In a dramatic shift, President George W. Bush’s administration abandoned the Clinton-era effort to break up Microsoft. It suggested a lesser antitrust penalty that could still force changes to the company’s new Windows operating system.

The Justice Department (JD) also dropped charges that the software giant illegally hurt competitors by tying or bundling separate features, like a web browser, to its flagship computer operating system.

Microsoft had hotly contested those charges because the company’s strategy calls for integrating more new features into products like the new Windows XP operating system, due in stores this month.

Officials said the legal shift was not an overture to Microsoft to settle. They suggested the government will ask the new judge handling the antitrust case to review the Windows XP software and seek a penalty that ensures the company doesn’t operate as an illegal monopoly in the future.

The administration’s decision sparked accusations that the White House was reluctant to pursue legal actions against big corporations, but it earned praise from those who believe the antitrust lawsuit should be resolved quickly.

Critics of the decision, which JD announced Sept. 6, pointed to a similar Bush administration move: JD’s determination in June that it should seek to settle a long-simmering civil lawsuit against the tobacco industry brought by the Clinton administration. In both cases, the White House has altered course–detractors would say capitulated–in Clinton-era lawsuits against large corporations, reflecting the new administration’s philosophy that lawsuits are not the best way to resolve disagreements.

JD said it made the about-face to streamline the case and bring it to an end as quickly as possible. The goal, it said, was to “obtain prompt, effective, and certain relief for consumers.”

The department said it would still seek a penalty that would open the operating system market to competition.

To that end, the government proposed a penalty similar to some interim penalties imposed by the original trial judge, U.S. District Judge Thomas Penfield Jackson.

Those would, among other things, stop Microsoft from making certain exclusive deals with partners, force computer manufacturers to keep specific icons and programs on the Windows computer desktop, and give other companies more access to Windows blueprints.

Some legal experts were mystified by the administration’s move, saying the government backed off on a case it was winning. “The government’s litigation was in the fourth quarter, yet the Bush administration chose to forfeit the game while it was ahead,” said Gordon Klein, a law professor at University of Southern California. “It was purely political.”

One antitrust expert predicted the case will get even murkier because so-called conduct remedies, rather than a clean breakup, are much more difficult to enforce.

“Conduct remedies will require much closer monitoring from the government and the courts,” said Norman Hawker, a finance and law professor at Western Michigan University.

Lawyers for both sides were to submit reports detailing their next moves to U.S. District Judge Colleen Kollar-Kotelly by Sept. 14.