Microsoft Faces New FTC Charges

Microsoft Corp. is facing federal charges of false and deceptive advertising for the second time in less than a year, casting new light on its business tactics just as it opens its appeal of the government’s antitrust case.

Microsoft is already negotiating to settle the charges, pending before the Federal Trade Commission, lawyers close to the case said. The FTC focused on Microsoft’s aggressive advertising campaign targeting Palm Inc., whose products compete against those hand-held devices using Microsoft’s Windows software.

Microsoft’s rivalry with Palm arose briefly at the end of the antitrust trial last year when the government introduced evidence suggesting that the software titan was already planning to use Windows as a weapon against Palm and other new rivals. Last April, a federal court found that Microsoft had used an arsenal of illegal and predatory tactics to protect its Windows monopoly and extend it to the Web.

The FTC found that Microsoft’s cheeky “Can Your Palm Do That?” ads last year deceptively claimed features that were unavailable unless buyers spent more for wireless capability, lawyers close to the case said. Consumers were told of this in nearly unreadable print at the bottom of the ads; Palm’s latest units had wireless capability built in. A Microsoft spokesman Sunday declined to comment.

While the new false-advertising charges are unrelated to allegations in the antitrust trial, they are an unflattering reminder of the harsh business practices central to the government’s case. In two days of arguments that begin here Monday before a seven-judge federal appeals panel, Microsoft is expected to tell the court that its aggressive tactics were legal and proper and that it doesn’t have monopoly power in today’s fast-changing technology industry. Microsoft is also expected to argue that the trial judge, Thomas Penfield Jackson, was biased against the company and committed a number of procedural errors during the historic 78-day trial.


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