Microsoft Deal Facing Intense New Scrutiny : Merger: Justice Department seeks more details about giant’s proposed purchase of Intuit. Antitrust questions loom.
The U.S. Justice Department has asked Microsoft Corp. and Intuit Inc. for more information about their proposed $1.5-billion merger, indicating that the deal is facing intense scrutiny for possible antitrust problems.
The request, issued Friday, is the second from the Justice Department, which is trying to weigh the merger’s implications for something that hasn’t yet taken full flight but is expected to soar: the market for on-line electronic transactions.
Among information being considered at Justice is a “white paper” from a Silicon Valley law firm, submitted last week at the agency’s request. The paper, prepared by an antitrust specialist at Wilson, Sonsini, Goodrich & Rosati in Palo Alto, uses an economic theory known as “increasing returns” to argue that Microsoft’s vast clout in the software world, combined with a strategic purchase of Intuit, would enable the company to seize an unhealthy amount of control of the networks that Americans will eventually be using to make purchases and do their banking.
“Intuit controls most of this market,” said Gary Reback, the antitrust attorney. “Microsoft is the only potential competitor. . . . (This deal) lets Microsoft seize another gateway that would otherwise take them five or six years to get.”
Reback and his firm have represented most of Microsoft’s competitors, including Novell, Borland International, Apple Computer and Sun Microsystems. He said the cost of preparing the white paper--more than $150,000--was billed to clients that had informally voiced fears about the Microsoft-Intuit combination and that wanted the Justice Department to understand the issues. Some executives of rival firms, he added, were wary of fully laying out their problems with the deal because of worries over possible retaliation by Microsoft.
Intuit, based in Menlo Park, makes the hugely popular Quicken program and controls an estimated 70% of the market for personal finance software. Microsoft, with headquarters in Redmond, Wash., is the dominant player in computer operating system software and is rapidly gaining market share in many other pieces of the software industry. It agreed in October to buy Intuit for what was considered an extraordinarily high price.
In the hope of preempting any antitrust concerns, Microsoft agreed to sell its own personal finance product, Microsoft Money, to Novell. But competitors say the real antitrust issue relates not to personal finance software itself, but to how Microsoft might use such products to gain advantage in emerging areas such as electronic commerce and on-line services.
Last week, the company announced Microsoft Network, an on-line service that will be available to users of Microsoft’s upcoming Windows 95 operating system, due next year. By being part of Windows, the Microsoft Network could gain a major--and perhaps unfair--advantage over rivals.
Although the Clinton Administration has been perceived as being far tougher on mergers than the administrations of George Bush and Ronald Reagan, the Justice Department took heat earlier this year for its settlement of a long-running investigation into Microsoft’s marketing practices.
Some industry observers said Justice might be focusing more closely on the Intuit deal to assuage concerns that it was being soft on Microsoft.
“The problem is that Justice is starting to figure out that Microsoft, not necessarily by crook but certainly by hook, is gaining a lot of clout,” said Mark Macgillivray, a Silicon Valley consultant. It is unusual for the Justice Department to issue a second request for information in a review of a merger case. Last year, it did so in only about 5% of the 2,300 proposed mergers that were large enough to warrant being reported to government authorities.
Still, Microsoft played down the importance of the request. “We remain confident that the merger will be approved after careful review,” spokesman Greg Shaw said.
