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Courts & The Administrative State

WWS 521 Domestic Politics Charles Cameron Professor of Politics and Public Affairs Woodrow Wilson School of Public and International Affairs Princeton University

Many of the slides used here are actual or modified slides created and copyrighted by Professor Daniel Diermeier.

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Introduction to the Administrative State Rule of Law in the Administrative State Pivots & Proposers The Microsoft Case

modest police powers .Rise of the Administrative State     Familiar story – hardly needs to be told Late 19th century Federal gov‟t‟s major expenditure: pensions for Civil War widows & orphans State & local gov‟ts primary.

Transformation  Role of War & Crises  WWI. Depression. WWI Almost unimaginable transformation of the powers of the federal gov‟t Growth of a vast bureaucracy Relative eclipse of state gov‟t Huge increase in the importance of federal courts   Results:     Why? .

Rule of Law in the Administrative State .

Constitutional Crisis  Role of Bureaucracy in the Constitution  None  Dilemma: How to create democratic accountability (and competence) in a new branch of gov‟t  A Need to improvise a missing portion of fundamental .

the DC Circuit)  Thus. expansion of federal judicial authority .A Solution (Of Sorts)  Administrative Procedures Act (1946)  Tries to bring order to improvised FDR improvisations  Emphasis upon procedures    Agencies can issue regulations with the force of law IF they follow the correct procedures Oversight of agencies by federal courts (esp.

Analyzing Agencies & Courts .

3. issuing regs Court reviews regs Congress may pass law 1. 5. President may veto bill Veto pivot over-rides or sustains .Basic Tool: Pivot Model  1. Important role of committees w/ gate-keeping 4. Sequence of Play Agency (= President [but see next week]) moves first. 2.

use backward induction up the game tree [like agendas] .How to Analyze This?   Use open & closed rule analysis [like before] Start at end.

An Example .

A Critical Issue: What Will the Court Do?    Must see if agency followed proper procedure Possible check of substance in light of legislation A pronounced tendency for Rep judges to rule “conservatively”. Principal-Agent analysis within circuits. and from Supreme Court [can‟t get too far out] . Dems “liberally”   What this means depends on who controls the bureaucracy + possible Congressional action But.

Judge Coffin and the Drug Company .

Microsoft Case .

browser) products are separate products  The party imposing the tie has enough market power in the tying product market to force the purchase of the tied product.e. Section 2 prohibits unlawful monopoly.Microsoft‟s Antitrust Case    In 1997 the U.S.  A complicating issue is the aspect of “leveraging” (just getting a better competitive position is not sufficient for a violation) .  A “not insubstantial “ amount of commerce in the tied product is affected. The DOJ must show that: Microsoft has monopoly power. Section 1 prohibits “tying” (usually a per se violation) provided that tying (i. and that  Microsoft willfully acquired or maintained power through anticompetitive acts. Department of Justice (DOJ) files a civil antitrust case against Microsoft  Initially the case was limited to a violation of the 1994 Consent Agreement between DOJ and Microsoft .e. but later broadened  DOJs case was based on section 1 and 2 of the Sherman Act. Windows) and tied (i.

 Files appeal .The District Court Judgment In the Fall of 1999. Judge Jackson issued his Rulings of Fact  damaging findings and harsh condemnation of Microsoft  among other things Microsoft is found a monopoly . Judge Jackson approves the submitted remedies by DOJ and state attorney generals  Main proposal is to break up Microsoft into two companies (operating system and everything else) plus temporary conduct remedies  Microsoft vows to fight on without any admission of guilt.may lead to private anti-trust suits  Rulings of Fact are hard to overturn on appeal  Microsoft‟s stock-price hardly moved  In June 2000.

Netscape.…)  Use of multiple arenas     DOJ (“proposer” of lawsuit) Senate committee (hearings. oversight of DOJ) Courts (testimony) Public opinion (public statements.”  Informational lobbying   . Sun. if the government did anything or not was obviously up to them. media campaign. AOL. Netscape sponsors 222-page white paper that forms basis of DOJ‟s suit.The Nonmarket Strategy of M‟s Rivals  Microsoft’s rivals used the nonmarket environment to erode Microsoft’s competitive advantage  Broad coalition of nonmarket rivals (IBM. After that. Roberta Katz. former Netscape‟s General Councel:  “My whole approach was to get to the point where they really understood what was going on. Bill Gates in “The Simpsons”) In the summer of 1996.

Using Public Agents in Legal Strategies President Attorney General Congress Courts .

”  No screening of internal memos for antitrust compliance (in contrast to Intel!)  Some of the most damning evidence against Microsoft are its own emails and memos (even after trial began!)  E. public opinion) No integration of court strategy with other strategy components. . 1997 James Allchin (senior exec in charge of Windows) suggests that Microsoft should “leverage Windows more.The Nonmarket Strategy of Microsoft  Microsoft underestimated amount of threat  Gates in June 1995: “Antitrust Thing will blow over.g. doctored video  Many missteps in court room (credibility!)    No effective counterstrategy in other arenas (hearings. in Jan.”  Microsoft pursues very aggressive strategy without any admission of guilt   Makes settlement unlikely Eliminates all remedies that rely on cooperation Gates‟ testimony.

and media strategy Political Strategy  Key objective: change in presidency  Campaign contributions   In 2000.3 million to both parties (making it the second-largest political donor after AT&T) Microsoft political donations increased 20-fold over 1996 Bush Campaign Congress secretly hired Ralph Reed‟s consulting firm during the Bush presidential campaign (Reed served as a senior advisor to the campaign) as well as other top lobbyists (for about $4 Mill. Microsoft gives $4.Microsoft Strategic Shift   Integration of political.)  Lobbying    . legal.

)  Donated millions of dollars to think tanks including Americans for Tax Reform and the Cato Institute  Funded two new groups: the Association for Competitive Technology and the Freedom to Innovate Network.Microsoft‟s Media Strategy Media Strategy  Commissioned polls showing that most Americans oppose the breakup of Microsoft  Invested in heavy advertising to show that Microsoft is a good corporate citizen (the Bill and Steve commercials showing how much software they are giving away for free to school. both of whom release pro-Microsoft research. etc. .

Microsoft‟s Legal Strategy Legal Strategy  Microsoft launched every appeal possible even if legal merit is questionable (particularly the appeals to the Supreme Court)  All of these appeals and delays gave it valuable time to make the other parts of its strategy work .

The Appeals Court Decision  In 2001.  the Court of Appeal held that these comments did not affect the judge‟s finding of fact or conclusions of law. U. Court of Appeals issued the following findings:     Monopoly finding in operating system market upheld No monopoly finding in the browser market Returned the issue of “tying” to the District Court changing the legal standard to be applied (no discussion of the merits)  From per se to rule of reason Disqualified trial judge for interviews with media and offensive comments about MS.S. .

2002 the new district court judge Colleen Kollar-Kotelly upholds the settlement (except for minor changes)   Microsoft has already complied with the 2001 settlement Microsoft immediately implements minor changes required by judge . nine states (including Connecticut. 2001. On November 6. California. 2001.The Microsoft Case – Outcome  On September 6. the DOJ announced that it had reached a settlement with Microsoft. the DOJ announced:   The DOJ was no longer seeking a breakup of Microsoft. and The DOJ was no longer pursuing its „tying‟ claim against Microsoft (the strongest claim and most concerning to competitors)    On November 1. and Utah) reject the DOJ-MS agreement On November 1. 2001.

New Challenges    The EU antitrust department has started MS‟s business practices including the XP system Microsoft is eager to settle Future of private antitrust suits and future challenges is uncertain .