Bill Gates came away bloodied last week from the first official round of Microsoft's battle with the US government to keep the Internet Explorer (IE) browser inside Windows 95.
In a three-hour assault against Gates from US Senate Judiciary Committee chairman, Orrin Hatch, the Microsoft CEO caved in to the fierce line of questioning about Microsoft's competitive practices.
Gates finally admitted that Microsoft's contracts with ISPs and content providers exclude these companies from promoting Netscape. He also said that companies with prominent Web sites featured in IE are not allowed to have their sites promoted on Netscape's rival Web site listing.
Though the hearing was unrelated to the Department of Justice's proceddings, much of the ground covered was similar. The case against Microsoft rests on whether the US government can prove the software giant has violated a 1995 consent decree concerning bundling IE with the OEM version of Windows 95 shipped with PCs. However, both parties have a far wider agenda: Microsoft's virtual monopoly of the PC desktop.
Under questioning, Gates put forward his case. "There's really only one key principle at stake, which is our ability to innovate in our products, the ability to add Internet support into the system or, in the future, to add other features like speech recognition and things that will make the system easier.
Analysts warned of a repeat of the IBM battle with the US government, which was dismissed after 19 years of investigation and $200 million (z121 million) in legal fees. The US Department of Justice is looking to hire David Boies, the New York lawyer who successfully defended IBM.
Separately, in a move to comply with the law on this side of the Atlantic, Microsoft made a U-turn in its software licensing agreement with European Union (EU) ISPs, which previously shut out Web browser competition by forcing users to run IE.
The EU has been probing Microsoft's relationships with European ISPs since October 1997 and was concerned that the Microsoft ISP contracts violated fair competition rules.
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