Should the computer king be dethroned? A court ruling could change the way Bill Gates does business. (business).

Microsoft is a big, rich, and powerful company. Is there anything wrong with that?

In America, a nation with a deep commitment to free-market economics, in which businesses are permitted to operate with a minimum of government interference, we tend to let the winners win. The government rarely steps in to give corporate losers a helping hand, or to restrain the winners.

Yet for a year and a half, the U.S. Justice Department and 19 states have waged a campaign to curb the power of Microsoft, the computer software giant, and it looks as though the government will win.

The government's weapon is a sweeping antitrust suit filed against Microsoft in May 1998. In a preliminary ruling last November, the federal judge hearing the case concluded that Microsoft is a corporate bully which hurt computer users by raising the price of software and limiting consumers' choice of competing products.

Microsoft denies this, as it did throughout the trial in Washington, D.C. From Microsoft chairman Bill Gates on down, Microsoft supporters believe the lawsuit was largely the work of the company's corporate enemies. "They are trying to change the rules of the game in a way, that would be very chilling, very damaging," Gates says.

Microsoft president Steven Ballmer sees Judge Thomas Penfield Jackson, who heard the case without a jury, as an outsider to the high-tech culture. "Nothing of the basic capitalist system that works so well for customers seemed to be" in Penfield's findings, Ballmer says.

The government replies that making sure businesses compete fairly is precisely what the Microsoft antitrust case is about. According to capitalist theory, competition results in better products, lower prices, and more efficient businesses. Capitalism, to be sure, can be a rough game. Think of it as an economic boxing match. The fighters hammer away at each other, and the losers can get hurt. Still, there are tactics that are not permitted. You cannot, for example, punch someone below the belt or bite someone's ear, as Mike Tyson did to Evander Holyfield. Even as rough a sport as boxing needs a referee.

And that is precisely the role that Joel Klein, the head of the Justice Department's antitrust division, says he is performing. "Our policy is very simple: Competition works and it is our job to make sure it is allowed to work," Klein says. "Without a referee, free-market competition will be neither free nor competitive."

ABUSE OF POWER?

The government argues that Microsoft used its market power in many ways to stifle competition and innovation. And the real danger, the government warns, is that Microsoft could continue to unfairly use its power to control the development of the Internet economy. Microsoft's power derives from the fact that more than 85 percent of new personal computers use Microsoft's Windows operating system as their basic software (most of the rest run on Apple's Macintosh).

The issue is whether Microsoft unfairly used this enormous power to keep rivals from competing against it. The lawsuit alleges that Microsoft threatened computer makers such as IBM, Compaq, and Gateway, saying that they would have to pay more for Windows if they loaded other software on their machines that was made by one of Microsoft's competitors. One fray involved browsers, the software used to navigate the World Wide Web. Microsoft wanted computer makers to include its browser, Internet Explorer, rather than Navigator, a browser made by Netscape.

Microsoft says that Internet Explorer is actually part of its Windows operating system, and not a separate product. And, Microsoft adds, it should be allowed to put anything it wants into Windows. "We believe that a company like Microsoft should be free to innovate, to enhance and improve our product," Ballmer insists.

But Klein says that Microsoft's bullying stifled other companies, like Netscape, from innovating. For computer users, the question is whether they were better off with the browser Microsoft was packaging with Windows, or having a choice. The eventual resolution of the Microsoft case will also affect users, but exactly how is unclear. The government is considering breaking up the company into different parts, prohibiting Microsoft from placing restrictions on computer makers, or forcing it to license its technology so other companies could produce its software.

If successful, the remedies would increase competition, bringing down the price of software and increasing the choice of software products. But if the remedies backfire, the result could be many different operating systems beyond Windows, and possibly a confusion of technology standards, so that it becomes harder for computer users to share work and communicate.

SUBJECT TO DEBATE

Just how the antitrust laws apply to Microsoft's behavior is a rich subject for debate. The nation's antitrust laws date from the Sherman Antitrust Act of 1890 and were aimed at the excesses of the big industrial trusts--groups of companies joined under common control--to dominate business in several industries, mainly oil, steel, and railroads. The courts have a lot of leeway in antitrust law to interpret what corporate conduct is or is not a violation.

The government and Microsoft are holding talks to try to reach an out-of-court settlement, but the two sides remain far apart. If no settlement is reached, a final ruling is expected in the spring of 2000. So far, however, it seems that Judge Jackson is preparing to side with the government.

Microsoft, he says, has shown that "it will use its prodigious market power and immense profits to harm any firm" that threatens it. "The ultimate result," the judge wrote in his findings, "is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self-interest."