FC: American Antitrust Institute: Reject MS class action settlement

[Declan McCullagh <declan () well com>]

[About as surprising as Handgun Control calling for more laws restricting 
firearms purchases, but there you are. --Declan]

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From: BFoer () antitrustinstitute org
Date: Mon, 26 Nov 2001 16:57:55 -0500
Subject: aai- Microsoft Class Action Settlement Unfair, AAI Tells Court
To: declan () well com

On Tuesday, Nov. 27, the Multidistrict Litigation Court in Baltimore will 
hd a hearing on a proposed national settlement of private class actions 
against Microsoft. AAI today sent the following letter to Judge Motz urging 
rejection of the settlement.
Bert Foer
American Antitrust Institute

November 26, 2001

Judge J. Frederick Motz
U.S. District Court
101 W. Lombard Street
Baltimore, MD 21201

By FAX: 410-962-2698

Re: Proposed MDL Microsoft Settlement

Dear Judge Motz:

	We write on extremely short notice over the holiday weekend to express 
distress at the proposed settlement that comes before your Court on 
November 27. Were there more time, we would apply to speak as amicus 
curiae, but we hope you will take notice of our concerns, which are based 
on public reports. The American Antitrust Institute is an independent 
non-profit education, research, and advocacy organization dedicated to a 
vigorous role for antitrust in the national economy.  We have commented 
frequently, as have many of our individual Advisory Board members, on 
matters relating to Microsoft's anticompetitive activities. It is with this 
perspective that we make the following points.

	· First, the proposed settlement does not appear to represent a fair and 
reasonable termination of the over one hundred private class action suits 
against Microsoft.

	· Second, even if the settlement is deemed fair with respect to consumers 
in non-repealer states, a national settlement would be grossly unfair to 
consumers in states where a right of recovery has clearly been brought into 
being and where the plaintiffs stand ready to go to trial and, indeed, are 
opposed to a national settlement that would preclude their right of trial.

	·Consumers in repealer states ought to have a right to their class actions 
being tried or settled on their own merits. As the Court of Appeals for the 
District of Columbia Circuit said, talking about how the judiciary should 
consider antitrust issues in the fast paced software market, even though 
the remedy in the federal litigation against Microsoft may be too late to 
do any good, "… the threat of private damage actions will remain to deter 
those firms inclined to test the limits of the law." 253 F3d 34, 49.
	·Given the large monetary damages to consumers that have been alleged in 
the various repealer states—in the billions of dollars, the proposed 
settlement is grossly out of proportion to what is at stake. Not only does 
it fail to provide any benefit directly to the consumer class, it also 
fails to achieve any of the benefits that the antitrust laws anticipate 
through their unique "private attorney general" function. Microsoft's 
illegal uses of its market power, which are alleged in these cases and 
which have credibility as a result of findings by the U.S. District Court, 
upheld by a unanimous Court of Appeals, will not be touched by this 
settlement. The money that Microsoft will pay under the settlement is a 
pittance for that company, having no deterrent value.

·An order for Microsoft to place low-cost computers and free Microsoft 
software into the public schools, where future Microsoft customers can be 
trained, is the type of punishment that Brier Rabbit sought in the brier 
patch. To the extent that this influx of Microsoft products undermines 
Apple, one of Microsoft's few remaining competitors, whose base of strength 
happens to be in the public schools, the proposed settlement of these 
antitrust suits may actually be anticompetitive.

· The proposed settlement must be viewed in the context of Microsoft taking 
advantage of a division between those states that have chosen to overturn 
the Illinois Brick rule and those that have not. Microsoft has cleverly 
engineered the fracture to the point where one group of lawyers 
(representing consumers in non-repealer states) who had lost their case and 
now have only the bargaining leverage of relinquishing their right of 
appeal, willingly enters a nationwide settlement that gives them (but not 
the class they represent) a little something including attorneys' fees, 
while appearing to sell out consumers in the repealer states, whose 
indirect purchaser claims have not yet been heard. As advocates of the 
antitrust mission, we worry that the public will view this settlement as an 
example of lawyers winning their fees while consumers get nothing of value, 
an outcome that can only diminish popular support for the antitrust laws 
themselves.

We urge the Court to reject the proposed settlement as unfair or, at the 
very least, to carve out from the settlement those states that provide for 
a right of recovery by indirect purchasers.

Sincerely,


Albert A. Foer, President

Cc: The Honorable Stuart R. Pollak
San Francisco County Superior Court
400 McAllister Street, Dept. 304
San Francisco, CA 94111
spollak () sftc org

fn.The AAI is described at www.antitrustinstitute.org. Our Advisory Board 
consists of 54 eminent law professors, lawyers, economists, and 
businesspersons, many of whom have carefully followed developments relating 
to Microsoft Corporation and the antitrust laws. By way of full disclosure, 
we are aware that three of our Advisory Board members have an interest as 
attorneys representing clients in private actions against Microsoft.




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