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|WASHINGTON - The Justice Department signaled its desire to
quickly resolve the antitrust lawsuit against Microsoft Corp. on
Thursday by dropping threats to dismember the company and to retry
other aspects of its case. |
Some analysts saw the unusual
public announcement as a settlement offer from the Bush
administration and the 18 remaining states that joined with the
federal government in 1998 to sue Microsoft. The states quickly
issued a joint statement concurring with the Justice Department's
"It's an important announcement the department didn't
need to make, so to a significant extent it is a signal that they
want a settlement," said Nicholas Economides, an economics professor at New York University's
Leonard Stern School of Business.
The announcement is also
expected to clear the way for Microsoft to release the latest
version of its operating system software, Windows XP, which computer
retailers hope will boost sales in a challenging marketplace.
A senior Justice Department official with the antitrust
division, speaking to reporters on condition of anonymity, said the
government wanted a "prompt, effective remedy as quickly as
possible. ... We're hopeful we can bring the Microsoft case to a
resolution in all of our lifetimes." The official did not give
details of remedies the government might seek.
little to say in response: "We are committed to resolving the
remaining issues in this case," company spokesman Jim Desler said.
Microsoft's competitors reacted by accusing the Bush
administration of surrendering advantage to the company by
abandoning the breakup threat.
"The only difference between
now and when the Department of Justice originally concluded a
breakup order was necessary and appropriate is that Microsoft's
market share has ballooned, their monopoly strengthened and their
practices are even more anti- competitive," said Ed Black, president
of the Computer & Communications Industry Association.
Rulings and appeals
Last year U.S. District Court
Judge Thomas Penfield Jackson ruled Microsoft used illegal business
practices to keep control of more than 90 percent of computer
operating systems. He ordered a corporate breakup.
Court of Appeals upheld Judge Jackson's finding of illegal monopoly
practices in June but overturned the breakup order and disqualified
the judge for talking with the press.
Microsoft has appealed
the verdict to the U.S. Supreme Court. Unless it prevails there, the
company faces mandated changes in its business to prevent the sort
of predatory practices the federal courts say it followed.
Those could involve universal pricing for all customers for
Microsoft products or a ban on adverse practices directed against
competitors such as exclusive contracting.
But consumers can
expect to see the next generation of Windows operating software -
Windows XP - on store shelves next month. The company offered
consumers advance orders for Windows XP on Thursday.
of the new operating system say it ties consumers to other Microsoft
products, such as Windows Media Player, at the expense of competing
But the U.S. Court of Appeals ruled in June
that the government had failed to prove an antitrust allegation
against Microsoft for bundling Microsoft's Internet browser software
with its operating systems. It ordered a retrial of the allegation,
but the Justice Department abandoned that effort Thursday.
Anthony Sabino, an associate law professor at St. John's
University's Peter J. Tobin College of Business in New York, said
the Bush administration was giving the economy "a shot in the arm"
with the Microsoft announcement.
"It's a conciliatory
gesture to Microsoft allowing it to send out Windows XP," he said.
"XP is already in the hands of PC makers, it will be coming out in
the stores in mid-October. Looking at the precipice of recession
that we're on, the Bush administration has pulled back from a case
where it had little merit, and at the same time is giving the
economy a shot in the arm."
Stock drops off
case, technology stocks fell sharply Thursday. Shares of Microsoft
fell $1.72 to close at $56.02.
The senior Justice Department
official said the government has no plans to seek an injunction
against Microsoft's release of Windows XP.
Mr. Economides noted the Justice
Department tried to win such an injunction to block the release of
Windows 95 without success.
"For the Department of Justice
to seek an injunction against XP, it would have lots of negative
reaction, and not just from Microsoft," he said. "This is the hope
of the computer industry for a recovery."
political motive in the Justice Department's announcement. Common
Cause, a public interest group critical of campaign finance
practices, suggested Microsoft had bought a verdict by contributing
more than $1 million to Republican causes in the 2000 election
"Microsoft put their bets on this horse, and now it
is time to collect their winnings," said Common Cause president
Mr. Sabino called that allegation
"nonsense" and said the Justice Department had little choice but to
drop the breakup remedy in the face of the June appeals court
The senior Justice Department official said remedies
for Microsoft's anti-competitive behavior would apply to any new
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