Government Drops Microsoft Breakup Effort — Last week, the U.S. Justice Department announced that it will not seek to break up Microsoft Corporation during the next phase of the long-running antitrust trial. Further, the Justice Department will not pursue charges that Microsoft illegally tied its Web browser to the Windows operating system. The announcement is a reversal of the previous Clinton administration’s legal strategy, and the Justice Department says the decision to drop key aspects of the Microsoft case is intended "to obtain prompt, effective and certain relief for consumers." Apparently, the new strategy will be to use the finding that Microsoft illegally maintained its monopoly in PC operating systems (a finding unanimously upheld by the Court of Appeals last July) to end Microsoft’s illegal conduct and open the operating system market to competition, though no details of possible remedies or settlements were revealed.
The announcement is widely seen as a victory for Microsoft, and vastly improves the likelihood of the company reaching a favorable settlement with the U.S. federal government (though at least 2 of 18 U.S. states – California and New York – that are also party to the antitrust lawsuit have expressed a more hard-line view). In the meantime, Microsoft is on the verge of releasing Windows XP, the latest version of its primary operating system, which integrates even more previously separate technologies into its operating system. Now that the government will no longer be pursuing the issue of whether Microsoft illegally tied its Web browser to its operating system, it seems less likely that legal ramifications will prevent Microsoft from usurping applications and markets by unilaterally declaring the technology to be part of Windows. [GD]