U.S. drops breakup of Microsoft

Agency hopes to order software company to widen code access

`Right decision, no surprise'

Windows XP debut on track

browser case abandoned, too

September 07, 2001|By Andrew Ratner | Andrew Ratner,SUN STAFF

In a decision that was considered significant but not surprising, the Justice Department announced yesterday that it would not pursue the breakup of Microsoft Corp. as a remedy in one of the largest antitrust cases in U.S. history.

Supporters and foes of the world's largest software manufacturer expressed a narrow range of emotion - from relief to resignation - at the decision. Attorneys general in 18 states that are part of the lawsuit, including Maryland, concurred with the federal government's decision.

The price of shares in Microsoft initially climbed $2 after the news broke but tumbled because investors were unsure whether negotiations toward a settlement would hamper the company's rollout of its latest product next month.

The stock closed down $1.72, nearly 3 percent, to $56.02. With roughly 56 million shares exchanged, it was the fourth most actively traded stock on the Nasdaq market yesterday.

"We remain committed to resolving the remaining issues in this case," said James Desler, a Microsoft spokesman. "Everything is still on schedule for the Oct. 25th release of Windows XP, which is a product generating a lot of excitement among consumers and is crucial for the PC industry."

As if to underscore the company's singular focus on the release, its Web site made no mention last night of the Justice Department action, leading instead with self-made headlines about the launch.

The "announcement that the Justice Department will not seek a breakup of Microsoft is like an announcement that leaves will be falling off trees this fall," said James L. Gattuso of the Competitive Enterprise Institute, a think tank based in Washington. "It's the right decision but no surprise."

The Justice Department also said yesterday that it would not pursue an unresolved claim that Microsoft illegally linked its Internet Explorer browser to Windows.

The course appeared in line with past statements by Attorney General John D. Ashcroft and President Bush, who had indicated discomfort at the breakup remedy sought by the Clinton administration. During a visit yesterday in Washington with Mexican President Vincente Fox, Bush declined to comment on yesterday's decision but expressed confidence in his attorney general's handling of the matter.

In June, the U.S. Court of Appeals for the District of Columbia scolded the District Court judge who originally ruled against Microsoft. Its ruling was also viewed as favorable to the company, even though the judges agreed with the trial judge's conclusion that Microsoft illegally abused its market strength to muffle competition.

U.S. District Court Judge Thomas Penfield Jackson ordered the splitting of Microsoft into two companies - one for its Windows operating system and the other for its other business and home software. But the Appeals Court removed Jackson from the case and criticized his remarks to news outlets that he believed that Microsoft founder Bill Gates suffered from "a Napoleonic concept of himself."

The Justice Department said it will seek to require that the company make its secret computer source code more accessible to software makers and prohibit retaliation against companies that do business with Microsoft's competitors.

"In view of the Court of Appeals' unanimous decision that Microsoft illegally maintained its monopoly over PC-based operating systems - the core allegation in the case - the department believes that it has established a basis for relief that would end Microsoft's unlawful conduct, prevent its recurrence and open the operating system market to competition," a Justice statement said. "The department is seeking to streamline the case with the goal of securing an effective remedy as quickly as possible."

Attorneys for Microsoft, the Justice Department and state attorneys general are scheduled to present a status report one week from today for the new District Court judge assigned to the case, Colleen Kollar-Kotelly. The parties will return to court Sept. 21.

The suit is one of the largest U.S. antitrust cases of the past century, including the breakup of AT&T Corp. in 1984 and of John D. Rockefeller's Standard Oil in 1911.

Microsoft continues to confront major legal challenges elsewhere in the world. Officials in Europe and South Korea are investigating antitrust allegations.

Iowa Attorney General Tom Miller, who has led the group of 18 states, said in a statement that while the coalition agreed not to pursue a breakup of the corporation, "all other remedy options remain open to consideration by the states."

"It's expedient to give up the concept of breakup, but there are many other options open," said Ellen Cooper, a Maryland assistant attorney general who heads that office's antitrust division. "We really are looking for an expeditious conclusion to this case."

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