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Justice Dept. Investigates Microsoft's Relationship with Corel

Federal antitrust investigators are investigating whether Microsoft's stake in rival Corel Corp. reduces competition in the market for office software like word processing and spreadsheets. A Justice Department spokeswoman said the investigation would "look at the competitive effects" of the transaction in which Microsoft invested $135 million in Corel last October.

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Federal antitrust investigators are investigating whether Microsoft’s stake in rival Corel Corp. reduces competition in the market for office software like word processing and spreadsheets. The investigation was confirmed both by the Justice Department and by Microsoft. “We’re looking at the transaction” in which Microsoft invested $135 million in Corel last October, said Justice spokeswoman Gina Talamona. She said it was a merger investigation “to look at the competitive effects of the transaction.” But Talamona denied a report in The Wall Street Journal that Justice’s antitrust division also was looking into Microsoft’s pending $1.1 billion buyout of Great Plains Software Inc. “We are not investigating the Great Plains deal, and we never opened an investigation into it,” Talamona said. The Great Plains deal was large enough that the companies were required to report it in advance to the government under the Hart-Scott Rodino Act. The antitrust division reviews that data but does not open investigations if it sees no competitive problems with the deals. On the Corel investigation, Microsoft spokesman Jim Cullinan in Seattle said that Microsoft had received a request for information from the department about “an aspect of our relationship with Corel.” “We are in full cooperation with the request, but we cannot discuss the details of the inquiry,” Cullinan said. That request came three weeks ago, the Journal reported. Prosecutors are investigating whether Microsoft’s share in Corel reduces competition in the market for office software packages, the paper said. Microsoft already dominates that market with its Microsoft Office package of software. Corel’s WordPerfect Office software is important for competition as it is also available in a version based on Linux, a computer operating system that competes with Microsoft’s Windows program. Cullinan said the agreement Microsoft signed with Corel does not prevent Corel from working on competing platforms. “We do not think that there are any legal issues in regards to the Corel transaction that should be a concern,” Cullinan said. The investigation is separate from the government’s pending lawsuit to break Microsoft into two companies. The company has appealed a break up order issued by a U.S. district judge. The U.S. Circuit Court of Appeals for the District of Columbia will hear arguments in that appeal Feb. 26-27. While there is some doubt that Bush administration officials favor such a drastic move as splitting the software giant, President Bush’s expected choice for head of the antitrust division, Washington, D.C., lawyer Charles A. James, has yet to be formally announced, much less confirmed or taken office. Observers expect the Bush administration will not make any move to alter the government’s case at least until after the appeals court rules, because that court may save them the trouble by ordering a more limited remedy for the abusive monopolistic conduct that Judge Thomas Penfield Jackson ruled Microsoft had committed.

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