The Microsoft Corporation bullies computer makers by withholding discounts if they promote products that threaten its Windows monopoly, a former Gateway Inc. executive testified today on behalf of states seeking tough antitrust remedies against Microsoft.

The executive, Peter Ashkin, said that the Justice Department’s proposed settlement of the four-year-old case would not stop Microsoft from punishing computer makers like Gateway that develop rival products. The states called Mr. Ashkin to testify on the fourth day of what is expected to be eight weeks of court hearings on their demands.

In 1999 and 2000, Microsoft reduced discounts Gateway received for the Windows operating system when Gateway developed an Internet-connection device and a network computer powered by the rival Linux system, Mr. Ashkin said.

“Our decision to choose Linux over Windows was often cited by Microsoft executives when explaining why they considered Gateway to be a ‘bad partner,’ ” Mr. Ashkin, who was dismissed by Gateway in 2001, said in written testimony.

The proposed settlement was negotiated last year after an appeals court ruled that Microsoft illegally protected its monopoly for Windows, which powers 95 percent of the world’s personal computers. California, Iowa and seven other states, along with the District of Columbia, refused to sign the plan that would require Microsoft to give computer makers freedom to promote certain types of products without retaliation.

The settlement would not prevent “Microsoft from retaliating in this situation,” said Mr. Ashkin, now an executive with AOL Time Warner.

Judge Colleen Kollar-Kotelly is reviewing the settlement and the opposition by the states. She got the case after the appeals court overturned an earlier judge’s order to break up Microsoft.

Microsoft says the standard Windows contract for the top 20 computer manufacturers under the settlement would free Gateway and other companies to promote programs that compete with the Microsoft Internet Explorer Web browser or the Windows Media Player.

A Microsoft lawyer, Richard Pepperman, questioned Mr. Ashkin’s assertion that Microsoft once threatened to end its license to load Windows onto PC’s if it did not agree to continue selling the popular Microsoft Office set of word processing and spreadsheet programs.

Was there “any paper trail” documenting the threats? Mr. Pepperman asked. Mr. Ashkin replied that he did not write memos or e-mail messages to warn colleagues of the threat.

The states want to force Microsoft to make a version of the Windows operating system that would let computer makers easily extract the Internet Explorer Web browser and other applications and substitute competing programs.

URL: http://www.nytimes.com

LOAD-DATE: March 22, 2002

TECHNOLOGY; Ex-Gateway Executive Says Microsoft Bullies PC Makers, The New York Times, March 22, 2002 Friday, Late Edition – Final , Section C; Column 3; Business/Financial Desk; Pg. 4, 452 words, Bloomberg News , WASHINGTON, March 21