Microsoft is not out of the woods yet

The US Justice Department's decision yesterday to narrow its antitrust case against Microsoft still leaves the government with a strong hand if it decides to go after the software giant's new Windows XP operating system, antitrust experts said yesterday.

Government lawyers, particularly the 18 state attorneys general who have joined the Justice Department in its suit against the company, have increasingly expressed concern that Windows XP repeats antitrust violations by integrating several new Microsoft products into its operating system.

In tossing out the possibility of a break-up and dismissing one of the two remaining accusations in the case, the Justice Department yesterday made a conscious decision to focus on what restrictions should be imposed on the company's business practices for violating the core antitrust charge in the suit: that Microsoft abused its monopoly position in computer operating positions.

Already there are clear signs the government will pursue penalties that could severely affect Windows XP, scheduled to be shipped at the end of next month.

Senior Justice Department officials said yesterday they would ask for restrictions based on the original remedies ordered by trial judge Thomas Penfield Jackson.

Even without break-up, these are a sweeping set of controls that would force Microsoft to open up its Windows operating system to competitors and prevent it from dictating what applications appear on PC desktops, conditions Microsoft has vehemently objected to.

Although a senior antitrust official at the Justice Department would not say what specific penalties the department would seek or how they would affect Windows XP, the aim was clear: "A remedy will affect any product Microsoft sells," he said.

Apart from his break-up order, Judge Jackson set a number of strict restraints on Microsoft in his 17-page final judgment.

They included giving computer manufacturers complete freedom to put any competing software on to Windows before they ship PCs out to customers.

Microsoft has already made some concessions in this area, announcing in July it would allow computer makers some limited leeway in structuring the Windows desktop, but the company has strongly opposed the sweeping freedoms ordered by Judge Jackson.

In Judge Jackson's decision, Microsoft was also forced to disclose parts of Windows's software code to competitors so they could write competing programmes that would work on Windows-based PCs.

Most importantly, however, Judge Jackson included a ban on "contractual tying", which prevented Microsoft from forcing computer makers to include Microsoft software when they shipped out PCs to consumers.

Windows XP currently includes several Microsoft applications welded to the operating system, including its Media Player video-watching software.

The Justice Department's decision to throw out the so-called "tying" charge, which accused the company of violating antitrust laws when it fused its Internet Explorer web browser into Windows, may make it harder for the government to impose such strict remedies.

But antitrust experts noted that the remaining charge in the case, which was upheld unanimously by a court of appeals in June, includes findings that Microsoft acted illegally when it intermingled the software code of Windows and Internet Explorer, making it impossible to remove Internet Explorer.