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News Release
January 29, 2002
CONTACT: David Fish
(202) 289-8928

DOJ Flubbed Analysis of Microsoft Settlement
Eisenach & Lenard File "Tunney Act" Comments Urging Breakup

WASHINGTON, D.C. - In detailed comments presented to the Department of Justice, two Progress & Freedom Foundation experts are severely criticizing the government’s handling of the proposed Microsoft anti-trust settlement and urging further consideration of tougher remedies, including a breakup of the software giant. Submitted under the Tunney Act, which requires a judge to rule that anti-trust settlements are in the public interest, their 31-page document will be read by the judge in charge of the case.

“The [Tunney Act] clearly requires, and good public policy demands, an ‘evaluation’ of the proposed remedy and major alternatives to it,” write PFF President Jeffrey A. Eisenach and Vice President for Research Thomas M. Lenard. “The DOJ has produced no real analysis of the relative merits of alternative forms of relief to guide the District Court in deciding whether to approve the Proposed Final Judgment…[DOJ] fails by a wide margin to meet the standards required of analyses of regulatory proposals…

“Accordingly, the District Court should not accept the Proposed Final Judgment, but should, instead, expand its hearing on the Litigating States Proposal to include the full range of major alternatives,” they conclude. Those alternatives include the PFJ, proposals by litigating states and structural remedies, including the ‘vertical-divestiture’ remedy initially adopted by the Court and Lenard’s ‘hybrid’ proposal.

“The Competitive Impact Statement [the Justice Department’s assessment of the proposed settlement] claims the PFJ ‘will eliminate Microsoft’s illegal practices, prevent recurrence of the same or similar practices, and restore the competitive threat that middleware products posed prior to Microsoft’s unlawful undertaking’,” write Eisenach and Lenard. “But the CIS presents virtually no analysis to support this claim.

“The PFJ does not even succeed in [the] minimal goal – of creating the conditions under which the Netscape browser could have competed without being subject to Microsoft’s exclusionary practices,” they continue. “Indeed, the PFJ specifically permits many of the exclusionary practices in which Microsoft engaged.”

Eisenach and Lenard have led the Progress & Freedom Foundation’s research on antitrust issues in hi-tech industries. Both are Ph.D. economists with broad experience in and out of government. The Foundation has issued a number of studies on the Microsoft case, applying a traditional economic approach to evaluate the issues and potential remedies.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation