WMU News

Did AGs cave-in on Microsoft suit?

Dec. 10, 2001

by Norman W. Hawker

In the mid-1970s, Sen. Philip A. Hart, the legendary "Conscience of the Senate" from Michigan, convinced Congress to strengthen the antitrust laws. Among its many provisions, the Hart- Scott- Rodino Antitrust Improvements Act of 1976 expanded the authority of state attorneys general to enforce the federal antitrust law. This added to the authority they already had under state antitrust laws to protect consumers, and indeed the economy generally, from anticompetitive behavior if the federal government failed to do so. Events in the Microsoft antitrust case presented the ideal test case for this legislation.

Did Senator Hart's plan work? Well, the Microsoft case presents a classic tale of good news and bad news. First, the bad news. The expanded authority proved to be a dismal failure in the Microsoft case. Half of the 18 state attorneys general involved in the case, including Michigan's Jennifer Granholm, followed the Bush Administration's lead by throwing in the towel on their most significant antitrust victory ever when they agreed to a proposal so weak, so one-sided in favor of Microsoft that it has been called a reward, not a remedy for Microsoft's illegal conduct.

Now for the good news. The expanded authority Hart fought for has proved to be an extraordinary success in the Microsoft case. Half of the state attorneys general courageously refused to abandon consumers. Instead of throwing in the towel, these state Attorneys general will seek a remedy that accomplishes the goals outlined by the Court of Appeals this summer: end Microsoft's illegal monopoly; deprive Microsoft of the fruits of its monopoly; and prevent Microsoft from reasserting its monopoly power.

But is the proposal really that bad? If not, then maybe the courageous ones were the state attorneys general who gave in rather than unnecessarily prolonging the battle.

Yes, the proposal really is that bad, at least if you believe that the government should enforce the antitrust laws. For example, the Court of Appeals held that Microsoft illegally maintained its operating system monopoly by commingling or including the software code of its middleware products with the operating system. But the proposal accepted by the Justice Department and half of the state Attorneys general expressly says that Microsoft can include whatever it wants in the operating system. All of the provision's restrictions are riddled with exceptions and weakened even further by the absence of serious consequences to Microsoft if it breaks the few rules contained in the proposal.

Why the federal government snatched defeat from the jaws of victory remains a mystery, but it probably stems from the ideological conviction stated by President Bush during the last election that antitrust law should not enforced except to prevent price-fixing between competitors. While Microsoft violated or attempted to violate the antitrust laws in just about every other conceivable way to protect its operating system monopoly, no one has suggested that Microsoft engaged in price-fixing.

State attorneys general who shared Bush's narrow view of antitrust law probably did not join the lawsuit to begin with. In some states, elections may have replaced the original attorney general with some one who held a narrow view of antitrust. In these states, ideology would have played the same role that it did on the national level.

But if state and federal attorneys general all shared the same ideology, it would have never made sense to expand the state authority in the first place. Moreover, a number of the states attorneys general, including Michigan, had established reputations as strong consumer protection advocates. Why would they walk away from a case that they had won just a few months earlier?

Much of the answer probably has to do with money. Not in terms of campaign finance reform. Microsoft, to be sure, vaulted from the ranks of the most miserly political contributors to the most generous almost overnight after the government began its antitrust litigation. But, for example, Microsoft gave large contributions to candidates like George W. Bush because he already opposed enforcement of the antitrust laws, not because it believed he would drop the case in exchange for large contributions. (It should be noted that Microsoft gave almost equal sums to democrats and republicans overall.)

The real money problem for a state attorney General is his or her budget. Rarely, if ever, does a state attorney general have much budgetary control, and without the ability to share costs with the federal government, few state attorneys general can afford to litigate such complex cases. Senator Hart's legislation provides for this insofar as the state attorneys general are entitled to reimbursement of their legal fees at the conclusion of the case. But most state governments must balance their budgets every year. The fact that Microsoft will reimburse the states some day hardly helps balance the budget today.

Here is where a state attorney general needs political courage, the kind of courage that it takes to ask a state legislature for whatever it takes financially to achieve justice in lawsuit that is understood by very few members of media or the public.

If one simply counts heads, the effectiveness of expanded power for state attorneys generals seems mixed at best. But on balance, the system put in place by Senator Hart and the rest of Congress has worked in the Microsoft case. Why? Because the number of successful attorneys general required to accomplish justice in the Microsoft is not 50 or even 18.

To protect the public interest, it takes only one courageous state attorney general. America just discovered that she has nine.

Dr. Norman W. Hawker is an associate professor of finance and commercial law at Western Michigan University and a former assistant attorney general for Michigan. He teaches courses in social responsibility and ethics in WMU's Haworth College of Business. This column was originally published in the Nov. 21 issue of MiBizSouthwest and is reprinted in WMU News with their permission. The article is part of a monthly MiBiz series featuring professors from the WMU Haworth College of Business.

Media contact: Jessica English, 269 387-8400, jessica.english@wmich.edu

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