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U.S. v. MICROSOFT CORP.

July 1, 2002

UNITED STATES OF AMERICA, PLAINTIFF,
V.
MICROSOFT CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Kollar-kotelly, District Judge.

MEMORANDUM OPINION

On May 9, 2002, the United States filed its "Certificate of Compliance with the Tunney Act," certifying that "it has complied with the provisions" of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16(b)-(h) ("Tunney Act"). United States Certificate of Compliance at 1. In so certifying, the United States leaves to this Court the final task of determining whether the "Second Revised Proposed Final Judgment" ("SRPFJ") resolves the above-captioned case in a manner that comports with the public interest. Preliminary to that determination, however, are two threshold issues. First, the Court must address whether the Tunney Act applies to this Court's consideration of the SRPFJ. Second, the Court is obliged to examine whether the provisions of the Tunney Act have, in fact, been satisfied.*fn1 Upon review of the record in this case, the voluminous filings of the United States, Microsoft, and amici curiae, the comments submitted by the public pursuant to 15 U.S.C. § 16(b), and the relevant law, the Court concludes that the Tunney Act applies to this case. The Court further concludes that the parties have complied with the Tunney Act's provisions such that this matter is ripe for the Court's public interest determination.

I. BACKGROUND

On May 18, 1998, the United States filed a civil complaint alleging that Microsoft had engaged in anticompetitive conduct in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. § 1, 2. On that same date, a group of state plaintiffs filed a separate civil complaint alleging similar violations of federal law, as well as violations of the corresponding provisions of their various state laws. Shortly thereafter, the two cases were consolidated and proceeded jointly through discovery and trial on the merits. On November 5, 1999, Judge Thomas Penfield Jackson entered 412 findings of fact, United States v. Microsoft Corp., 84 F. Supp.2d 9 (D.C. 1999) ("Findings of Fact"), and on April 3, 2000, Judge Jackson entered conclusions of law, finding Microsoft liable for violations of Sections 1 and 2 of the Sherman Act and the corresponding state law provisions, United States v. Microsoft Corp., 87 F. Supp.2d 30 (D.C. 2000) ("Conclusions of Law"). On June 7, 2000, Judge Jackson entered final judgment in the consolidated cases and imposed a remedy for Microsoft's antitrust violations. United States v. Microsoft Corp., 97 F. Supp.2d 59 (D.C. 2000).

Microsoft appealed, and the D.C. Circuit considered the consolidated cases en banc. Following extensive briefing and two days of oral argument, the D.C. Circuit issued a unanimous per curiam decision affirming in part, reversing in part, vacating the remedy decree in full, and remanding in part for remedy proceedings before a different district court judge.*fn2 United States v. Microsoft Corp., 253 F.3d 34 (D.C.Cir. 2001). Following reassignment, on September 28, 2002, this Court ordered the parties to enter into intensive settlement negotiations. United States v. Microsoft Corp., Nos. 98-1232 and 98-1233 (D.C. Sept. 28, 2001) (order setting a schedule for settlement discussions). On that same date, the Court entered a schedule for discovery and commencement of evidentiary proceedings, in the event that the cases were not resolved through settlement.

The United States and Microsoft were able to reach a resolution in United States v. Microsoft Corp., No. 98-1232 (D.C.), in the form of a proposed consent decree, which was filed with the Court as the "Revised Proposed Final Judgment" on November 6, 2001. The settlement negotiations were partially successful with regard to the companion case, State of New York, et al. v. Microsoft Corp., No. 98-1233 (D.C.); a portion of the Plaintiff States joined the settlement between the United States and Microsoft. Those states which opted not to join the settlement proposed a remedy distinct from that presented in the proposed consent decree. As a result, the Court vacated the discovery schedule with regard to United States v. Microsoft Corp. and deconsolidated that case from its companion case. See United States v. Microsoft Corp., Nos. 98-1232 and 98-1233 (D.C. Nov. 2, 2001) (vacating the Scheduling Order with regard to Civil Action No. 98-1232); United States v. Microsoft Corp., Nos. 98-1232 and 98-1233 (Feb. 1, 2002) (deconsolidating cases). Rather than proceed to an evidentiary hearing on the issue of remedy, as did some of the plaintiffs in State of New York, et al. v. Microsoft Corp., the United States and Microsoft commenced the process for obtaining judicial approval of the proposed consent decree pursuant to the Tunney Act, 15 U.S.C. § 16(b)-(h). Additional facts relevant to the Court's discussion of the parties' compliance with the Tunney Act are recounted as appropriate below.

II. TUNNEY ACT, 15 U.S.C. § 16(b)-(h)

At the center of the inquiry before the Court is the Antitrust Penalties and Procedures Act, 15 U.S.C. § 16(b)-(h). The aforementioned statute, commonly referred to as the Tunney Act, applies to "[a]ny proposal for a consent judgment submitted by the United States for entry in any civil proceeding brought by or on behalf of the United States under the antitrust laws." 15 U.S.C. § 16(b). Concerned with "the integrity of and public confidence in procedures relating to settlements via consent decree," H.R.Rep. No. 93-1463, at 6 (1974), reprinted in 1974 U.S.C.C.A.N. 6535, 6536, Congress enacted the Tunney Act to prevent "judicial rubber stamping" of proposed consent decrees, id. at 8, reprinted in 1974 U.S.C.C.A.N. at 6538. See also United States v. Microsoft Corp., 56 F.3d 1448, 1458 (D.C.Cir. 1995) (citing legislative history). The Tunney Act mandates that, prior to entry of a consent decree between the United States and the party charged with violation of the antitrust laws, "the court shall determine that the entry of such judgment is in the public interest." 15 U.S.C. § 16(e).

True to its name, the Antitrust Procedures and Penalties Act mandates compliance with a number of procedures before the Court can render its public interest determination as to the proposed penalties. See generally 15 U.S.C. § 16(b)-(h). The United States must first publish the proposed consent decree, accompanied by a "competitive impact statement,"*fn3 in the Federal Register. Id. § 16(b). Section 16(b) further mandates that the United States file with the Court those materials and documents which it considers to be "determinative in formulating" the proposed consent decree. Id. Subsection (c) requires the United States to provide the public with notice of the proposed consent decree and competitive impact statement by publishing summaries of the two documents in "newspapers of general circulation of the district in which the case has been filed, in the District of Columbia, and in such other districts as the court may direct." Id. § 16(c). Following publication in the Federal Register, the public has an opportunity to submit comments to the United States regarding the proposed consent decree. Id. § 16(b). The United States is required to "receive and consider any written comments relating to the proposal for the consent judgment submitted under subsection (b) of [Section 16]." Id. § 16(d). Ultimately, the comments must be published in the Federal Register and filed with the District Court. Id. § 16(b). In concert with its receipt and consideration of the public comments, the United States is obliged to publish a response to the comments in the Federal Register and to file the response with the District Court. Id. § 16(d).

Although the Tunney Act burdens the United States with numerous requirements, the Act also demands certain action by the defendant proposing entry of a consent decree. Subsection (g) mandates that the defendant "file with the district court a description of any and all written or oral communications by or on behalf of such defendant . . . with any officer or employee of the United States concerning or relevant to [the proposed consent decree]." Id. § 16(g). The Tunney Act exempts from the subsection (g) disclosures "any such communications made by counsel of record alone with the Attorney General or the employees of the Department of Justice." Id. § 16(g).

A. Applicability of the Tunney Act

Since announcing a settlement in this case, the parties have maintained that the Tunney Act governs the Court's consideration of the proposed consent decree. See generally Stipulation and Revised Proposed Final Judgment. Similarly, the Court has proceeded under the presumption that the Tunney Act applies to the Court's review of the proposed consent decree. See United States v. Microsoft Corp., No. 98-1232 (D.C. Nov. 8, 2001) (order setting schedule for compliance with the Tunney Act). Notwithstanding this presumption, it would be unwise to embark upon a Tunney Act analysis of the public interest in this case without first examining whether the Tunney Act governs these proceedings. Accordingly, the Court commences its analysis by considering whether the procedural posture of this case-which has proceeded through the liability stage and awaits only an order of remedy-affects the applicability of the Tunney Act to the Court's review of the proposed consent decree.

By simply reading the statute and applying the language to the facts of this case, there seems little room to argue that these proceedings are not governed by the Tunney Act. Once again, the Tunney Act applies to "[a]ny proposal for a consent judgment submitted by the United States for entry in any civil proceeding brought by or on behalf of the United States under the antitrust laws." 15 U.S.C. § 16(b) (emphasis added). Despite this clear statutory language, "[i]t has been variously suggested the Act does not apply to proposals that arise after the taking of testimony begins; . . . and after litigation through judgment and appeal. . . ." United States Mem. at 12. Much of the ammunition for this argument derives from the language used by then-Justice William Rehnquist in his dissent from summary affirmance in Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983). Concerned with the constitutionality of the Tunney Act, Justice Rehnquist, joined by Chief Justice Warren Burger and Justice Byron White, observed that "[t]he [Tunney] Act applies only when a case has been settled." 460 U.S. at 1004, 103 S.Ct. 1240 (Rehnquist, J., dissenting). Justice Rehnquist therefore concluded that, in Tunney Act cases, "by definition, there has been no judicial finding of relevant markets, closed or otherwise, to be opened or of anticompetitive activity to be prevented." Id. Seeming to reflect the fact that, traditionally, most consent judgments in antitrust cases are entered before trial, see H.R.Rep. No. 93-1463, at 6 (1974), reprinted in 1974 U.S.C.C.A.N. 6535, 6536 ("As an annual average since 1955, approximately 80 percent of antitrust complaints filed by the Antitrust Division of the Department of Justice are terminated by pre-trial settlement. . . ."); S.Rep. No. 93-298, at 5 (1973) ("Approximately 80 percent of all complaints filed by the Antitrust Division of the Department of Justice are settled prior to trial by the entry of a consent decree."), Justice Rehnquist's comments assume that all settlements in antitrust cases will occur prior to any judicial findings. Maryland v. United States, 460 U.S. at 1004, 103 S.Ct. 1240. Thus, by implication, argue some, Justice Rehnquist's comments indicate that the Tunney Act cannot apply where the Court has already identified a monopoly and imposed liability for illegal monopoly maintenance.

Justice Rehnquist's comments, although worthy of examination, do not prevent application of the Tunney Act to these proceedings. The comments were offered in dissent and therefore are not binding upon this Court as precedent.*fn4 More importantly, Justice Rehnquist's comments did not concern the distinction between pretrial settlements and post-trial settlements, a distinction upon which those dissenting from application of the Tunney Act rely heavily to support their arguments. At most, Justice Rehnquist's comments serve to emphasize the unusual nature of this case. Indeed, the Department of Justice represents to the Court that, "[t]he United States has never before initiated a Tunney Act proceeding so late in a lawsuit." United States Mem. at 12 n. 9. Nevertheless, the mere fact that Justice Rehnquist, in commenting on a distinct legal issue, did not consider the possibility of a post-liability proposal for consent judgment does not itself render the Tunney Act inapplicable to these proceedings.

More instructive on the applicability of the Tunney Act than Justice Rehnquist's comments, in dissent are the statute's structure and legislative history. First, the plain language of 15 U.S.C. § 16(b) is drawn broadly to apply to "[a]ny proposal for a consent judgment." 15 U.S.C. § 16(b). Nothing in the language of this subsection, expressly or implicitly, indicates that the Act's provisions are inapplicable to consent decrees proposed after commencement of trial but in advance of a final judgment. Id.

Furthermore, as the United States points out, the statute's structure belies any argument that the statute was written to apply only to consent judgments submitted in advance of the taking of testimony. The statutory provisions referred to as the "Tunney Act" have been incorporated into the larger statutory scheme of the Clayton Act. Thus, the provisions codified at 15 U.S.C. § 16(b)-(h) can also be characterized as subsections (b) through (h) of Section 5 of the Clayton Act. While a seemingly minor point, the incorporation of the Tunney Act into the Clayton Act takes on significance when attempting to interpret the statutory provisions so as to "avoid a reading which renders some words altogether redundant." Gustafson v. Alloyd Co., 513 U.S. 561, 574, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995). The subsection immediately preceding the 1974 additions that bear Senator Tunney's name, Section 5(a) of the Clayton Act, reflects an understanding of the term "consent judgments" which necessarily includes court-approved resolutions entered after testimony has been taken. 15 U.S.C. § 16(a) ("Provided, [t]hat this section shall not apply to consent judgments or decrees entered before any testimony has been taken.") (emphasis in original). If the taking of testimony in this case renders it too late for introduction of a proposed "consent judgment," the proviso in subsection (a) would be surplusage. As "[t]he cardinal principle of statutory construction is to save and not to destroy," in "giv[ing] effect, if possible, to every clause and word of a statute," the Court cannot read the reference to "consent judgments" in 15 U.S.C. § 16(a) to be limited to pre-testimony settlements. United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 99 L.Ed. 615 (1955) (internal citations and quotation marks omitted).

The meaning of "consent judgments" in subsection (a) impacts upon the Court's interpretation of the use of "consent judgment" in subsection (b) by operation of the "normal rule of statutory construction that identical words used in different parts of the same act are intended to have the same meaning." Commissioner v. Lundy, 516 U.S. 235, 250, 116 S.Ct. 647, 133 L.Ed.2d 611 (1996) (quotation marks omitted). This rule dovetails with the "save and not destroy" principle, described above, such that the Court cannot read the term "consent judgment" in subsection (b) to exclude judgments entered subsequent to the taking of testimony. Lending further credence to this interpretation are the "interrelationship and close proximity of these provisions of the statute." Id. Having chosen to place seven additional subsections into Section 5 of the Clayton Act, between former subsections (a) and (b),*fn5 Congress did not likely intend the term "consent judgment" to carry a meaning in the new subsection (b) different from that employed in subsection (a).

Although the Court need not look to the legislative history because the statute is unambiguous on its face, United States v. Braxtonbrown-Smith, 278 F.3d 1348, 1352 (D.C.Cir. 2002), examination of the legislative history surrounding the seven subsections that comprise the Tunney Act supports the Court's broad reading of "consent judgment." Both houses of Congress heard testimony relating to consent decrees filed in judicial proceedings after the taking of testimony. For example, Thomas E. Kauper, described as "the chief spokesman for the Antitrust Division," 119 Cong.Rec. at 24,599, while testifying before a subcommittee of the Senate Committee on the Judiciary, noted that although "most consent decrees . . . come within a period of less than a year after the filing of the case . . . a consent decree may come much later. It may come after trial, even." Antitrust Procedures & Penalties Act: Hearings on S. 782 & S. 1088 Before the Subcomm. on Antitrust & Monopoly of the Senate Comm. on the Judiciary, 93rd Cong. 117 (1973) ("Senate Hearings") (statement of Thomas E. Kauper, Asst. Attorney General, Antitrust Div., Dep't of Justice). Similarly, in testimony before the House Subcommittee on Monopolies & Commercial Law, while questioning the power of the judiciary to perform all that was required by the bill, Representative Edward Hutchinson remarked that a court's evaluation of the "public interest" would be particularly difficult in a case where, due to changed circumstances, the government opted to settle in the midst of a trial on the merits. Consent Decree Bills: Hearings on H.R. 9203, H.R. 9947, and S. 782 Before the Subcomm. on Monopolies & Commercial Law of the House Comm. on the Judiciary, 93rd Cong. 41 (1973) ("House Hearings") (statement of Representative Edward Hutchinson). Moreover, in testimony before the same House subcommittee, Former Federal Trade Commission Chairman Miles Kirkpatrick noted that, in some instances, prosecutors at the Antitrust Division of the Department of Justice may choose to settle "after the partial trial of the case itself," based upon a realization that "there are certain aspects of its case that do not have the strengths that were initially believed to be present." Id. at 145 (statement of Miles W. Kirkpatrick). These statements support the view that Congress was aware that, in certain cases, a proposal for a consent decree may be filed after substantial judicial proceedings on the issue of liability. As a result, the Court can readily infer that, given the absence of language specifically exempting such cases from the Tunney Act's requirements, Congress intended the Tunney Act to apply in those rare cases.

Of particular interest in the legislative history is the testimony of Judge J. Skelly Wright, who raised the "El Paso Pipeline litigation" as an "example" of a case where the "great influence and economic power" wielded by an antitrust violator was used to exert "significant pressure" on the government, and the government "succumbed to [the] pressure." Senate Hearings, 93rd Cong. at 147 (statement of Judge J. Skelly Wright); 119 Cong.Rec. at 24598 ("In the El Paso case-perhaps the leading atrocity in the whole litany of antitrust suits-after 17 years of inconclusive litigation, the U.S. Supreme Court, in language which some have described as unique for that body, accused the Antitrust Division of `knuckling under' to the El Paso Natural Gas Corp."). In referencing the El Paso Pipeline litigation, Judge Wright sought to emphasize the usefulness of the legislation pending before the subcommittee.*fn6 Judge Wright's example is only effective if the proposed legislation is understood to apply to settlements entered after testimony has been taken; otherwise, the El Paso Pipeline litigation would serve only to exemplify a problem that the proposed legislation would not have resolved. Judge Wright's testimony regarding the El Paso Pipeline litigation proved persuasive to Congress and was relied upon by Senator Tunney in describing the need for the Antitrust Penalties and Procedures Act. 119 Cong.Rec. at 24,598.

Drawing from Judge Wright's example of the perceived need for legislation applicable both before and after the taking of testimony in an antitrust case, it is clear that the ultimate purpose of the legislation would be no better served by a construction limiting its application to pre-trial resolutions of antitrust cases. To the contrary, the legislation's broad purpose in "transform[ing] a procedure which was generally accomplished in a series of private, informal negotiations between antitrust lawyers and attorneys for the defendant, into one that is exposed to the full light of public awareness and judicial scrutiny" would be undermined by such a limitation. 93 Cong.Rec. at 24,598. This conclusion is particularly apt given that post-testimony resolutions of antitrust cases require levels of public awareness and judicial scrutiny which are at least equal to those applied to pre-testimony settlements.

Undoubtedly, presentation of a consent decree after a finding of liability, but in advance of a remedies-specific evidentiary hearing, is not the norm. Still, mere abnormality does not invalidate application of the Tunney Act in this instance. Based on the plain language, structure, and legislative history of the statute, the Court concludes that the provisions of the Tunney Act and the review described thereunder are applicable to this case. Accordingly, the Court will proceed with an inquiry into and analysis of the parties' compliance with the procedures set forth in 15 U.S.C. § 16(b)-(h).

Such inquiry and analysis are appropriate in this case and are authorized, if not required, by the Tunney Act itself. See United States v. Central Contracting Co., 527 F. Supp. 1101, 1104 (E.D.Va. 1981) ("The Court is of the opinion that the record should affirmatively show that both parties have complied with the requirements of the statute. . . ."). As noted above, pursuant to subsection (e) of the Tunney Act, prior to entry of any consent judgment covered by the Tunney Act, the Court must "determine that the entry of [the proposed consent] judgment is in the public interest." 15 U.S.C. § 16(e). Implicit in the Court's obligation to determine that the consent decree comports with the public interest is the requirement that the Court satisfy itself of the parties' compliance with the Tunney Act. Any other conclusion would diminish the effectiveness of the Act and the Court's inquiry thereunder. Reinforcing this view is the fact that, with the exception of subsection (h),*fn7 each subsection of the Tunney Act involves the Court at some level.*fn8 Thus, given the structure of the Tunney Act, the duties imposed upon the Court, and the persistent involvement of the Court at every stage of the Tunney Act process, the Court deems it appropriate and necessary, prior to its evaluation of the public interest, to assess whether the parties have satisfied their obligations under the Act.

B. Subsection (b): Determinative Documents, Competitive Impact Statement, and Publication ...

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