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

From: Declan McCullagh (declanat_private)
Date: Wed May 08 2002 - 22:05:32 PDT

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    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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