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The Microsoft Threat to Electronic Commerce

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Date: Mon, 13 Apr 1998 15:30:24 -0700 From: "Nathan Newman" Subject: MS Threat to E-Commerce

FOR IMMEDIATE RELEASE April 13, 1998

Contacts: Nathan Newman, Project Director Phone:(510) 452-1820 Email: nathan@netaction.org or Audrie Krause, Executive Director Phone:(415) 775-8674 Email: audrie@netaction.org

Web URL:

The Microsoft Threat to Electronic Commerce: DoJ Won the Intuit Battle, But Microsoft Could Win the War

SAN FRANCISCO, CA -- An in-depth report by NetAction reveals how important antitrust enforcement is to assuring vigorous competition in the emerging online financial services marketplace. The report, released today, describes how the Justice Department's 1995 opposition to the proposed Microsoft-Intuit merger opened the door to industry competition and ultimately resulted in the emergence of an open standard for electronic banking protocols.

But continued vigilance by the Justice Department is necessary, NetAction's report warns, because Microsoft continues to use its financial and technological power to establish a monopoly in online financial transactions.

"If the company is successful, it could ultimately gain control of the economic lifeblood of Internet commerce," said Project Director Nathan Newman, who wrote the report.

"People who criticize the Justice Department for investigating Microsoft need to understand that the government's 1995 intervention is the reason we have open competition today in online financial transactions," Newman added.

The report, "The Microsoft-Intuit Merger: The Intervention that Worked and the Dangers Today from Microsoft's Monopoly Practices in the Online Financial Marketplace" also examines Microsoft's more recent attempts to monopolize Internet banking. The complete report is available on NetAction's Web site, at: .

The NetAction white paper explains how the government's intervention made it possible for new competitors to enter the online financial marketplace, and at least gain a foothold in some of the markets that Microsoft was attempting to monopolize. Although Microsoft had sought to control the standards of online commerce through its merger with Intuit, the Justice Department's opposition killed the proposed merger and forced the company to compromise with competitors in building core open standards into the online financial economy.

Unfortunately, Microsoft's increasing dominance of corporate computing and Internet technology has led to a renewed monopoly threat in the world of online financial transactions.

"Microsoft is inserting its Internet servers into most online financial transactions," said Newman. "With its growing control of the Internet browser market, Microsoft is not only in a position to direct customers to its Internet sites, it can direct consumers to the financial services from which it gets a commission."

The most serious threat is that Microsoft is building a partnership with First Data Corporation in an effort to replace the role of banks in processing online bills that were previously mailed to customers by credit card companies, utilities or other merchants.

"All of this calls for increased government scrutiny of Microsoft," said NetAction Executive Director Audrie Krause.

"The danger is that rapid, unregulated changes in the financial world can have dire economic results," warns Newman. "Just look at the recent crisis in East Asia's banking system, or at the Savings and Loan crisis a few years ago which cost American taxpayers hundreds of billions of dollars."

NetAction's report argues that government intervention now, oriented toward promoting open competition and economic equity, will negate the need for much broader, more expensive intervention, in the coming years.

Last May, NetAction launched the Consumer Choice Campaign to educate cyberspace consumers about the threat of a Microsoft monopoly of the Internet, and to mobilize Internet users to pressure federal officials for more vigorous enforcement of antitrust laws. Additional information about the campaign is on the NetAction web site at: .

Reporters may contact Nathan Newman for an email copy.

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