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From...

Netscape details complaints against Microsoft

Netscape CEO Jim Barksdale   

October 21, 1998
Web posted at: 11:30 PM EDT

by Margret Johnston

(IDG) -- An alleged Microsoft proposal to divide the Web browser market stunned Netscape officials in 1995, leaving them believing that Microsoft's only goal was to take control of the growth of the Internet, according to testimony released here Monday in the U.S. Department of Justice's antitrust lawsuit against Microsoft.

The proposal came at a June 21, 1995, meeting of Microsoft and Netscape executives that the U.S. government said, as the trial opened Monday, would be a pivotal part of its proof that Microsoft's business practices violated antitrust laws and established a pattern of anticompetitiveness.

In 126 pages of written testimony, Jim Barksdale, president and chief executive officer of Netscape, recalls how in 1995 Netscape and Microsoft were engaged in discussions about technical standards and a possible cooperative arrangement, and he believed the June 21 meeting to be just another in that series of meetings.

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But something entirely different and not covered in the agenda arose at the meeting, according to Barksdale, who is expected to be called as the government's first witness in the trial Tuesday if there is enough time after Microsoft presents its opening arguments.

"They proposed that a 'line' be drawn between the area in which we developed products and competed and the area in which they developed products," Barksdale said in his written testimony.

The proposal, made by Microsoft executive Dan Rosen, who is presently general manager of new technology at Microsoft, would reserve the Windows 95 operating system browser market exclusively for Microsoft's Internet Explorer browser, which was still in development at the time, Barksdale said.

Netscape would be relegated to producing cross-platform versions of its Navigator browser for the relatively small market of non-Windows 95 platforms, including Macintosh and Unix, under the proposal. Microsoft also made it clear that if Netscape did not agree to its plan, it would "crush" the start-up company, according to Barksdale.

"I have never been in a meeting in my 33-year business career in which a competitor had so blatantly implied that we should either stop competing with it or the competitor would kill us," Barksdale said in his written testimony.

The U.S. government's opening arguments in the far-reaching antitrust trial lasted all morning and half the afternoon Monday before Judge Thomas Penfield Jackson ordered the trial recessed until Tuesday morning.

Government lawyers later released Barksdale's written direct testimony, which he submitted on Oct. 13, under rules agreed by the two sides in the trial. He will be subject to cross-examination by lawyers representing Microsoft, which has denied the government's charges.

After the 1995 meeting, Netscape refused Microsoft's proposal and quickly found itself dealing with the consequences, Barksdale said in his written testimony.

"I did not anticipate the extent to which Microsoft would use its monopoly power over operating systems to take specific actions designed to destroy Netscape's ability to compete in the browser marketplace -- or at a minimum, to so disrupt our browser-generated revenues that it would impede our ability to continue to pose a competitive threat," Barksdale said.

Microsoft flexed its corporate muscles with computer manufacturers by warning them not to get too close to Netscape or there could be negative consequences in their dealings with Microsoft, according to Barksdale's testimony.

The Redmond, Wash.-based software vendor also entered into restrictive contracts with Internet service providers, and offered a wide range of financial incentives in exchange for their commitment to give preference to Internet Explorer over Netscape Navigator, Barksdale said.

Navigator's market share peaked at about 70 percent in mid-1996 and then started to decline, and is currently positioned at between 40 and 50 percent, he added.

"If Microsoft had not engaged in its anticompetitive practices, it is my belief and was the expectation of Netscape that Netscape would have been able to continue on its mid-1996 trajectory," Barksdale said.

Barksdale concluded his testimony by saying that as a remedy the U.S. government should order Microsoft to distribute Internet Explorer separately from its operating system and should also prohibit the company from entering into exclusionary contracts relating to the distribution of the browser.

He also posited the separation of Microsoft's operating system business unit from the unit working on applications software.

Margret Johnston is Washington bureau chief for the IDG News Service, an InfoWorld affiliate.

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