WASHINGTON - A computer manufacturer says Microsoft keeps a stranglehold on computer makers through a stick and carrot contract system and won't let consumers buy computers without also paying for Microsoft's Windows operating system.
Gateway executive Anthony Fama, a witness for the nine states asking for strong penalties against Microsoft for antitrust violations, said Microsoft's ``Market Development Program,'' billed as voluntary, is used to keep computer manufacturers in line.
Fama on Monday told U.S. District Judge Colleen Kollar-Kotelly that Microsoft keeps Gateway and others from installing competing software on its computers by offering discounts on Windows royalties.
For example, if a Gateway computer starts within a specified amount of time - which is not usually possible if Gateway installs non-Microsoft programs - the computer maker earns the discount.
The discounts are worth millions of dollars, Fama said, and the benchmarks set by Microsoft are subjective and change from year to year.
``It is this level of discretion that gives Microsoft the power to use market development allowances in an arbitrary and discriminatory manner,'' Fama said.
Last week, a former Gateway executive said Microsoft punishes ``bad partners'' - which the executive defined as companies that don't follow Microsoft's edicts - by withholding discounts.
The nine states want Kollar-Kotelly to force Microsoft to create a stripped-down version of its flagship Windows software that could incorporate competitors' features. The states also want Microsoft to divulge the blueprints for its Internet Explorer browser.
The federal government and nine other states settled their antitrust case against Microsoft last year with lesser penalties.
The original judge in the case, Thomas Penfield Jackson, ordered Microsoft broken into two companies after concluding it illegally stifled its competitors. An appeals court reversed the penalty, but not the conviction, and appointed Kollar-Kotelly to determine a new punishment.
Fama said new Microsoft contracts, set after the federal settlement, keep computer makers from giving customers a choice of operating systems.
Microsoft says the provision helps fight piracy of Windows, Fama said. ``This rationale, however, ignores the possibility that customers may have legitimate licenses for an operating system that they obtained from other sources.''
Fama said Microsoft's uniform license, which applies to all major computer makers, would force either Gateway or its customers to pay the Windows royalty, even if the customer already has a copy of Windows or wants to use a different operating system.
When Gateway expressed concerns about the contracts, Fama said, Microsoft told him that they could not immediately be changed because of the federal settlement that called for the uniform deals.
States that rejected the government's settlement with Microsoft and have continued to pursue the antitrust case are Iowa, Utah, Massachusetts, Connecticut, California, Kansas, Florida, Minnesota and West Virginia, along with the District of Columbia.
Friday
July 4th, 2025
6:02PM
