Is government going soft on Microsoft?

WASHINGTON -- By choosing to stop pursuing a breakup of Microsoft Corp., the government refocused attention on whether the Bush administration will aggressively prosecute the company for antitrust violations or try to reach a minimal settlement and move on.

"Is this something we view as going soft on Microsoft? Absolutely not," said a senior official in the Justice Department's antitrust division. The government intends to curb the company's excesses through other means. Jettisoning the request to force a breakup will help the case move faster and result in speedier remedies for consumers, officials said.

Yet many experts also said that by removing the severest possible sanction from the bargaining table, the Justice Department and its allies, 17 states and the District of Columbia, have handed a significant victory to the Redmond, Wash.-based software firm. Microsoft viewed any proposed breakup as a fundamental threat to its success and vigorously fought the idea in court.

"Obviously it's a concession," said Andrew Gavil, a law professor at Howard University. "It's clear this Department of Justice was never crazy about the idea of a breakup as a philosophical matter."

Gavil said dropping the breakup plan was probably done for practical reasons, given that the U.S. Court of Appeals for the District of Columbia set high standards for approving any such proposal. But, he added, the decision also fits with more conservative views of antitrust law and how far governments should intervene in the marketplace.

During his presidential campaign, George W. Bush indicated that he had concerns about a proposed Microsoft breakup, saying that he was "on the side of innovation, not litigation." The administration continues to battle suspicions, especially from some Microsoft competitors, that cozy relationships between White House officials and Microsoft may be influencing the way Justice handles the case.

Microsoft gave $2.5 million in contributions to Bush and other Republicans during the last election. Microsoft CEO Steve Ballmer met in June with Vice President Cheney, although officials said antitrust issues were not discussed. Cheney's son-in-law, Phil Perry, oversees the Justice Department's antitrust division as acting associate attorney general.

But top-ranking Justice Department officials said Thursday that the decision to abandon a breakup remedy was made by Charles James, the new antitrust chief and veteran antitrust litigator who has been given broad discretion by Attorney General John Ashcroft.

In addition to announcing that it would stop seeking a breakup of Microsoft into separate operating-system and applications businesses, the Justice Department also said it would drop its claim that Microsoft illegally hurt competitors by tying, or bundling, its Web browser and other features to its Windows operating system.

"The department is seeking to streamline the case with the goal of securing an effective remedy as quickly as possible," the department said in a prepared statement.

Ed Black, president of the Computer and Communications Industry Association, which represents Microsoft competitors, said he fears that Thursday's decision will mean "business as usual for Microsoft."