Statement by Sen. Orrin Hatch (R-UT).
Re: Judiciary Committee Investigation of Microsoft.
Date: June 26, 1998.
Source:  Senate Judiciary Committee.  This document was created by scanning a fax copy sent by the Judiciary Committee, and converting it to HTML.

News Release
JUDICIARY COMMITTEE
United States Senate - Senator Orrin Hatch, Chairman

STATEMENT OF SEN. ORRIN HATCH
BEFORE THE U.S. SENATE
ON THE JUDICIARY COMMITTEE'S MICROSOFT INQUIRY

Mr. Presidency, I rise this morning to speak for just a few moments on the Judiciary Committee's progress with respect to our Microsoft inquiry and, more specifically, to share my perspectives on how Microsoft has conducted itself before the Committee; to discuss some important developments from this past week; and to discuss the Committee's upcoming plans with respect to the Microsoft issue.

This week has been a significant one. Just yesterday, Windows 98 was rolled out to consumers. I might note that contrary to Microsoft's emphatic protests last month that a federal lawsuit would have catastrophic consequences for the PC industry, the Justice Department did file suit, and, lo and behold, the sky has not fallen on either Microsoft or the computer industry. Meanwhile, the Department of Justice encountered a set back in its original consent decree case. And, something which got less attention in the midst of these other developments, the Software Publisher's Association, the 1200 member software industry association of which Microsoft is a member, released a report describing how, if allowed to proceed with its tried and true market practices, Microsoft will extend its current desk-top monopoly to control the market for network servers -- a technology which provides the foundation for the Internet and corporate intranets.

So, for those who have looked seriously at the Microsoft issue.  I believe it is clear that the issue is about much more than just the browser, It is about whether one company will be able to exploit its current monopoly in order to control access to, and commerce on, the Internet; whether one company will control the increasingly networked world in which we are coming to conduct our business and lead our lives.

Indeed, the reach of Microsoft's monopoly power is on the verge of extending well beyond markets which we have traditionally thought of as software or technology markets, and the effects of this expansion will be felt not just by the software companies who have traditionally competed with Microsoft, but by a broad swath of U.S. consumers. As The New York Times yesterday observed,

Right now Microsoft is expanding into myriad Internet businesses, including news, entertainment information, banking, financial transactions, travel bookings and other services.  Since consumers have no choice but to buy the Windows operating system when they buy personal computers, Microsoft is in a position to give such a big advantage to its own software that any other software maker would not be able to compete.

I agree with the Times's conclusion; "It is not healthy for the courts to grant Microsoft a permanent chokehold over the entire expanding world of the Internet. " I ask that this New York Times editorial be entered into the record.

I believe this is one of the more important policy issues of our day, one which will have far reaching ramifications for years to come, and that it would be remiss for lawmakers and law enforcers not to be paying close attention to this issue. So, when we return from the July recess, I plan to hold further hearings on competition in the digital age. In particular, I plan for the Committee to examine market practices and developments in the so-called "enterprise" or back office software market, and more generally to examine practices and developments affecting access to, and transactions on the Internet. Specific hearing dates and witness lists win be released when finalized.

While I will reserve comments regarding Microsoft' tactics in these markets until after we learn more about this issue next month, I do have a few comments regarding Microsoft's tactics in Washington over the last several months. In a nutshell, I would offer my view that Microsoft has, regrettably, seen fit to deploy a massive pr campaign grounded in spin control and misdirection, as opposed to engaging the American public, on the basis of the facts and the merits.

For starters, I find it rather surprising that any one company would, rather than seeking to prevail on the merits, instead have the hubris to try and use the appropriations process to "go on the offensive' and seek to restrain a federal law enforcement agency that has an obligation to enforce the laws, as was recently reported. I trust that my colleagues in this Chamber would have little difficulty in seeing this as anything but an effort to interfere with an ongoing law enforcement action. I can certainly appreciate my colleagues wanting to go to bat for their constituent, but I would find it surprising and disturbing were they or any other Senators swayed to permit this body to seriously consider such an effort.

More fundamentally, though, I am troubled that Microsoft has seen fit to engage in a game of hide the ball, as opposed to putting their best case forward on the facts and on the merits. This issue has nothing to do with the government trying to design software. It is about trying to preserve competition and innovation -- the hallmark of a free market -- in an area that is absolutely critical to the future of our economy. And, it is about getting to the bottom of the true facts here so as to understand how best to accomplish this fundamental objective. And, frankly, if the facts truly aren't so bad, I would expect Microsoft to be happy to explain them,

One of the issues I have been concerned with since last fall, for example, is the restrictive contracts Microsoft, has imposed on various Internet firms seeking placement on the ubiquitous Windows desktop. Rather than admit that they have indeed imposed such terms, and us why we should not find them objectionable, Microsoft has consistently sought to avoid the existence and implications of these contract terms. When pressed on the issue, Microsoft announced on the eve of our March hearing that it would no longer enforce these restrictive contract provisions, instead of explaining why these provisions were legal.  But, when the Justice Department filed its suit nearly three months later, we learn not only that these restrictive and exclusionary provisions existed, but that Microsoft in fact continues to enforce them with respect to the biggest Internet firms such as AOL and Compuserve, notwithstanding Microsoft's prior representations to the Committee that these very provisions had been removed from its contracts "on a worldwide basis."

These are just a few examples where Microsoft has been less than one hundred percent candid and forthright. There are others. Committee staff has prepared a brief report outlining some of the areas where I believe Microsoft could and should have been more forthright with the Committee.

As the Committee continues its inquiry, I plan to give Microsoft a fair opportunity to be heard on these issues. But I think they should be heard on the record, rather than through carefully orchestrated, multi-million dollar pr campaigns that are more concerned with blurring the true facts than explaining them. So I hope that, when given the opportunity to be heard on the record, Microsoft chooses to be somewhat more candid with the American people than it has to date.