Commentary

51 Antitrust Enforcers: 50 Too Many

It’s been 10 years since the Microsoft antitrust case began. The cost of the litigation - in time, money, and diversion of executive resources - has been enormous. With the nation transfixed by Enron’s $60 billion collapse, it’s worth recalling that Microsoft’s shareholders suffered an $80 billion erosion in market value on a single day - April 3, 2000, when Judge Thomas Penfield Jackson issued his conclusions of law.

Now the case continues on two parallel tracks: (1) In a Washington, D.C. courtroom, a federal judge ponders whether a long-awaited settlement between Microsoft and the Justice Department serves the public interest. (2) In that same court, before the same judge, nine defecting states - out of 20 who had originally joined the federal suit - demand that Microsoft’s conduct be more severely restricted. Both court proceedings are based on the same trial, the same findings of fact, and the same conclusions of law. Both proceedings allege the same injuries to the same people.

If that sounds like two bites at the apple for the non-settling states, double jeopardy for Microsoft, and a waste of taxpayer resources, that’s exactly what it is. Forty-one of 50 states accept the Justice Department’s assessment that the settlement advances the public interest. Thirty of those states didn’t even sue Microsoft, two others abandoned the suit, and nine more signed onto the settlement. That left the District of Columbia and nine seceding states asserting that Congress intended their view of the public interest to displace the view of the Justice Department. They would substitute themselves as enforcers of the federal antitrust laws.

The nine states have not argued that their state laws yield a different result than federal law. In fact, the states concede that their state claims “neither enlarge nor conflict with federal law.” Nor do they claim that Microsoft’s behavior affected their citizens in a manner different from other citizens across the country. Yet they want much broader relief than the settlement affords - to vindicate their singular view of the public interest.

Yes, states have so-called parens patriae authority under federal antitrust statutes to sue on behalf of their residents. But Congress did not intend that those states - in a case where the Justice Department has already spoken - could supersede the role of the federal government. Moreover, states are not empowered to seek remedies that affect citizens in every state of the union - remedies that dictate nationwide product design, restrict Microsoft’s business dealings everywhere, even expropriate Microsoft’s federally protected intellectual property and provide it royalty-free to Microsoft’s competitors.

Here’s how the Supreme Court put it in BMW v. Gore (1996): “[N]o single state could … impose its own policy choice on neighboring states. No state can legislate except with reference to its own jurisdiction…. [O]ne state’s power to impose burdens on the interstate market … is not only subordinate to the federal power … but is also constrained by the need to respect the interests of other states.”

Consider as well the remarks of respected federal appeals judge Richard Posner, who mediated an abortive Microsoft settlement two years ago. Posner offered these recommendations in a recent issue of the Antitrust Law Journal: “I would like to see, first, the states stripped of their authority to bring antitrust suits, federal or state, except … where the state is suing firms that are fixing the prices of goods or services that they sell to the state…. [States] are too subject to influence by … competitors. This is a particular concern when the [competitor] is a major political force in that state. A situation in which the benefits of government action are concentrated in one state and the costs in other states is a recipe for irresponsible state action.” Amen to that.

So what is a state to do if it doesn’t like the settlement? The Tunney Act establishes a comprehensive process - now unfolding in federal court - for determining whether antitrust decrees are in the public interest, and how non-settling parties can voice their objections. Indeed, the nine states filed comments and submitted parts of a deposition, but they didn’t participate further in the Tunney Act proceedings. Mostly, the states rejected the formula prescribed by Congress so they could pursue their own strategy to override the federal settlement.

Initially, the Justice Department and 20 states, responding to the special interests of rival businesses, combined to challenge Microsoft. Now, with that challenge resolved to the satisfaction of almost everyone, nine out of 50 states shouldn’t be allowed to wreck the settlement - or even delay it long enough to spoil our economic recovery. It’s time to let the software industry get back to serving its customers, and get the state attorneys general out of the business of enforcing federal antitrust law.

Robert A. Levy is senior fellow in constitutional studies at the Cato Institute.