Tech Industry

Commentary: Microsoft catches a break

The Bush administration is signaling its distaste for the antitrust case, as the two sides are getting closer to a settlement on how to penalize the company.

By David Smith and French Caldwell, Gartner Analysts

The pro-business Bush administration is signaling its distaste for the Microsoft antitrust case, as the two sides are getting closer to a settlement on how to penalize Microsoft for abusing its monopoly position.

On Thursday, the U.S. Department of Justice announced that it would no longer seek to break apart the software company. Justice officials also said they would not pursue charges that Microsoft illegally bundled its Internet Explorer browser into the Windows operating system. The company, the agency and attorneys general from 18 states are scheduled to meet in U.S. District Court on Sept. 14 to discuss the next steps in the case.

By backtracking on prior insistence (during the Clinton administration) and its own recent rhetoric that Microsoft must be broken up as a penalty for monopoly abuses, the Justice Department is likely conditioning the public that the Bush administration believes it is bad politics to pursue the case.

The purpose of the current phase in the federal government's antitrust case against Microsoft--following the June ruling by the U.S. Court of Appeals for the District of Columbia that upheld an earlier decision that the company abused its monopoly--is to determine the penalty that Microsoft must pay for that violation. The new judge in the case, Colleen Kollar-Kotelly, last month directed the Justice Department and Microsoft to complete a joint report by Sept. 14, a move that Gartner interpreted as nudging the two sides to devise a penalty settlement. Thursday's unexpected announcement signals that progress is being made toward such an agreement.

See news story:
Justice Dept. downshifts in Microsoft case
Any progress toward a less draconian settlement fits the ideological profile of the Bush administration. Given stagnant growth and the increasing politicization of U.S. economic woes, Gartner believes that the Justice Department doesn't want to be perceived by the public and influencers as erecting roadblocks to any potential for economic recovery. Microsoft has positioned its forthcoming shipment of the Windows XP operating system (due out in October) as a potential savior for the technology sector of the economy. That hype likely also motivates the Justice Department to tread a little lighter in penalty discussions.

However, should Windows XP fail to impress the technology sector and help ignite an economic renewal, then the ensuing disappointment may spur increased government scrutiny on Microsoft, product by product, if a broader settlement of this case hasn't already been reached by then.

(For a related commentary on Microsoft's release of Windows XP, see Gartner.com.)

Entire contents, Copyright © 2001 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.