February 8, 2005
(Letter to all Members of the Joint Legislative Audit and Review Commission)
Dear ______________:
In 1995, the Joint Legislative Audit and Review Commission (the "Commission") issued a report entitled "Review of the Virginia State Bar." Among the subjects covered was "Expansion of Virginia State Bar commercial activities raises concerns" (at pp 82-91). The Commission cautioned that the involvement of the Virginia State Bar (the "Bar") in certain commercial products and services "places other vendors at a competitive disadvantage due to the mandatory nature of the Bar's membership."
Despite these admonitions, at its October 15, 2004 meeting, the Virginia State Bar Council voted to proceed with a plan to purchase an online legal research system and to provide legal research services at no cost to every member of the Bar. Shortly after that meeting, the Bar issued an RFP setting out the details of the system, and seeking proposals from vendors to provide such a system. The system as described in the RFP would compete directly with the legal research system we produce. Bids are closed, finalists have been determined, and the Bar intends to enter into a contract with the winning bidder on February 21, 2005.
Our company, Geronimo, believed then and believes now that such an arrangement would violate state and federal antitrust laws. Prior to the deadline in the RFP for bids to be received, our attorney wrote the VSB to explain this antitrust violation and ask the VSB to withdraw the RFP (copy enclosed).
Seven weeks later, we received a response from the Virginia Attorney General's office, expressing the opinion that the Bar's plans do not violate the antitrust laws (copy enclosed). We disagree with the findings of the Attorney General, for the reasons set out below.
For fourteen years, Geronimo has produced a Virginia-specific computerized legal research system, "CaseFinder®," widely used throughout the Commonwealth. It is our only product; Virginia is our only market. CaseFinder provides an economical alternative for Virginia attorneys who do not need access to the huge databases contained in Lexis and WestLaw. Those giants own the "premium" market segment; we compete with others in a "Virginia-specific" segment of the market.
The Bar intends to purchase one legal research system from one supplier and make that system available at no charge to every Bar member. The proposed system will include fewer databases than Lexis or WestLaw, and thus will not be competitive in the premium market segment. However, the proposed system will contain almost every database that is in CaseFinder and will be in direct competition in the Virginia-specific market segment.
But there will be no "competition." The Bar's plan eliminates competition. Virtually every potential purchaser in the Virginia-specific segment of the market is a member of the Bar, so every one of them will receive the Bar's research system for free. CaseFinder is a good product, proven in a competitive marketplace for fourteen years, but neither Geronimo, nor anyone else, can compete with Zero.
Virginia attorneys are not regulated by any government agency; they regulate and govern themselves through the Virginia State Bar, an unincorporated association. When the General Assembly and Supreme Court created the Virginia State Bar in 1938, they did not appoint any government officers to run the Bar. Rather, the Bar was created as a democratic and representative association in which sovereignty was vested in the individual members.
Members of the Bar elect a representative body, the Bar Council, to whom they delegate their authority. They are bound by the decisions made by a majority of those representatives. When the Bar Council acts, it can only exercise the authority that the Bar members have delegated to it; it is exactly the same as if all 25,000 members of the Bar were sitting in one room, acting in concert.
As explained in greater detail in our lawyer's letter to the Bar, the goal of the antitrust laws is to promote competition. When all of the buyers in a market, who ordinarily compete with one another, band together to buy collectively from one supplier at a set price, other suppliers are unable to compete and competition is destroyed. As the U.S. Supreme Court has already held, the Bar constitutes a collection of lawyers who compete with one another, and any attempt to collectively fix prices is illegal.
The Commission warned in 1995 that "the involvement of the Virginia State Bar in certain commercial products and services places other vendors at a competitive disadvantage due to the mandatory nature of the Bar's membership." We urge the Commission to take what steps it can to alleviate the harm that may follow from the Bar's refusal to heed that warning. If we can assist the Commission in any way, do not hesitate to call upon us.
Sincerely,
O. R. Armstrong
President
Elizabeth J. Oyster
Vice-President