DOJ decision limits impact on Microsoft users

The government's decision this week to drop its attempt to break up Microsoft Corp. will likely limit the long-running antitrust case's ultimate impact on corporate users, according to IT managers and analysts.

Without a breakup on the table, the U.S. Department of Justice's remedy menu shrinks to a set of restrictions that could be imposed on the software vendor's business practices. Such restrictions would likely be aimed at improving the ability of PC makers to customize systems and offer competing software products.

Ashok Bakhshi, IT director at Schindler Elevator Corp. in Morristown, N.J., said he's relieved by the decision because he was concerned about a breakup's potential effect on product integration. An intact Microsoft means he doesn't "have to worry about multiple vendors [and] multiple interfaces," he said.

The benefits that could have been gained by splitting Microsoft into two companies were questionable, said Jon C. Dell'Antonia, information systems director at clothing maker OshKosh B'Gosh Inc. in Osh Kosh, Wis. "It might introduce more competition, but it might not," he said. "Instead of one giant, you [could] have two."

But others had been hoping that the antitrust case would help reduce Microsoft's sway over the software market. "Unless there is something new that happens, it's going to be business as usual," said Donald Stroud, information systems director at Plain Dealer Publishing Co. in Cleveland. "Microsoft will continue to dominate the industry. I wish somehow, some way, there was a reasonably strong competitor."

In making last week's move, the Bush administration opened itself up to attack from Microsoft critics who have said that anything less than a breakup will be ineffective in restraining the company.

"It sounds to me like [government officials] are all but giving up," said David Smith, an analyst at Gartner Inc. in Stamford, Conn. "There are going to be some conduct remedies, but it remains to be seen just how much more than a slap on the wrist they are."

But a Justice Department official defended the government's action and argued that the agency will now be able to move more swiftly to seek changes in Microsoft's business practices.

"Is this something that we view as going light on Microsoft? Absolutely not," said the official, speaking on the condition that he not be identified. "We believe that we can get prompt and effective relief that addresses the core monopoly maintenance claims . . . and we're going to get [it] soon."

The decision not to try to separate Microsoft into an operating systems company and a separate business for its other products also had the backing of the 18 states still involved in the antitrust case, according to the Justice Department.

The department also said it wouldn't continue to pursue a claim that Microsoft had illegally tied its Internet Explorer Web browser to Windows.

U.S. District Court Judge Thomas Penfield Jackson, who ran the trial phase of the case, ordered a breakup of Microsoft last year. But Stephen Houck, the former lead trial counsel for the 18 states, said the Justice Department faces an uphill battle to persuade a new judge to do the same thing. Houck cited the skepticism about a breakup that the U.S. Court of Appeals expressed in June while affirming the ruling that Microsoft illegally maintained its desktop operating system monopoly.

"I think the government opted to pursue a strategy [it] thought would be effective and fairly quick," said Houck, who is now an attorney at Reboul, MacMurray, Hewitt, Maynard & Kristol in New York. A conduct remedy could actually be more onerous to Microsoft by subjecting the company "to continual scrutiny," he added.

The case was remanded to the U.S. District Court in Washington by the appeals court late last month. The new judge assigned to the case has scheduled a status conference for Sept. 21. The Justice Department last week said it plans to seek an expedited process that will include a review of recent developments in the software industry.

Microsoft officials were muted in their public response to last week's developments and simply reaffirmed their desire to resolve the case.

The Justice Department said it doesn't plan to try to block the release of Microsoft's new Windows XP desktop operating system, which is due for release Oct. 25. But the official who spoke at the agency's briefing made it clear that "a remedy will . . . apply to any product that Microsoft sells."

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