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E-mail Print Why State Antitrust Enforcement is Bad Policy
Action Alerts
By: Helen Chaney
7.16.2001

Action Alerts


Bill Lockyer, Attorney General of California, has requested—and the Assembly and Senate have supported—a roughly 400-percent budget increase for his office to prosecute antitrust complaints against the high-tech sector. This measure, if passed, will harm consumers by arming a campaign to capture private benefits at the public’s expense.

Both houses of the California legislature have recently passed separate budget bills to boost funding for antitrust enforcement against the state’s tech industry by $3.7 million. A final vote on the budget legislation is expected within the coming weeks. Meanwhile, a movement is underway in Washington, D.C. that could severely limit the power of states to enforce antitrust law.

Late last month, House Judiciary Committee Chairman Jim Sensenbrenner (R-Wis.) introduced a bill that would create an antitrust modernization commission to study and, after three years, make recommendations on what role state attorneys general should have in enforcing antitrust laws. The best policy would strip state attorneys general of the power to bring antitrust suits altogether.

Antitrust enforcement by state attorneys general is a recipe for irresponsible state action. Many state attorneys general are aspiring politicians who hardly ever let principle stand between them and higher office. And all too often, they disregard the economic health of the nation in favor of headline-grabbing cases with enough superficial appeal to raise their visibility.

But worst of all, they free ride on misguided federal anti-trust suits, complicating their resolution and racking up countless dollars in litigation fees, all at the consumer’s expense. For example, the state attorneys general were the main obstacle to a settlement when Chicago Judge Richard Posner was working to broker an agreement between Microsoft and the Department of Justice (DOJ) last year. Both Microsoft and the feds came to a provisional agreement. But the group of state attorneys general, who were allied with the DOJ, refused to accept the deal.

Americans have paid at least $35 million in costs at the federal and state levels for the ongoing antitrust enforcement against Microsoft. By its own estimate, the California Attorney General’s office has already put in 4,422 hours of work on the case, costing Californians a total of $1.4 million.

It’s difficult to see how the government’s case against Microsoft could benefit consumers. Consider the outcome of the billion-dollar tobacco settlement between the 46 states and the major cigarette companies. Under the settlement, tobacco companies will have to pay the states $246 billion in damages, money that is supposed to be used as reimbursement for the cost of treating smoking-related illnesses.

But many states, including California, are using the funds for totally unrelated purposes. Los Angeles administrators have said that they will be using the settlement money to improve the sidewalks and curbs around town. And San Diego County has set aside tobacco money to build a new library.

New libraries and sidewalks won’t help save the thinning ranks of smokers from cancer or heart disease. Then again, maybe the state’s case against the tobacco companies had nothing to do with protecting public health, as the state attorneys general claimed, but instead was aimed at filling up state coffers.

Lawmakers ought to protect the interests of consumers by putting an end to the irresponsible use of antitrust law by the state attorneys general. Governor Gray Davis should bear this in mind when he considers the budget increase for state high-tech antitrust enforcement. And Congress can contribute to this goal by reconsidering the authority of state attorneys to bring anti-trust suits.

Doing so will allow the American economy to progress forward, less encumbered by the negative effects of an overzealous antitrust regime that would be better occupied with dismantling the postal and education monopolies.

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