AAI's Oral Argument in Microsoft Settlement Hearing.
United States of America v. Microsoft Corporation, CA No. 98-1232, before Judge Kollar-Kotelley. March 6, 2002.
THE COURT: Thank you. If we can go to counsel for the American Antitrust Institute. If I could ask you to identify yourself.
MR. LENETT: Yes. Good afternoon, Your Honor. My name is Mike Lenett. I represent the American Antitrust Institute, and we would also like to thank the Court for allowing us to participate today.
We would like to confine our remarks today to about two points. Mainly first that the parties are asking the Court to apply a much too deferential scrutiny to the proposed settlement, and second, that they have failed to comply with their disclosure requirements under the Tunney Act. To a significant extent this hearing is about how much deference the Court should give to the Justice Department and how much independent judgment it should bring to bear in determining whether the settlement is in the public interest. There was a time when these settlements were secretive and courts routinely gave them rubber-stamp approval. Congress found that such a lax approach was subject to abuse and contrary to the public interest.
The Tunney Act was enacted specifically to charge courts with a more active role within a new framework of transparency and public engagement.
As the Senate report says, the proposed legislation provides that the District Court shall make an independent determination as to whether the entry of a proposed consent judgment is in the public interest.
The fact that Congress authorized the courts to hold an evidentiary hearing further demonstrates its intent that courts should do whatever they feel is necessary to satisfy themselves that the settlement is in the public interest. We agree with the government to this extent, that some deference may be appropriate, and that the proper standard of review is somewhere between de novo review on one end of the scale and a rubber stamp on the other. I think we are still in agreement that deference is subject to a sliding scale depending on the facts and circumstances, but where we differ is where we feel the Court should be in this case on that sliding scale.
Whereas they contend the review should be toward the rubber stamp end, we think it's toward the other end where the government has accorded little deference. This is partly because we are at such a late stage of the case, even after a trial, but it's also because the Court has the benefit of an exhaustive and highly developed factual record regarding the relative, competitive market and the conduct at issue, because the Court has the benefit of two court decisions that it can interpret independently, and because there have been findings of fact and conclusions of law establishing liability.
None of the cases cited by the parties in support of substantial deference involve this unique context. We, therefore, urge the Court to very carefully scrutinize the settlement with minimal deference. The parties also have failed to comply with the disclosure requirements under the Tunney Act thereby depriving the public of its right to fully informed input, and the Court can give no deference to the government's asserted compliance. That is a legal determination for the Court to make itself.
Among other things, the CIS is deficient because it fails to disclose mandatory disclosures regarding alternative remedies. Under Section 16(b)6 of the Tunney Act, the CIS must include a description and evaluation of the alternatives considered by the government.
On pages 62 to 63 of the CIS, the Justice Department lists six alternative remedies it considered, but there is zero evaluation of any of them. The CIS discusses these six alternative remedies, maybe the most important material disclosure to the public's understanding of what the value is of the settlement, it discusses those six alternatives in two sentences, which essentially say, the United States weighed them and the United States rejected them.
That is not any kind of evaluation. The statute does not say, Tell the public that you evaluated alternatives. The statute says evaluate them.
Approval of this disclosure would make a mockery of judicial power because it ignores the plain language of the statute and because the public can have no idea from the CIS why the Justice Department concludes, as it does, that the remedies it chose are the most effective. The Tunney Act does not oblige the public simply to take the government's conclusion on faith. That's the whole point of the Tunney Act.
Microsoft also has failed to comply with the Tunney Act. One of the primary purposes of the act was to expose lobbying contacts to sunlight in order to discourage improper influences and to strengthen public confidence in antitrust consent decrees.
Toward that goal, Section 16(g) is extremely broad, subject to a narrowly defined exemption. It requires Microsoft to publicly file a description of any and all written or oral communications by or on behalf of such defendants with any officer employed with the United States concerning or relevant to such proposal; not just if, as Mr. Warner suggested, that the discussion was about a quote "term" in the final agreement.
In addition, Microsoft must certify that the descriptions are both true and complete. Well, Microsoft's Section 16(g) disclosure says simply that some unnamed counsel from Microsoft met with some unnamed counsel for the United States to discuss some unspecified subjects, and that various unnamed Microsoft people met with unidentified representatives of the United States for unspecified purposes.
Microsoft's certification that that description is true and complete is a sham. In fact, there is no description of the subject matter of any communication at all. This is another clear violation of the Tunney Act.
In addition, Microsoft reveals that it did not disclose any contacts with any employees of the United States except those in the executive branch. There is no support for that limitation. Congress knows exactly how to specify a part of the federal government when it wants to, and did so right here in the same sentence of the act that refers to contacts with employees of the United States. It makes an exception for contacts with employees of the Department of Justice.
Moreover, as you pointed out, Senator Tunney, when he introduced the legislation, said that the provision would cover contacts with Congress.
The big point is that if the Tunney Act is interpreted to shield from disclosure settlement-related lobbying contacts with Congress, it will open a hole in the Tunney Act big enough to drive an Army of lobbyists through, and Microsoft has an Army of lobbyists.
In conclusion, we submit that the unique procedural posture of this case combined with the language and ideas of the Tunney Act strongly suggest that the Court should carefully scrutinize this settlement with a minimal amount of deference to the government.
In addition, it is vitally important that the Court not set a precedent whereby a settlement based on deficient public disclosures is nevertheless approved. As Your Honor has aptly stated in an AII separate case, if the Court determines that the disclosures were insufficient, the proposed consent decree cannot be approved. Thank you, Your Honor.