Consumer Bid Against Microsoft Tests Federal Antitrust Doctrine

October 22, 2001
Reprinted with permission from the Connecticut Law Tribune week of October 22, 2001, Thomas Scheffey
Connecticut's Supreme Court is ready to decide whether consumers have a right to sue Microsoft Corp. to recover "monopoly pricing" built into the cost of Windows 98.
 
The case of Andrew Vacco v. Microsoft is set to be argued Nov. 1, and will test a federal antitrust doctrine that has stymied monopoly pricing actions in the past.
 
Plaintiff Vacco, of Wallingford, Conn., bought a computer from Staples in 1999, and is seeking to make out a class action case for refunding the amount Microsoft charged due to its alleged monopoly in desktop operating systems. Vacco's case is backed by Connecticut Attorney General Richard Blumenthal.
 
Microsoft, represented by Day, Berry & Howard's James Sicilian in Hartford, Conn., and New York-based Sullivan & Cromwell, is backed by the Connecticut Business and Industry Association. It filed an amicus brief written by Blumenthal's former antitrust and unfair trade expert, Robert. M. Langer, now a partner in the Hartford offices of Wiggin & Dana.
 
Microsoft is defending its Windows' profits with a brick -- Illinois Brick v. Illinois, that is. In that 1977 U.S. Supreme Court case, the nation's high court determined that only "direct purchasers" could sue under the Clayton Antitrust Act.
 
The case arose when Illinois sued a group of concrete block manufacturers, alleging that collusive pricing forced the state to pay more for its buildings. The Supreme Court decided that direct purchasers, in this case the masonry contractors, were the only ones who could sue. To allow "indirect purchasers" like the state to sue would force courts to make difficult apportionment decisions. Potential plaintiffs at multiple levels of the distribution chain would squabble, alleging that all of the overcharge was absorbed at their level.
 
To avoid difficulties, the Supreme Court ruled that only original purchasers could assert a monopoly pricing claim.
 
Benjamin Solnit, of New Haven, Conn.'s Tyler, Cooper & Alcorn, is slated to argue Vacco's case before the state supreme court.
 
In an interview and in briefs, Solnit contended that Microsoft never sells Windows, but licenses it to computer original equipment manufacturers (OEMs) and to individual purchasers.
 
"Our first argument is there's no purchaser here, because Microsoft never sells the software," says Solnit. Microsoft, in its briefs, calls this "a play on words."
 
But the plaintiff's lawyer says that Vacco is indeed as close to a direct purchaser as any Windows customer. "If you need a direct transactional relationship with Microsoft to bring this case, guess what, we have it," says Solnit, "There's no one with a more direct one."
 
The plaintiff's appeal emphasizes that Connecticut's antitrust law specifically allows consumers to bring antitrust claims.
 
Solnit is quick to admit that in many other states, Microsoft has been sued for monopoly pricing, but successfully protected itself with the Illinois Brick doctrine. However, the actual language of C.G.S. §35-35 is unique, and expressly gives consumers the right to bring an antitrust claim. There was no such language in the 13 other states where businesses were unsuccessfully sued for monopoly pricing, so those decisions do not apply, Solnit says. Richard M. Bowerman and William H. Champlin III round out Vacco's team.
 
Microsoft, and the CBIA amicus brief, contend that Connecticut's legislature has never passed a law to repudiate the Illinois Brick doctrine. Both cite failed lobbying efforts by Blumenthal, in support of a statute expressly repealing that doctrine, as proof that it is in effect in Connecticut.
 
The Tyler Cooper team, in a reply brief, argues that legislative inaction is no proof of legislative intent. Other than the Superior Court decision by Judge Robert F. McWeeney which dismissed Vacco's claim last fall, no Connecticut court has considered the Illinois Brick issue. Inaction is inherently ambiguous, Vacco's lawyer say.
 
The trial judge ruled that Vacco couldn't use the Connecticut Unfair Trade Practices Act to revive an antitrust claim felled by Illinois Brick doctrine. But Vacco contends that CUTPA is a remedy that was intended from its inception to go beyond other consumer remedies, including antitrust: Indeed, "one of the differences between CUTPA and the federal FTC act is the provision in CUTPA of a private right of action for consumers."
 
The Microsoft team's oral advocate is David B. Tulchin, Sullivan & Cromwell's polished point man in its 1998 defense of antitrust and CUTPA claims in 1998 by Bristol Technology, of Danbury, Conn.
 
Tulchin's team won on antitrust grounds but was stung with CUTPA punitives of $1 million, set by U.S. District Judge Janet B. Hall. After a financial settlement prior to appeal, Microsoft persuaded the 2nd U.S. Circuit Court of Appeals to vacate Hall's CUTPA ruling.
 
In its briefs in the Vacco case, Microsoft characterized CUTPA-like claims as mere "creative pleading" that make "an end run around the policies allowing only direct purchasers to recover under the antitrust act."