  
  IN THE UNITED STATES
DISTRICT COURT
 FOR THE DISTRICT OF COLUMBIA
 RESPONSE OF THE UNITED STATES OF AMERICA
TO SUPPLEMENTAL SUBMISSION OF AMICI CURIAE
This memorandum responds to the most recent attempt by the
anonymous amici
to divert this proceeding from its proper purpose under the Tunney
Act. They do so by
misstating the law and by offering misleading characterizations of
the government's
submissions. The only thing new in the amici's latest submission is
one document recently
produced in the government's ongoing investigation of the
Microsoft/Intuit transaction,
which is entirely irrelevant to this proceeding.
1.
The government repeatedly has
emphasized that its ongoing and future
enforcement efforts -- in particular its investigation of Microsoft's
proposed acquisition of
Intuit -- could be prejudiced by a public debate concerning
evidence or legal theories
that are not relevant to this proceeding, but that might well be
germane to future
cases. 1 For reasons known only to themselves, the anonymous
amici now seek to
Page 2
provoke precisely such a debate. They have submitted to the Court
a document that
was produced by a third party to the Department of Justice only
three days ago, in
response to compulsory process issued in the ongoing investigation
of the proposed
Microsoft/Intuit transaction. Amici apparently hope to entice the
Court into an analysis
or evaluation of this document, entirely outside of the factual and
legal context in which
the document might be relevant.
Their invitation should be rejected. The amici's tactics forestall
any meaningful
assessment by the Court of the document or the issues to which it
relates -- which, in any
event, are not the subject of the complaint now before the Court.
Although amici's
counsel have provided an unredacted copy of the document to the
government, 2
they
did so on the express condition that the document be accorded "the
fullest possible
protection of confidentiality provided for by law." Microsoft has
been denied any
access to the document, and thus cannot respond at all. These
restrictions, combined
with the risk of prejudice to the Microsoft/Intuit or some future
investigation, preclude the
government from discussing the substance of the document
submitted by amici. Under
these conditions, any reliance on this document by the
Court would be fundamentally
unfair.
We can, however, point out what the document is not.
The document does not
discuss any product that was the subject of the government's
complaint or the proposed
consent decree. The document does not relate to the
anticompetitive licensing
practices that are the subject of this case. The document does
not relate to the
Page 3
"vaporware" allegations about which the Court has inquired. Thus,
even apart from the
extraordinary procedural defects of amici's submission, further
consideration of the
document or the issues to which it relates would be improper.
Amici should not be
permitted to turn this Tunney Act proceeding into an unbounded
inquiry into competition
in the software industry, without regard to the specific licensing
practices challenged in
the government's complaint. The document and the issues to which
it relates have no
bearing on the sole question that is before this Court today under
the Tunney Act:
whether the government has a reasonable basis for concluding that
the proposed
consent decree adequately resolves the specific claims in its
complaint. If it does, the
Court must find that the proposed decree is within the reaches of
the public interest and
enter it. United States v. Western Elec. Co., 993 F.2d
1572 (D.C. Cir.), cert. denied, 114 S.
Ct. 487 (1993).
2.
The anonymous amici attempt to
justify their tactics by misstating the legal
standard that governs the approval of antitrust consent decrees. As
we have explained
before, 3 antitrust remedies should constitute "a reasonable method of
eliminating the
consequences of the illegal conduct." National Soc'y of
Professional Eng'rs v. United
States, 435 U.S. 679, 698 (1978) (emphasis added). 4 Under the Tunney Act,
"[t]he
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balancing of competing social and political interests affected by a
proposed antitrust
decree must be left, in the first instance, to the discretion of the
Attorney General."
United States v. Western Elec. Co., 993
F.2d 1572, 1577 (D.C. Cir.), cert. denied, 114 S. Ct.
487 (1993) (internal quotations omitted). The government's
predictions concerning the
effects of the proposed relief can be rejected only if the Court has
"exceptional
confidence" that the government is wrong. Id.
In this case, however, the government's assessment is supported
fully by the
declaration of Nobel Laureate Kenneth Arrow. As Professor
Arrow explains, "[t]he
Department of Justice's complaint against Microsoft and the
resulting settlement
eliminated unnecessary and artificial obstacles erected by Microsoft
to disadvantage
future competition." Arrow Dec'l at 4
(emphasis added). The proposed settlement, in his
view, "appropriately addresses and remedies the anticompetitive
effects" of the illegal
practices. Id. at 13. In contrast, Professor Arrow
concludes that the linchpin of amici's
argument -- the contention that Microsoft's large installed base was
the result of its illegal
licensing practices -- is "flawed." Id. at 11. Those
practices, he concludes, "made only a
minor contribution to the growth of Microsoft's installed base."
Id. at 12. We submit that
in this case, as in United States v. Western Elec. Co., 993
F.2d 1572, 1582 (D.C. Cir.), cert.
denied, 114 S. Ct. 487 (1993), Professor Arrow's declaration
provides more than enough
Page 5
"to establish an ample factual foundation for the judgment call
made by the
Department of Justice and to make its conclusion reasonable."
Thus, the far-reaching
inquiry into the software industry that amici urge in this proceeding
falls well beyond the
proper scope of the review authorized by the Tunney Act.
3.
Amici criticize the government's
submission concerning "vaporware"
because it does not discuss United States v. American Tel. &
Tel. Co., 524 F. Supp. 1336
(D.D.C. 1981). The criticism is unwarranted. That case did not
reach any conclusion
regarding the legality of product preannouncements under the
Sherman Act. Rather,
the Court denied a motion to dismiss where the plaintiff challenged
a broad course of
conduct, one element of which was a preannouncement, on the
theory that the entire
course of conduct constituted an illegal denial of access to an
essential facility. The
Court explicitly confirmed that it viewed the case as "a single
Sherman Act claim on a
course-of-conduct basis," id. at 1345, and recognized that
even though some of the acts
in that course of conduct might not have injured competitors, those
acts "may still be
relevant as evidence of [defendant's] intent," id. at
1344.
One of the episodes examined by the Court involved AT&T's
reaction to a
competitor's proposal to develop a digital data network. The court
found evidence that
AT&T, in opposing the competitor's application for an FCC
license, had engaged in "a
series of misleading statements, of representations having the effect
of actually barring
access to an official body, or of an intent to mislead the body
concerning central facts."
Id. at 1364. In addition, AT&T allegedly
responded to the competitor by engaging in
predatory pricing. Id. at 1364 n.118, 1366 n.122. Finally,
AT&T's response also included the
product preannouncement discussed by amici.
Page 6
All this behavior constituted just one of seven episodes
in the overall course of
conduct. And as to the overall course of conduct, the Court did
not find that there was
antitrust liability. Rather, the Court denied a motion to dismiss
under Rule 41(b),
recognizing that the motion could be denied "even if under the law
that motion might
have been granted." 5 This case surely does not contradict the proposition set forth
in the
government's submission that "product preannouncements do not
violate the antitrust
laws unless those preannouncements are knowingly false and
contribute to the
acquisition, maintenance, or exercise of market power." 6
4.
Amici fault the government's
submission regarding vaporware because, in
their words, it "emphasizes" the "purported" need to show market
impact. Supplemental
Submission of Amici Curiae at 6. This requirement is not
"purported." It is hornbook law 7
and amici cite no authority to the contrary. Amici point
to economic articles suggesting
that product preannouncements might be anticompetitive.
But the government has
never disputed that proposition, and has stated clearly and
repeatedly that it will
challenge preannouncements if the facts support such a
challenge under the
applicable legal standard. Amici contend that the Department has
"committed the
United States to a position . . . in which it appears largely to accept
a practice which the
Page 7
economists substantially agree `can eliminate competition and
reduce welfare.'"
Supplemental Submission of Amici Curiae at 7. We cannot accept
the notion that by
describing the holdings of prior cases, divorced from any factual
setting or actual case,
and in response to the Court's request that we do so, we have
"committed the United
States to a position" on these issues, which will arise in the future
only in particular factual
settings and on a developed record. But even if that assertion were
true, it merely
highlights the risk of prejudice to the government's future
enforcement efforts of having
to discuss complex and fact-sensitive legal issues outside of the
context of a particular
case or controversy in which those issues are relevant.
Conclusion
The Court should not tolerate further efforts by the anonymous
amici or others to
prolong this proceeding. 8 The government has explained in great detail the basis for
its
conclusion that the proposed settlement provides a complete
remedy for Microsoft's
illegal conduct, and that the relief is needed now. The
government's explanations have
been supported in full by the declaration of Nobel Laureate
Kenneth Arrow. Nothing
presented by the anonymous amici or others refutes these
conclusions. The record
establishes an ample basis for the Court to find that the proposed
consent decree
adequately resolves the specific claims in its complaint.
Accordingly, the proposed Final
Page 8
Judgment is within the reaches of the public interest. We urge the
Court to enter the
Final Judgment immediately.
Respectfully submitted,
_____________________________
Anne
K. Bingaman
Assistant Attorney General
Steven C. Sunshine
Deputy Assistant Attorney General
Donald J. Russell
Lawrence M. Frankel
Mark
S. Popofsky
Attorneys
U.S.
Department of Justice
Antitrust Division
Judiciary Center Building
555
Fourth Street, N.W.
Washington, D.C. 20001
(202)
514-5621
February 3, 1995
.
FOOTNOTES
1 See
Memorandum of the United States of America In Support of Motion To Enter Final Judgment
and In Opposition to the Positions of I.D.E. Corporation and Amici, at 14-15; Memorandum of
the United States of America in Response to the Court's Inquiries Concerning "Vaporware" at 3;
Transcript of Motions Hearing, Jan. 20, 1995, at 22.
2 Amici have
not given the government a copy of the redacted version that was submitted to the Court.
Therefore, the government has no way of knowing precisely what information has been deleted
from the Court's version of this document.
3 See
Memorandum of the United States of America In Support of Motion To Enter Final Judgment
and In Opposition to the Positions of I.D.E. Corporation and Amici, at 7-10.
4 Quoting
United States v. American Tel. & Tel. Co., 552 F. Supp. 131 (D.D.C. 1982), amici contend
that a consent decree must "effectively open the market to competition" in order to satisfy the
"minimum" standard for approval by the Court. Supplemental Submission of Amici Curiae, at 3.
That standard was appropriate, and consistent with the principle articulated in Professional
Engineers, in the AT&T case, where competition had been foreclosed by a wide
variety of exclusionary acts over many years. In this case, however, the rapid growth of
Microsoft's installed base "is primarily the result of the extraordinary commercial success of the
IBM-compatible PC platform." Arrow Dec'l at 11. Microsoft's illegal practices "made only a
minor contribution to the growth of Microsoft's installed base." Id. at 12. The proposed
consent decree provides a complete remedy for Microsoft's anticompetitive licensing practices,
thereby "eliminating the consequences of illegal conduct," Professional Engineers, 435 U.S.
at 698. But the antitrust laws were not meant to provide "remedies" for the consequences of
actions by third parties (e.g., IBM's original decision to obtain from Microsoft the operating
system for its PC), or the "consequence of good fortune and possibly superior product and
business acumen." Arrow Dec'l at 11.
5 Id. at
1343. In light of the length and complexity of the AT&T litigation, the Court was mindful
that a Rule 41(b) motion should be granted cautiously, because of the risk that an erroneous
ruling would necessitate a second trial. Id.
6 Memorandum
of the United States of America in Response to the Court's Inquiries Concerning "Vaporware" at
2.
7 See,
e.g., A.B.A. Section of Antitrust Law, Antitrust Law Developments at 262-69 (3d ed.
1992); 16B Julian O. von Kalinowski, Business Organizations: Antitrust Laws and Trade
Regulation §§ 8.02[1], 9.01[5] (1991).
8 Amici urge the
Court to prohibit the government and Microsoft from destroying documents collected in
connection with this investigation. It has been the intention of the Department to preserve the
documents in its possession until the expiration of the proposed Final Judgment, and we
represent to the Court that we will do so.
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