyers about the credibility of the notes.

In his trial statement, Barksdale quoted these notes at length including Microsoft's effort to keep Netscape out of the Windows 95 market for the browser -- or "client" in computer jargon.

Typed in all capital letters for emphasis, Andreessen wrote that Microsoft wanted to "OWN THE WIN95 CLIENT MARKET AND THAT NETSCAPE SHOULD STAY AWAY."