A narrow reprieve comes for Microsoft

The break-up of the software giant is voided, due to the judge's conduct.

Yesterday's out-of-the-blue court decision that stalls the breakup of Microsoft Corp. is a clear-cut victory for the software giant - but perhaps only a temporary one.

A US court of appeals did not settle Microsoft's future, but ordered that a new judge be assigned to decide what penalty the firm should pay for monopolizing a segment of the software market.

In doing so, the appeals court in the District of Columbia rapped the knuckles of federal Judge Thomas Penfield Jackson, who presided over the US government's antitrust case against Microsoft. Judge Jackson's actions, the court said, "seriously tainted the proceedings before the District Court and called into question the integrity of the judicial process."

This development poses a dilemma for the Bush administration, which has shown less zealotry in pursuing Microsoft than did the Clinton team. Still, "there is a large staff over at [Department of] Justice with a very large stake in the case," says Bert Foer, president of the American Anti-Trust Institute. "It's going to be impossible for the Bush administration to completely walk away from this case."

One possibility, Mr. Foer says, is that the administration will craft a settlement in which Microsoft remains intact but agrees to change some of its marketing strategies.

At the conclusion of last year's trial, Microsoft was found to have engaged in anticompetitive practices by packaging its Windows operating system with its Explorer Web browser.

To appeal or not to appeal

If President Clinton were still in office, an appeal would probably have been filed immediately to the nation's top court. That may yet occur: Although Bush officials are regarded as "antitrust minimalists," Attorney General John Ashcroft is regarded as no big fan of Microsoft.

If he decides to appeal the case to the US Supreme Court, the battle with Microsoft is not over. If his team opts to reargue the case in a lower court, Microsoft may have won.

"This is not really the big victory for Microsoft that it appears to be," says Norm Hawker, an antitrust expert at Western Michigan University in Kalamazoo. "Microsoft got a big win in terms of avoiding the breakup," but the court did not alter two key findings by Judge Jackson.

First, the verdict that Microsoft acted illegally as a monopoly still stands. Second, the company is found to have violated antitrust laws.

"Those two findings alone spell real troubles for Microsoft, in terms of private litigations," regardless of how vigorously the Bush team pursues the case, Mr. Hawker says. "What the Bush administration does with this case is the acid test of their commitment to free enterprise."

There's some danger for Washinton in letting Microsoft off the hook. One is that inaction would leave the antitrust field primarily to Europe. The Bush administration has already expressed some unease with the proposal of European Commission antitrust regulators to block General Electric Co.'s proposed acquisition of Honeywell International Inc.

A company on notice

Judge Jackson's decision did put Microsoft on notice that it better behave. The Redmond, Wash.-based company has long been regarded as a bully.

Only this week, it decided that its forthcoming Windows XP operating system will not include a new capability that could forcibly alter the appearance of millions of Web pages.

The Wall Street Journal had reported three weeks earlier that the new feature, called Smart Tags, would allow the company's Internet Explorer browser to turn any word on any website into a link to Microsoft's own sites and services, or to any that Microsoft favors.

Apparently the fuss that followed after this disclosure that these links would appear without the knowledge or permission of a website's owner prompted Microsoft to back off for now.

In recent months, US public opinion has shifted in favor of Microsoft. A year ago, Americans sided with Microsoft 55 percent to 34 percent, according to a Gallup poll. A more recent poll by CNN found that only 35 percent of Americans want Bill Gates's company broken up.

The appelate court's decision yesterday was clearly a stinging rebuke to Jackson's handling of the trial and outside comments. In interviews with newspapers, magazines, and book authors, Jackson was quoted as comparing Mr. Gates to Napoleon and the company to a drug-dealing street gang, for one.

Jackson granted some of the interviews on an embargoed basis before the antitrust trial ended last year with the expectation they would be published afterward - a fact singled out by some appeals judges.

"Jackson spent over a year determining what Microsoft did wrong. It was a waste of time," says Luke Froeb, management professor at Vanderbilt University in Nashville.

Staff writers Dante Chinni, Abraham McLaughlin, and Mark Trumbull contributed to this report.

(c) Copyright 2001. The Christian Science Monitor

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