The Microsoft appeals court decision presents a clear test of how forcefully the Bush administration will move on antitrust matters.
Analysts have questioned whether the more conservative Bush administration is willing to take on big business as aggressively as President Clinton's Justice Department. The Clinton administration used the antitrust division to crack down on some corporate giants, such as American Airlines and MCI as well as Microsoft, over anti-competitive practices.
Just how Atty. Gen. John Ashcroft responds to the Microsoft decision "is really going to shine a very clear light on the Justice Department and how they approach antitrust," said Gene Kimmelman, a co-director of Consumers Union, which publishes Consumer Reports.
Ashcroft on Thursday would only say that the appellate court's decision was a "significant victory." And White House spokesman Ari Fleischer said it is too soon to conclude that the Bush administration would pursue the case less vigorously than the Clinton administration.
But it may take some time before any clear direction is evident or resolution is at hand. Thursday's ruling had all the finality of a presidential election vote in Florida.
The Justice Department's options now are widely varied, and some could lead to lengthy new court proceedings.
The department must decide whether to turn up the heat on Microsoft and appeal to the U.S. Supreme Court, fight the case again at trial court or settle on terms well short of a breakup.
The department may be willing to settle with Microsoft and avoid another trial if the company can assure the government that it will end its monopolistic practices for good, according to one senior department official.
But the court's finding that Microsoft abused its monopoly power makes it highly unlikely that the new Bush Justice Department could seek only mild punishment for Microsoft.
The government's allies in court, the 18 state attorneys general who are co-plaintiffs in the case, were emboldened by the appellate court's decision. Several state officials indicated a desire to vigorously pursue the case against Microsoft.
"We received unanimous affirmation that Microsoft has violated antitrust laws," New York Atty. Gen. Eliot Spitzer said. "This will permit us to go forward aggressively to seek a remedy" when a new trial judge gets the case.
Thomas Lenard, a vice president at the Progress and Freedom Foundation, a Washington think tank on the digital economy, said with the court's strong affirmation that Microsoft had violated antitrust laws, the Justice Department "isn't going to be able to just walk away. . . . They can't just let them off with a slap on the wrist."
Ashcroft surprised many antitrust observers this week when the Justice Department said it would appeal a judge's dismissal of the department's lawsuit charging that American Airlines had used "predatory tactics" to drive out low-cost carriers in its Dallas-Fort Worth hub.
Still, the government probably will move cautiously in future cases, said Ernest Gellhorn, an antitrust expert and law professor at George Mason University. "I don't think you'll see [the Justice Department] experimenting and going after a company just because they're successful," he said. The court's ruling "gave a clear indication that the breakup of a company not put together by illegal means is a remedy of last resort."
Some of the attorneys general who sued spoke with Justice Department officials Thursday. And they came away believing that the ruling supported their joint case enough that the federal officials wouldn't settle for lighter remedies.
"This should remove any doubts or ambivalence in the Justice Department on whether to continue as vigorously," Connecticut Atty. Gen. Richard Blumenthal said. State officials had been less eager than federal lawyers to settle the case last year.
When a new judge hears evidence on the extent of Microsoft's misconduct and then considers whether to order a breakup or less severe penalties, the state attorneys said they planned to bring up Microsoft's recent behavior.
The officials have faulted Microsoft for pressing America Online to include Microsoft's audio- and video-playing technology in AOL's software. And they are concerned that the upcoming Windows XP operating system includes Microsoft's instant-messaging program, while barring tinkering by the computer makers that install Windows.
"When you bring all those things before the judge, we have a good argument for a strong remedy--perhaps a breakup," said Iowa Atty. Gen. Tom Miller.
The state lawyers said they would discuss a settlement but would accept one only if it fundamentally changed the way Microsoft does business. Because Microsoft said Thursday it did not foresee making any significant changes, the appeals court's decision may have only marginally improved prospects for a resolution outside of court.