US and state antitrust enforcers said they won't seek a breakup of Microsoft Corp and instead will ask a federal judge to curb the No. 1 software company's business practices.
The US Justice Department said the government will seek "prompt, effective and certain relief for consumers" in the wake of an appeals court ruling that Microsoft illegally defended its Windows monopoly. That might include giving computer makers more freedom to hide access to Microsoft programs on the new Windows XP system and to feature competing software.
The announcement was mixed news for Microsoft, ending any lingering concerns about a breakup while leaving room for significant business-practice restrictions. An appeals court had all but ruled out the possibility of splitting up the company.
"We thought it made more sense strategically to zero in on the remedy that's possible," said Iowa Attorney General Tom Miller, leader of the 18 state attorneys general suing Microsoft.
Antitrust enforcers said they will model their proposals on restrictions once imposed as interim steps by the original trial judge. That would require Microsoft to let computer makers install a version of Windows without the Internet Explorer browser and to provide software developers with more access to the code needed to make programs run on the operating system.
In seeking to impose those restrictions, and possibly others, the Bush administration signaled it is taking a hard line in a case inherited from former President Bill Clinton's Justice Department, antitrust experts said. Microsoft once said the interim remedies would be "devastating." Microsoft shares fell US$1.72 to US$56.02, or 3 percent. They dropped as low as US$55.95 shortly after the Justice Department statement.
After the appeals court decision, "Microsoft was safe from the kind of drastic relief that the Justice Department had originally considered," said Louis Kokernak, senior equity strategist at Martin Capital Advisors, which owns 30,000 Microsoft shares in its US$50 million portfolio. Nonetheless, "they may still have to pay the piper in some fashion." Microsoft spokesman Vivek Varma declined to comment except to say, "We remain committed to resolving the remaining issues in the case." Settlement talks between the two sides have stalled after one meeting.
Antitrust officials said they don't expect to get new business practice restrictions in place until after the scheduled Oct. 25 release of Windows XP. The remedy proceedings will likely take several months and would have lasted much longer had the government sought a breakup, a senior US antitrust enforcer told reporters.
Officials reiterated concern about the newest versions of an operating system that powers 95 percent of the world's personal computers. XP bundles a host of new applications into Windows, including instant messaging, an Internet telephone and software to download digital music and video.
Critics argue that Microsoft is bundling these features into Windows to consolidate its monopoly, just as it included Internet Explorer in earlier versions of Windows.
"We're very concerned about XP, very concerned that Microsoft may have repeated the kind of violations in the case right out in front of us," said Iowa's Miller.
Microsoft is counting on XP to boost sales as the holiday season approaches.
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