Letter to Assistant AG on Microsoft Settlement

The staff of the Antitrust Division has designated a limited set of comments on the proposed settlement as “major.” It plans to engage in special indexing and organizing of these to facilitate public access. More than 2,850 other comments that contain “a degree of detailed substance concerning the RPFJ,” according to the Joint Status Report of February 8, 2002, will be relegated to insignificance, and to what should be described as the “don’t bother” pile, because they will be lumped together with 2,800 form letters and 19,500 comments that contain no analysis whatsoever.

The Competitive Enterprise Institute filed comments supporting the proposed settlement that the case staff apparently regards as insignificant. We disagree. Among the points we made were the following:

Consideration of the adequacy of the settlement must be tightly tied to the legal context, which was described quite precisely in your December testimony before the Senate Judiciary Committee. Most of the public discussion is ignoring this context.

The findings of fact are a thorough mess, consisting mostly of what administrative lawyers describe as “legislative facts,” which are general conclusions about the state of the world, not facts in the sense in which that term is usually used in litigation. If the settlement is rejected, then a trial court trying to craft an acceptable legal remedy using these findings as a basis will plunge into an impenetrable morass, delaying resolution for years and damaging the industry and the economy.

The case is doing great harm to the legal system because of: (a) The publicity about the pre-complaint relationships among the press, competitors, and government lawyers; (b) The conduct of the original trial judge, and (c) What appears to be an organized propaganda campaign intended to pressure the judge to remove the decision from the realm of law and into the realm of politics, and to traduce you personally in the process. All these factors are combining to turn the proceeding into an antitrust O. J. Simpson affair. The trial court should place great weight on the need to end this hemorrhage of legitimacy.

That the case staff regards these points as insignificant indicates how completely the antitrust system has broken down in this case. The comments characterized as major, which are overwhelmingly against the settlement, seem to consist largely of legal minutiae combined with webs of jargon spun by hired-gun economists who are willing to exceed not only the limits of their own expertise but all limits of human knowledge. A grandiose antitrust industry assumes itself qualified and entitled to use the guise of antitrust to create industrial policy, ignoring the needs of business and the national economy for predictability, speed, and clarity, and it is not interested in arguments to the contrary.

The selection of “major” comments is making true prophets of Professors William J. Baumol and Janusz A. Ordover, who wrote in 1985:

There is a specter that haunts our antitrust institutions. Its threat is that, far from serving as the bulwark of competition, these institutions will become the most powerful instrument in the hands of those who wish to subvert it. More than that, it threatens to draw great quantities of resources into the struggle to prevent effective competition, thereby more than offsetting the contributions to economic efficiency promised by antitrust activities.

— “Use of Antitrust to Subvert Competition,” Journal of Law & Economics, Vol. XXVIII (May 1985), reprinted in CEI Antitrust Reform Project, Antitrust Reader (1997).

You should have all substantive comments reviewed by people independent of the case staff – indeed, independent of the Antitrust Division — to ascertain how many others were rejected because they did not start from the premise that the remedy in this case should represent a consensus about proper industrial policy for the software industry.

Obviously, no one can quarrel with the basic idea of making comments available online rather than by printing in the Federal Register, or with the need to ease the burden on the trial judge, but the use of such a truncated procedure adds to the need for vigilance against bias, whatever form it may take.