For Nine States, a Second Bite at the Microsoft Apple

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 U.S. District Judge Thomas Penfield Jackson issued his conclusions of law.

Now the case continues on two parallel tracks: in a Washington courtroom, where a federal judge ponders whether a long-awaited settlement between Microsoft and the Justice Department serves the public interest; and in that same court, before the same judge, where nine states of the 20 that 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, 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 nine 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 on to the settlement. That leaves the District of Columbia and nine states attempting to substitute themselves as enforcers of the federal antitrust laws and the public interest.

Attorneys general in the nine states, including California, concede that their state and federal claims are the same. They also acknowledge that Microsoft’s behavior did not affect their citizens more profoundly than anyone else. Yet they want much broader relief than the settlement affords--to vindicate their singular view of the public interest. But Congress did not intend that states--in a case where the Justice Department has already spoken--could supersede the role of the federal government.

Consider the remarks of federal Appeals Court 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? There is a comprehensive legal process, established by the Tunney Act in 1974 and now underway in this case, for determining whether antitrust decrees are in the public interest and how nonsettling parties can voice their objections. Yet the nine states mostly 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.

Let the software industry get back to serving its customers and get self-aggrandizing state attorneys general such as California’s Bill Lockyer out of the business of enforcing federal antitrust law.