Battle lines were finally drawn this week in the increasingly acrimonious confrontation between software giant Microsoft and the US Government. On the day that Microsoft shipped to computer makers the latest upgrade of its windows operating system, the US government filed a sweeping anti-trust court action against the software giant, claiming that it was exercising a "choke on hold" on competitors, suffocating innovation, restricting choice and was inherently "anti consumer". Among the most contentious of the claims made by the Federal government and 20 supporting states is that Microsoft secretly met rival Netscape to divide up the market for Internet browser software, a charge implying illegal collusion to restrict competition. Microsoft's chairman Bill Gates dismissed that charges as "an outrageous lie", a precursor to how nasty and personal this battle of the titans could become .

The lawsuit is certain to delay the market debut of Windows 98 and affect current year earnings and, in addition, has already carved around 4 per cent off the value of Microsoft equity. Initial hearings in the case began yesterday - evidence includes electronic messages and memorandums from senior Microsoft executives, acquired under subpoena .