PRIVATE SECTOR USE OF THE FEDERAL GOVERNMENT AS A PLAINTIFF:
THE MICROSOFT CASE

Public Versus Private Action

Antitrust law is a powerful force than can reshape entire industries. Oil and telecommunications are examples of major industries which were radically restructured as a result of antitrust action. Thus, antitrust litigation can serve as a powerful regulatory tool.

There are, traditionally, two distinct types of antitrust action that may be taken against a company which is perceived as having violated antitrust law:

1. Private legal action by a potentially aggrieved party; and

2. Public action by the federal government.

To ensure that the private litigation is a viable means for seeking redress of some alleged antitrust violations, the Sherman Antitrust Act not only permits private parties to file certain antitrust lawsuits, it specifies that, in some cases, successful plaintiffs may receive triple the actual damages incurred. Thus, the law provides a strong incentive for injured parties to use the court system to enforce the antitrust law.

There are appropriate roles for both public and private actions under the law. However, it is important that each type of action remain distinct so as to prevent abuse of the antitrust regulatory mechanism.

Recently, however, a new twist has occurred which threatens to breach the distinction between private and public antitrust actions: private parties lobbying federal officials to undertake lawsuits on their behalf.

An example of private interests harnessing the federal government to their own benefit is the Microsoft case. In this instance, we are informed that senior management of several leading high technology companies lobbied the Justice Department to sue Microsoft. The strategy was successful.

There are four key aspects of this new aspect of Regulation by Litigation that give cause for concern:

1. Courts generally give at least some measure of deference to the federal government in litigation. Thus, by working through the Justice Department, the complaining companies were able to obtain greater status than if they had brought the suit themselves;

2. The litigation is fully funded with taxpayer dollars. The complaining party, even when very wealthy, need not risk any of their own resources other than lobbying costs;

3. The federal government can devote virtually unlimited investigative and litigation resources to the issue, including hiring extremely expensive private sector litigators; and

4. The federal government is seeking to change public policy while avoiding the checks and balances that are part of the democratic legislative and regulatory processes.

The following is an article by Microsoft's Director of Government Affairs which was published on the Op-Ed page of The Washington Post (October 26, 1999). The article discusses a major lobbying effort by several large technology firms to persuade the federal government to sue Microsoft. The lobbying effort apparently involved private meetings with Department of Justice officials, including a breakfast meeting with the nation's senior antitrust official at the home of Netscape's CEO. Mr. Krumholtz also discusses Microsoft's efforts to protect its interests through the democratic process.

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