Justice: We Won't Break Up Microsoft

Focus Of Latest Move Is On Consumer Relief

(CBS)  The Justice Department announced Thursday that it no longer is interested in seeking a court-ordered breakup of software giant Microsoft. The Bush administration is gearing up for the penalty phase of the continuing antitrust case against the software giant later this month.

The department also said it will not pursue the bundling issues in its protracted antitrust suit against the software giant.

The agency is taking these steps to obtain "prompt, effective and certain relief for consumers," it said in a press release.

Boies Weighs In
Attorney David Boies says the Justice Department's decision not to seek a Microsoft breakup is good for the software maker - but not as good as it might appear.

Boies, who had led the government's antitrust case against Microsoft, told NBC Friday that the decision is a victory in that the company gets to stay in one piece. But, he said, a breakup might have been easier for Microsoft, because it would have allowed the split parts to operate more freely.

Boies also said he doubted Attorney General Ashcroft's decision was based purely in politics. (AP)

"The Department of Justice's Antitrust Division today advised Microsoft that it will not seek a break-up of the company in remand proceedings before the U.S. District Court," the statement said. "The Department is seeking to streamline the case with the goal of securing an effective remedy as quickly as possible."

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Text of the federal announcement.

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The release follows a judge's order for the two sides to produce a joint status report by Sept. 14.

The government told Microsoft that it does not intend to pursue a breakup and will drop the bundling issue to "facilitate consultations" in the joint report, the department said.

However with Microsoft's new operating system, called Windows XP, about to hit the market, CBS News Correspondent Jim Stewart reports the Justice Department said it would seek to enforce an earlier court ruling that ordered Microsoft to stop pushing around computer manufacturers who didn't want the whole Microsoft product on their machines. And that, say analysts, will make Microsoft rethink how it treats competitors.

"Microsoft certainly has thrown its weight around," analyst James Lucier of Prudential Financial said. "It's a big, tough company, and it's got the ability to act as the playground bully. To some extent this court wil put Microsoft on a shorter leash."

The federal about-face wasn't totally unexpected. At the time of his confirmation hearings to be attorney general, John Ashcroft hedged when asked repeatedly by senators about the government's commitment to pursuing the lawsuit against Microsoft.

Ashcroft for the most part said that was among a host of issues he would need to review.

On Thursday, his department said that since an appellate court agreed that Microsoft illegally maintained a monopoly over the market for computer operating systems, the government "believes it has established a basis for relief that would end Microsoft's unlawful conduct, prevent its recurrence and open the operating-systems market to competition."

Pursuing the tying claim would only prolong the proceedings, the department said.

Microsoft's smaller competitors, however, say it's a case of the Justice Department caving in.

"They've unilaterally disarmed. They've given up their biggest weapon, which is the threat of a breakup," said Glenn Manishin, general counsel of the Computer and Communications Industry Association. "A decade from now we'll see the department still fighting with Microsoft and Congress will have to step in."