FC: Cato's Bob Levy on why states' suit against Microsoft is evil

[Declan McCullagh <declan () well com>]

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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