Richard McKenzie, professor in the Graduate School of Management at the University of California at Irvine, and the author of "Trust on Trial: How the Microsoft Case Is Reframing the Rules of Competition"

Consider this: Dropping the proposed breakup was the only sensible thing the Justice Department could do, given that the threat of a breakup would have only prolonged the case. Microsoft's competitors might have benefited from the proposed breakup -- neither "Micro" nor "Soft" would have been nearly as competitive as Microsoft is today -- but consumers would have only been harmed. Besides, the appeals court gave strong signals that it would not look favorably on a breakup.

By setting aside the bundling issue, the Justice Department was not really giving up much. Microsoft must still confront a legal fact of life: The appeals court found that the company's "commingling" of the browser code with the Windows code was anti-competitive. The introduction of Windows XP, and that operating system's future development, remains at risk. Moreover, the government is not likely to get out of this case without getting into the business of deciding how Microsoft's operating system will be developed for years into the future. That is a sad commentary on modern antitrust enforcement, since the Justice Department is hardly well known for its expertise in software development.

Luke Froeb, associate professor of management at the Owen Graduate School of Management at Vanderbilt University, former antitrust lawyer at the Department of Justice antitrust division

I think it's an indication that Microsoft's delay strategy is working.

When you reach an out-of-court settlement, your bargaining position is determined by the alternatives. I think that Microsoft's strategy is clear -- delay, delay, delay -- until the case becomes moot, or mooter than it already is.

I think that the Justice Department, by taking the breakup off the table, is trying to get Microsoft to hurry up. It's an olive branch to Microsoft to try to get them to settle the case and stop their delay tactics. They're still arguing about Windows 95.

As for the tying issue, I think that this is an admission that there is no good solution to that issue, and if there is no good solution then it is not a problem. If you're not going to break them up, then there's only going to be a behavioral remedy. When they resolve this case there's going to be a consent decree that says this is what Microsoft gives up, to agree to resolve the case. To make sure that they follow through on the agreement, a judge will oversee the remedy.

So, every time Microsoft wants to add a new functionality to its software, there's going to be a judge overseeing the consent decree. Every time they want to include something into the operating system they have to go before a judge and have a hearing -- everyone agrees that would be very costly. The Justice Department does not want to put itself in the position of having to go into court every time Microsoft wants to make a design modification to its operating system.

One thing for sure: It will dramatically slow down the pace of innovation, and particularly in the case of tying and integrating new products into the operating system that seems difficult to resolve. So, the remedy there is probably worse than the problem. There is no good solution to the problem of tying; there's not a solution that's not worse than the problem.

Albert Foer, president of the American Antitrust Institute, a pro-antitrust think tank

We're disappointed that they're throwing in the towel on the structural remedy. This is understandable politically, but the breakup would probably have been the best antitrust solution to the monopoly problems. There are still opportunities for strong creative remedies that can go a long way toward controlling Microsoft's arrogance, but these run the risk of having a regulatory nature, meaning that you'll be stuck with a court overseeing a very detailed program for quite a while into the future.

In terms of tying, I think they could have won that issue. The question is whether it would have added anything to their panoply of remedies. The actual tying issue with the browser is ancient history. [Microsoft] won, and you can't re-create a vigorous Netscape. In terms of the larger question of future significance, the Court of Appeals left open the possibility of prosecuting tying arrangements in the future.

It will come up in other contexts, and tying is still clearly illegal. But it's a fact-intensive inquiry, so applying the law of tying to the field of technology will have to wait until another day. But no one is suggesting that you can't try a tying case. Really, [the DOJ decision] is an attempt to streamline the case.

Jamie Love, director, Consumer Project on Technology

We were not too surprised about the breakup issue, but somewhat disappointed on the tying comments. In our view, the key remedies now on the table are interoperability remedies, modeled after the 1984 European IBM case [which regulated how IBM could do business], and compulsory licenses to OEMs [original equipment manufacturers] -- to reduce MS coercion.

We'd like to see Microsoft be forced to open up Windows and really resolve the compatibility issues as IBM did after its 1984 case. Right now you'd have to be crazy to try to write a program for Windows; we'd like that to change.

Second, we'd like to see compulsory licensing. We'd like to see it mandated that Microsoft give out compulsory licenses; that forces them to provide nondiscriminatory terms, so anyone could get Windows for the same price, the same terms. It would mean that if you're Dell or Compaq, you can moon Bill Gates and still get the same deal as the next guy. You can feature competitors' products without worrying that the decision will affect what you pay for Microsoft's software.

These two ideas go to the heart of what the case is about. The breakup was just a macho remedy; it was about the power of the government to split up a massive company. A lot of people thought that was right because it was a moral representation of the government's power. But I was never convinced it was essential. The regulatory approach could deal with the problems identified in the case. There are other problems, like tying, that may still need to be addressed, but Bush has been better than people expected. Microsoft hasn't gotten a free ride.

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