Federal anti-trust enforcers opened a new front in their scrutiny of Microsoft, investigating the software giant's alliance with Corel and another recent strategic investment.
The investigation began in January even as Microsoft and the government prepared to argue the company's appeal of a federal court finding last year that it had repeatedly violated anti-trust law.
In a civil subpoena served on Microsoft three weeks ago, the Justice Department demanded all internal documents on the software company's US$135 million investment in Corel last October, lawyers briefed on the case said.
The Justice Department is looking into whether Microsoft's stake in Corel could reduce competition in the market for office software packages that include word processing, spreadsheets and graphics, where Microsoft Office dominates with a market share of more than 90 percent.
Corel's WordPerfect Office software is important for competitive reasons as it is also available in a version based on Linux, a computer operating system that competes with Microsoft's Windows.
A Microsoft spokesman said the company is cooperating with the Justice Department and that the investigation is narrowly focused. He also said the deal doesn't raise legal issues and that Microsoft expects it to proceed unhindered.
New administration, new probe
The new round of government scrutiny could offer an early test of the Bush administration's approach toward Microsoft. While the latest review was initiated by career Justice Department staff who will remain in place, the subpoena was signed by Douglas Melamed, a Clinton appointee who became anti-trust chief after Joel Klein resigned from the post last year.
Melamed's likely successor, Washington anti-trust lawyer Charles James, hasn't been formally named by the White House. In his few public comments on the Microsoft case, he has expressed skepticism about the wisdom of an outright breakup of Microsoft, saying it might harm consumers. But he hasn't said he would drop the case. Indeed, he is widely expected to await the appellate court's ruling before taking action on the case.
The Justice Department also has been looking into Microsoft's pending US$1.1 billion buyout of Great Plains Software, a maker of business-accounting programs. The Great Plains inquiry began as a routine review, but has raised fewer competitive issues than the Corel investment because there are few direct overlaps with Microsoft products.
Shortly after Microsoft made its investment, Corel said it would leave the market for Linux operating-system software, raising additional anti-trust concerns, lawyers briefed on the inquiry said. Federal officials also are examining terms of a contract in which Corel commits to develop software for Microsoft's new .Net Internet software initiative, before it writes similar programs for other operating systems, according to lawyers.
Meanwhile, the broader Microsoft anti-trust case that was decided in the government's favour last year is scheduled to be heard by a seven-judge US Circuit Court appellate panel on February 26 and 27.
Rebecca Buckman contributed to this story.
