In a statement Friday, the department's antitrust division said it also would not challenge an alliance proposed between AOL and Sun Microsystems, Inc.

"The division has decided that it will not challenge the transactions, having concluded that neither the merger nor the alliance violate the antitrust laws," the government said in the statement announcing it had closed its investigation.

The purchase of Netscape by AOL, the world's largest online service provider, would create a single Internet company with remarkable reach across the high-tech world -- and challenge Microsoft Corp.'s dominance in key areas.

Netscape's shareholders are scheduled to vote on the deal Wednesday.

Jim Whitney, an AOL spokesman, said the company was pleased with Justice's announcement and was looking forward to the vote by Netscape shareholders. The proposed merger faces no other regulatory hurdles.

The alliance could pose dramatic new competition for Microsoft, which has been sued by the federal government for alleged antitrust violations. That trial, which began in October in U.S. District court, is on a month-long recess.

Netscape's "Netcenter" Web site is among the four most popular on the Internet with more than 20 million visitors each month. The AOL, Microsoft and Yahoo! sites are the other three most popular.

Under the proposed deal, AOL would acquire Netscape's pioneering Navigator browser software, which was introduced in 1994 and helped popularize the Internet. The software is now used by millions of people to view information on the Web.

Microsoft's Internet software competes directly against Netscape's, and its Microsoft Network online service is a rival to AOL although it has been far less successful.

Many industry observers believe the planned Netscape-AOL deal might hurt the Justice Department's pending antitrust case against Microsoft, which has argued that the deal proves the high-tech industry is fast-changing and highly competitive.

-- AP - 3/14/99