by David Williams
WASHINGTON, Sept 6 (AFP) - The US government abandoned Thursday its demand for a break-up of software titan Microsoft Corporation to prevent illegal abuse of its power over the global industry.
"The Department of Justice's anti-trust division today advised Microsoft that it will not seek a break-up of the company in remand proceedings before the US District Court," it said in a statement.
Government lawyers also dropped a complaint that Microsoft unfairly tied the Internet Explorer web browser into the Windows operating system, the Department of Justice said in a statement.
"The department is seeking to streamline the case with the goal of securing an effective remedy as quickly as possible," it said.
The decision came ahead of a September 21 court hearing before a new judge to decide on action against billionaire Bill Gates' software giant, which holds sway over the entire personal computer industry.
The apparent change of tactic under US President George W. Bush's administration raised the prospect of a settlement in the three-year, four-month legal battle.
"The Department of Justice is signalling very strongly that they want to settle the case," New York University business school professor Nicholas Economides told AFP.
"I would interpret this as saying that they want to get together with Microsoft to settle."
Department of Justice prosecutors said that instead of trying to break Microsoft apart, they would seek stringent restrictions on its business operations.
Pursuing the complaint over its Internet Explorer browser would only have prolonged the court proceedings and delayed the imposition of a solution that would help customers, they added.
"I do not view this as a retreat," said a Justice Department official, who asked not to be named.
The Department of Justice would not seek any interim injunctions and had no plan to block Microsoft from releasing its latest Windows XP software on October 25, he added.
Eighteen US states suing Microsoft decided to join the Department of Justice decision.
Microsoft said it was determined to settle the entire case. "We remain committed to resolving the remaining issues of this case," Microsoft spokesman Jim Desler said. The announcement failed to help Microsoft's shares, which fell 1.72 dollars to 56.02.
And it provoked widely differing reactions. "This company performed an illegal operation but they will not be shut down," complained Scott Harshbarger of the citizen lobbying group Common Cause, blaming the Bush administration.
The American Conservative Union (ACU) hailed the decision, however. "The decade-long, multi-million-dollar, competitor-driven persecution of Microsoft is rapidly coming to a pertinent conclusion," said ACU chairman David Keene.
The Department of Justice announcement followed an order by the new trial judge, Colleen Kollar-Kotelly, for both sides to submit a joint status report by September 14, a week ahead of her first hearing.
The new judge was appointed to decide on remedial action after the US appeals court in June upheld a lower court finding that Microsoft acted as an illegal monopoly but overturned a break-up order.
The appeals judges found that the original District Court judge, Thomas Penfield Jackson, had violated judicial ethics in discussing the case with journalists.
The US government said it would ask the new judge for a quick investigation to check industry developments and to evaluate the need for further provisions, "especially in the absence of a break-up".
The Department of Justice said it wanted to curb Microsoft with an order similar to Jackson's original decision governing its conduct.
That ruling would force Microsoft to reveal the software code of its operating systems, allow computer manufacturers to change the look of Windows on their PCs and set public pricing guidelines for Windows.
Microsoft complained at the time that such a course of action could be "devastating".
New York University's Economides said the steps being sought by the Justice Department could include a ban on Microsoft writing exclusive contracts with its suppliers and customers.