Overdrive, page 7
Bob Lockwood, legislative aide to Hatch, said he drafted the letter sent to the FTC. “All we cared about was a decisive vote one way or another,” Lockwood said. “We had never been asked by Novell to write the letter. I had no contact with Novell.”
But several sources confirmed that Pitofsky also had a hand in the Hatch letter. Pitofsky faxed Lockwood a copy of the Metzenbaum letter before it was sent, and urged Lock- wood to rework the letter and send it to the FTC over Hatch’s signature. These sources saw the fax that was sent to Lock- wood.
The stage was now set for the climactic meeting of the FTC on the Microsoft case. It turned out to be anything but. Once again, it split 2-2 on whether to take action. The vote breakdown was the same as in February, with Steiger and Yao voting in favor of an injunction. A second vote at the end of the meeting again split 2-2 on a motion by Owen, Microsoft’s strongest supporter on the commission, to close the Microsoft investigation.
Owen said later in an interview:
“For me, a telling argument was this: This is an industry where people have to look over their shoulders all the time and be prepared to meet the competition on any day if they are to stay in business. I did a lot of personal research. It’s a very different industry from a lot of others we see, and we must look at the case in that context.” The FTC staff would later put the following in the public record of that meeting:
At a closed meeting on July 21, 1993, Chairman Steiger moved that the Commission—having reason to believe that Microsoft Corporation has violated Section 5 of the Federal Trade Commission Act and Section 3 of the Clayton Act—issue an administrative complaint against Microsoft Corporation. The motion failed for lack of a majority. For the record, Chairman Steiger and Commissioner Yao voted in the affirmative on the motion. Commissioner Owen and Commissioner Azcuenaga voted in the negative; and Commissioner Starek was recused.
A week after the FTC vote, the Justice Department’s Antitrust Division filed a formal request with the FTC’s Bureau of Competition to examine its Microsoft files. Bingaman made courtesy phone calls to each of the commissioners to explain why she wanted the files. Owen accused Bingaman of wanting the case for reasons of publicity. In a confidential memo to the other commissioners, Owen wrote that efforts to “second- guess the commission’s decision should be resisted at all costs, as matter of institutional integrity.”
Steptoe, director of the Bureau of Competition, was eager to hand off the case to Justice. On July 28, she sent a memo to the commissioners, advising them that she planned to turn the files over to Bingaman within 24 hours unless the commission voted to stop her. Commissioner Owen tried to force a vote but could not muster a second. On July 29, as Steptoe promised, the Bureau of Competition officially gave custody of the huge volume of Microsoft files to Justice Department lawyers. Except in price-fixing cases, the agency had never before surrendered a case to Justice.
The Clinton administration now had a sticky and sensitive problem on its hands. An antitrust action against Microsoft by the Justice Department trustbusters could damage one of the nation’s high-tech stars, a key player in the global economy.
In an interview, Commissioner Owen was highly critical of Steptoe’s actions. “At some point, one wonders if taxpayer money is being well spent by constantly looking and looking and looking and hoping you will one day find something.... This was gross abuse of government power. This business of duplicating what we did after 38 months of investigation was unheard of, absolutely unheard of.”
Commissioner Starek would not say how he would have voted had he not recused himself from the case, but he was not surprised that the case ended up at the Justice Department after the second vote. “Perhaps even a Republican administration would have done the same thing,” he said, “but I doubt it, because it was unprecedented. But we did have this 2-2 vote that folks on both sides felt strongly about; and there was a kind of clamor for some resolution. But I didn’t view this as a deadlock. It was a decision not to take action. It was a refusal to vote out a law-enforcement action. I believe that if the vote of the commission had been 3-2 not to take action, then Justice would never have gotten involved. But because this was portrayed as a deadlock, there was this clamor that, ‘Oh my God, there’s been no resolution of this case.’ I would argue that there was a resolution of the case. There was no consensus to take a law-enforcement action.”
In an interview, Bingaman agreed that she would never have asked for the case had a majority of the commissioners voted to take enforcement action against Microsoft. “We viewed it as a deadlock at the FTC, a 2-2 vote in a very important case that appeared possibly to have merit; possibly not. It wasn’t obvious where the facts were. It was obvious it was an important area of the economy. It seemed something that we should look at given this tie vote. If there had been a three-way vote, no way. We would have never touched it.”
Novell and other companies that had been working with the FTC on the Microsoft case were, of course, delighted that the case had been moved to Justice. But most nationally recognized antitrust attorneys considered Bingaman’s decision to be unfair to Microsoft. “It was unfortunate,” said Phil Proger, an antitrust attorney in D.C. who knew Bingaman. “While there is no legal requirement that she not do it, if you are going to have two federal antitrust enforcement agencies with a procedure under which they clear to one or the other, once that clearance is done, that’s it. If that agency fails to prosecute, it’s a little unfair to the parties to have a second investigation by the second agency. It’s not a question of due process. It’s a question of fairness. It just wasn’t fair to Microsoft.”
That clearance procedure dates back to the 1940s, when a memorandum of understanding was issued on how the FTC and Justice Department should divide cases. When a potential case is brought to the attention of the two agencies, a committee with representatives from both agencies decides where it goes.
Bingaman’s decision to take the Microsoft case came after a meeting with several people, including someone who worked for the Office of Science and Technology at the White House. Soon after the July 21 stalemate, Braden, the former Justice and FTC attorney who had urged the commissioners by letter not to vote but to give the Microsoft case to Justice instead, went to visit her friend Bingaman.
“You should use this [tie vote at FTC] to seize jurisdiction,” Braden told Bingaman. “It’s a disgrace that the commission has taken this much time, and the staff is recommending action.”
Bingaman and Braden had known each other for years, since Braden’s brother-in-law tried a famous uranium antitrust case in which Bingaman was involved. There are few female antitrust trial lawyers, so Braden and Bingaman had that unusual status in common. They also saw each other occasionally around Washington because of their husbands. Bingaman was married to a U.S. senator, and Braden’s husband worked for many years for Senator Ted Kennedy. After she was nominated by Clinton, Bingaman met with a number of people, including Braden, to pick their brains about what she should do as head of the Antitrust Division.
“If the FTC did have a case, and staff said they did,” said Braden, explaining why she went to see Bingaman to urge her to take the Microsoft case, “then it seemed to me that someone ought to look at this thing and either make a cut and say, ‘There’s nothing here, it can’t be prosecuted,’ and let Microsoft walk off. They are hard competitors, they may be a tough son of a bitch, we may not like them, but that’s life, that’s business. But at least belly up to the bar and make a cut. Bring in the resources of the people within A1 Gore’s task force and bring in the trade people and look at this in a multidimensional way and use your muscle.”
In addition to talking to Bingaman about the Microsoft case, Braden talked with Robert Litan, who was a partner in the same Washington firm as Bingaman and had known her for about 10 years. A fellow with the Brookings Institute, Litan had a background in law and economics. Braden knew that he was about to go to work for Bingaman, even though the announcement had not yet been made. (When Litan did join the Antitrust Division, Bingaman placed him in charge of overseeing the Microsoft investigation.)
Braden knew Litan because he had worked for her brother- in-law years earlier. “I talked to him about what I saw in the Microsoft case,” Braden said. “He’s a policy guy. He would understand the policy implications of what I was suggesting. And he did.”
Next, Braden called a friend of hers at the White House who worked in the Office of Science and Technology. “This is an atrocity,” she told him. “It’s government not being good government. To bring Microsoft in and go through all this and have the staff say there's a problem and the commission not be able to figure out what’s on is ridiculous!”
The friend in the White House told Braden he didn’t know much about the case. Braden told him to go talk with Binga- man and urge her to take the case because of the policy issues involved.
“I’m sure that’s why she took the case,” Braden said. “It was a confluence of events—Anne’s instincts, Litan’s influence, and this guy from the White House.”
On Friday, August 20, the Justice Department officially notified Microsoft that it was proceeding with the case. This followed a 4-0 vote by the FTC not to pursue legal or administrative action against the company, clearing the way for the matter to be handed off to Justice and ending the commission’s three-year investigation. The letter to Microsoft’s Neukom stated:
The Commission has conducted an investigation involving possible violations of the Federal Trade Commission Act by Microsoft Corporation. Upon further review of this matter, it now appears that no further action is warranted by the Commission at this time. Accordingly, the investigation has been closed. This action is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred.
Microsoft’s fate was now in the hands of Bingaman, a 50- year-old trial lawyer and friend of Hillary Clinton, whose hero was one of history’s most famous trustbusters.
No sooner had Anne Kovacovich Bingaman moved into her new office in the Antitrust Division on the third floor of the U.S. Department of Justice building than the office décor changed. It was hard to miss the symbolism. Down came 20- foot drapes; in came sunlight. On the wall of the hallway just outside her office, Bingaman hung a drawing of Teddy Roosevelt. The drawing, a gift, depicted Roosevelt in hunting garb complete with rifle, stalking the robber barons of the coal, cattle, and oil industries. The caption under the drawing said: “No Lack of Big Game.” Among the big game Roosevelt bagged just after the turn of the century was John D. Rockefeller.
Roosevelt was one of Bingaman’s heroes. Although he was called “the trustbuster,” Roosevelt contended he wanted only to regulate and not “bust” the trusts. Nevertheless, during his presidency, the government filed suits against more than 40 corporations. It ended Rockefeller’s oil trust, James B. Duke’s tobacco trust, and J. P. Morgan’s railroad trust.
Another of her heroes was Thurman Arnold, the legendary Depression-era trustbuster who was Franklin Roosevelt’s assistant attorney general for antitrust. New Dealer Arnold took over the division when it had fewer than 35 lawyers and within five years had built it up to 144 lawyers in 1944. He was one of the founding partners in the Washington firm of Arnold and Porter, which was representing Novell in the Microsoft case.
Bingaman, the Clinton administration’s antitrust gunslinger, was determined to take on a new gang of robber barons after 12 years of Republican laissez-faire inaction. She came to the job with a reputation as a skilled and tenacious litigator, a plaintiff’s attorney who represented the people and companies that sue corporations for antitrust violations. Most big-time antitrust lawyers make their living defending large corporations against antitrust accusations. That she would take the Microsoft case after the FTC deadlock was very much the approach of a plaintiff’s attorney.
The antitrust lawyer who had set her legal gunsights on one of the world’s most powerful men was born out West, in Jerome, Arizona, a small mining town of a few thousand people. She grew up in Phoenix, the daughter of a grocer. One of her childhood heroes was Adlai Stevenson. Bingaman told the New York Times that she took it hard when Stevenson ran for president against Eisenhower and lost.
“Honest to God, I was nine years old when he lost and I cried for days. I didn’t even know what a lawyer did, but I knew Adlai Stevenson was a lawyer so I wanted to be a lawyer.”
She attended Stanford and went to law school there, graduating in 1968. One of her law professors was William Baxter, often called the intellectual father of President Reagan’s antitrust policy. As his pupil would years later, Baxter headed the Antitrust Division at the Justice Department during the first three years of the Reagan administration. Baxter stressed economic analysis in developing antitrust policy.
Bingaman met her future husband, Jeff, in law school. After Stanford, they moved to Abuquerque, New Mexico, where she taught at the University of New Mexico, and Jeff Bingaman was elected the state’s attorney general. Later, as a lawyer in private practice in New Mexico, she was involved in a lawsuit that would become well known outside of antitrust legal circles. She represented a uranium-processing company, United Nuclear Corporation, that alleged the existence of an international uranium cartel. When the defendants failed to produce witnesses and documents that were hidden abroad, a federal judge awarded Bingaman’s clients $1 billion.
One of Bingaman’s early political interests was women’s rights, and she wrote one of the few books published on the Equal Rights Amendment. She led a coalition that successfully pushed for the adoption of New Mexico’s Equal Rights Amendment, and she helped open the New Mexico Military Institute to female cadets. Bingaman also served as general counsel to Planned Parenthood.
When Jeff Bingaman was elected to the U.S. Senate in 1982, Bingaman and their son followed him to Washington, where she eventually became a partner in the Atlanta-based firm of Powell Goldstein Frazer & Murphy, Hinguman won a multimillion-dollar class action suit brought against Bell South Corporation by customers who complained that the company monopolized the business of installing and repairing telephone wiring.
As the wife of a senator, Bingaman raised millions of dollars for his campaign and hosted Washington parties. The outgoing Bingaman, known for her down-home style, was well connected in Democratic circles and among lawyers and lobbyists. She and Hillary Clinton had met three years before her appointment to the Justice Department while working for the Children’s Defense Fund.
Bingaman was named by President Clinton to head the Justice Department’s Antitrust Division in late April 1993. Following Senate confirmation, she moved into her office about a month before the FTC took its second vote on the Microsoft case. Her selection as the nation’s top enforcer of antitrust law came as something of a surprise to Washington insiders. Her name first began circulating as a possible candidate during the winter after Clinton’s election. But few knew much about her. She was not part of the old-boy network in Washington, and although she was a respected and tenacious litigator, she was not an antitrust expert. The favorite, at least among those inside the beltway, had been Robert Pitofsky. Like Pitofsky, Bingaman was a member of the Clinton transition team and lobbied for the antitrust post. Long before she was ever nominated for the job, Bingaman went so far as to send faxes denying rumors that she had employed an illegal alien—an issue that had sunk other Clinton appointees.
Once on the job, Bingaman soon became known within the Antitrust Division as a note-taker and hall-walker. She threw pool parties for her staff and gave her unlisted phone number to the division’s lawyers.
But by the time Clinton was elected, the Antitrust Division was only a shadow of its former self. Bingaman described the division as having been “eviscerated” during the Reagan administrations, the years of free-market policies. Monopoly investigations fell from 20 to 5 from 1979 to 1991. The Antitrust Division had approximately 300 lawyers when Bingaman took over, some 100 fewer than in 1980 when Reagan was swept into office. Bingaman moved quickly to rebuild and reenergize the division. She brought on board a top legal team of deputies that drew praise even from her former professor, Baxter. Two key hires were deputies Litan and Richard Gilbert, both of whom were assigned to the Microsoft case. Gilbert was made deputy attorney general of economics in the division. He had a master’s degree in electrical engineering from Cornell University and worked on semiconductor technology while in the Navy. At Stanford, Gilbert received his Ph.D. in engineering economic systems.
While Litan was to oversee the Microsoft investigation, Gilbert’s job was to analyze the economic ramifications of the case. Those ramifications were many, and significant. The danger in taking action against Microsoft was that it could damage the highly competitive software industry, still in its infancy. When Clinton campaigned for president, he and Gore had promised to improve U.S. competitiveness by helping and promoting the country’s high-tech industries, of which Microsoft was arguably the brightest star. Hardly a day went by after Clinton took office that someone in his administration was not preaching the gospel of high technology. When Justice took over the FTC’s investigation of Microsoft, there were strong differences of opinion within the administration as to whether it made sense to go after Microsoft and possibly dim that light.
Not long after she began her new job at the Justice Department, Bingaman referred in an interview to the drawing that hung on the hallway wall outside her office. “I’ve got that cute little cartoon out there of Teddy Roosevelt in 1905 or 1908, shooting down three big cases. This division was started with the Standard Oil case, breaking up the Standard Oil trust. This division has a long and incredibly impressive history in major civil conduct cases that affect a major area of the economy.” And Microsoft, she went on to say, certainly affected a major segment of the economy.
