http://www.cato.org/dailys/05-08-02.html
May 8, 2002
The Malign Nine vs. Microsoft
by Robert Levy
Robert A. Levy is senior fellow in constitutional studies at the Cato
Institute.
From mid-March to mid-April, nine holdout states and the District of
Columbia tried to convince a federal judge to punish Microsoft more
severely than the Justice Department thinks is appropriate or
necessary.
Now it is Microsoft's turn to present its case. Meanwhile, the court
is considering a motion by Microsoft to dismiss the states' lawsuit
altogether. Judge Colleen Kollar-Kotelly, if she grants the motion,
will be promoting innovation and competition, eliminating duplicative
federal and state antitrust enforcement, and reining in opportunistic
behavior by nine attorneys general who believe they are entitled to
two bites at the Microsoft apple.
Microsoft argues in its motion that the non-settling states, because
they did not show injury unique to their residents, do not have legal
standing to bring a separate suit. Those nine states -- relying on the
same trial, the same facts, the same conclusions of law, and the same
injuries to the same people -- want to override a settlement between
Microsoft and the federal government, supported by 41 out of 50
states.
As private plaintiffs in a case where the Justice Department has
already spoken, the holdout states must show they are redressing
state-specific injuries, not just substituting their judgment for the
Justice Department's on how the federal antitrust laws should be
enforced. Yet, Microsoft declares, the nine states expressly denied
that their residents were injured any differently than residents in
other states.
Judge Kollar-Kotelly asked the Justice Department to comment on
Microsoft's argument. In its brief, the antitrust division lawyers
said they could find no definitive case law that compels the case to
be dismissed. Nonetheless, the Justice Department offered four
powerful reasons why the states' claims, as a matter of equity, should
be rejected.
First, "the United States is the sole enforcer of the federal
antitrust laws on behalf of the American public." Second, the states'
remedies would affect competition and consumers outside their borders
-- raising "for the very first time the prospect that a small group of
states, with no particularized interests to vindicate, might somehow
obtain divergent relief with wide-ranging, national economic
implications."
Third, many of those remedies "appear unrelated to the theories of
illegality advanced by the United States and the plaintiff states at
trial and the findings of liability sustained by the courts." In fact,
the remedies extend to "new products, new services [and] new markets."
Fourth, the proposed settlement will provide all the relief needed to
protect consumers against future antitrust injury. Any doubts in that
regard, according to the Supreme Court, should be resolved in the
federal government's favor.
Essentially, said the Justice Department, "The public interest is best
served when federal and state antitrust activity is complementary, not
duplicative or conflicting." In this case, however, the nine holdout
states "have neither the authority nor the responsibility to act in
the broader national interest, and the plaintiff with that authority
and responsibility [that is, the United States] has taken a different
course."
Still worse, the relief sought by the non-settling states "may harm
consumers, retard competition, chill innovation, or confound
compliance" with the federal settlement.
Echoing the Supreme Court, the Justice Department warned that
antitrust redress requires a showing of "harm to competition, not
competitors." Remedies must be crafted for the benefit of the public,
not for the private gain of Microsoft's rivals.
Judge Kollar-Kotelly, having solicited the Justice Department's
guidance, would do well to give it great weight. That's the short-term
solution. Longer-term, a more permanent approach is necessary.
Congress is constitutionally authorized to intervene whenever actual
or imminent state practices threaten the free flow of commerce.
Congress should use that power and strip the states of their ability
to enforce federal antitrust laws. Otherwise, some states will
continue to abuse their existing authority -- exercising it to impose
sovereignty beyond their borders and catering to the parochial
interests of politically powerful local constituents.
Would constraints on state antitrust enforcement powers violate
time-honored principles of federalism? Not at all. Federalism isn't
simply a matter of states' rights. Nor is it exclusively about
devolution of power or promoting efficient government. First and
foremost, federalism is about checks and balances based on dual
sovereignty.
Most often, the states are a counterweight to excessive power in the
hands of the federal government. Yet antitrust -- especially the
Microsoft case -- is an instance where the federal government must
curb excessive power in the hands of the states.
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