Even though a US appeals court overturned a judge's order to split Microsoft Corp, antitrust enforcers say the decision provides plenty of ammunition to seek "fundamental change" in the software giant's business practices.
The decision that Microsoft illegally defended its Windows monopoly through exclusive contracts, threats of retaliation and by bundling Web-browsing software into the personal computer operating system left the core of the government's case intact, US Justice Department and state antitrust officials said.
Legal experts predicted that the decision would prompt the Bush administration to accept chairman Bill Gates's invitation to settle.
Microsoft shares rose US$1.60 to US$72.74, more than 2 percent, after rising as high as US$76.15. Trading was halted for more than three hours after release of the ruling.
Antitrust enforcers were quick to say that any settlement would have to end the anticompetitive business practices that prompted the lawsuit and guarantee they are not repeated.
"Any settlement that doesn't involve fundamental change of how Microsoft uses its monopoly in the marketplace would be doomed to failure," said Iowa Attorney General Tom Miller.
Miller is a leader among the 19 states attorneys general that joined the Justice Department in suing Microsoft in 1998.
Asked if the government was in a strong negotiating position, a senior Justice Department official told reporters that antitrust division attorneys were very pleased with the court's decision.
The case now goes back to US District Court in Washington for more hearings on a possible remedy. Microsoft may delay that proceeding by seeking Supreme Court review of the appeals court decision.
The appeals court provided "a good argument for a very strong remedy, perhaps a breakup," Miller said.
The Justice Department officials declined to say whether they would seek a breakup. The officials noted the appeals court left a breakup as a option while warning that it should be ordered "only with great
caution."
While "the breakup is still theoretically on the table, I can't see the Justice Department pursuing it with any zeal," said Andrew Gavil, who teaches antitrust law at Howard
University.
If the states insist on seeking a breakup, the Justice Department under Republican leadership can say "you are going to go into the district court alone,'' Gavil said.
No judge would order a breakup without the US government's support, he said.
Even if a breakup is not pursued, the decision "will provide the basis for remedies that fundamentally change Microsoft's conduct in the marketplace so as to stop its misuse of monopoly power," said Connecticut Attorney General Richard Blumenthal.
He and other attorneys general suggested that they might seek changes in Windows XP, the next version of the PC operating system due to be shipped Oct. 25.
Windows XP is likely to be cited as evidence of Microsoft's determination to tie new products into the operating system to dominate new markets, state antitrust enforcers said.
"It looks very much like more of the same in the misuse of monopoly and particularly the kind of tying or bundling this court now has found to be a very viable claim in this case,"Blumenthal said.
The states will cite "the potential that XP presents to continue Microsoft's domination of current markets" to argue for "the types of remedies that are appropriate," said New York Attorney General Eliot Spitzer.
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