Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
October 2, 2000
The Supreme Court last week put a damper on plans for Joel Klein's going-away party when it declined to hear a direct appeal of the Microsoft antitrust suit.
This procedural ruling means the divestiture of Microsoft now will undergo scrutiny by a court that has in the past shown sympathy for Microsoft's arguments. This decision jeopardizes what Mr. Klein, the outgoing Justice Department antitrust chief, no doubt sees as a major legacy of his tenure. It is nevertheless good news for consumers and the New Economy.
In many ways, last Tuesday's decision should not have been too surprising. The Justice Department had wanted the Supreme Court to hear Microsoft's case right away, skipping over the normal first stop for such cases, the DC Circuit Court of Appeals. It argued that this step was justified, pointing to the federal Expediting Act, which allows direct appeals in antitrust cases of "general public importance in the administration of justice."
Certainly this case is of general importance. But this also is a case with a daunting and complex record - with 412 separate findings of fact, in addition to sure-to-be-challenged interpretations of antitrust law. On top of this, trial court Judge Thomas Penfield Jackson ordered the divestiture of Microsoft into two parts - a radical step - without any separate hearings or presentation of evidence. All in all, this simply was not the type of briar patch into which the Supreme Court would want to step.
The decision doesn't mean the Supreme Court won't eventually end up deciding the case. After the circuit court is done, one or both parties are sure to petition the court to take on the case at that time. Even so, an intermediate appeals court has a big role to play in sorting through the facts and winnowing the issues. The Supreme Court, for instance, gives greater deference to findings of fact if two lower courts have concurred with them. Without an intermediate review, its burden is increased substantially.
Moreover, since the DC Circuit has considerable antitrust expertise, its analysis will likely provide a valuable guide for the Supreme Court.
But does this additional review outweigh the need for speed in resolving this case? The government pointed to the need for "legal certainty" and a quick resolution to keep the Internet sector on course. And direct Supreme Court review would have saved time - cutting perhaps a year off the whole process. But, while speed has its place, it is hardly a comfort if it means speedily doing something harmful.
The break-up of a company -especially the most successful company in U.S. history - isn't something that should be taken lightly. It is more important that this case be decided correctly than decided quickly.
In any case, the government's push for direct review was driven by more than an abstract belief in the virtue of speedy justice. The Justice Department (and the 19 state attorneys general also in on the case) know they will find the going rougher at the DC Circuit than in the friendly confines of Judge Jackson's courtroom. Of seven judges who will hear the case, four have already written opinions favorable to Microsoft in related antitrust cases, first in 1995, and again in 1998.
The 1998 decision should be particularly worrisome for the government. In that case, the government argued that Microsoft had violated a prior consent decree by tying together Windows with Microsoft Explorer too closely. In a bruising opinion by Judge Stephen Williams, a three-judge panel threw out the claim, and articulated guidelines under which tying could or could not be found to violate antitrust rules. Judge Jackson explicitly rejected these guidelines in this year's case. It is unlikely any government lawyer is looking forward to explaining to Judge Williams why he was disregarded.
Perhaps even more problematic for the government's case is what happens outside the courtroom while appeals go on. The digital world has been changing since this lawsuit began. And despite prosecutor's glum predictions of monopoly, Microsoft's dominance has been increasingly challenged - by new technologies such as Internet appliances, by the growth of wireless Internet use, and by newly reinvigorated competitors such as AOL. Before too long, Microsoft's Window's "monopoly" may seem as quaint as a punch card. In that case, consumers might be grateful the Supreme Court spoiled the party at the Justice Department by rejecting a rush to judgment in this lawsuit.
James L. Gattuso is vice president for policy and management at the Competitive Enterprise Institute. He is a former deputy chief of the Office of Plans and Policy at the Federal Communications Commission.