The Obama Administration is making good on a campaign promise to stepup antitrust enforcement. The Justice department’s top antitrustenforcement official, Christine Varney, said in a speech Monday morningthat the DoJ would be setting aside a policy interpretation developedin the previous Bush Administration.
The interpretation was set out last September in a report that directed the government to avoid interfering in “the rough and tumble of beneficial competition.” Rather, regulatory authorities would have to find that a certain business practice’s harm to competition was “substantially disproportionate to any associated pro-competitive” benefit.
Speaking at an event sponsored by the Center for American Progress, Varney said the Obama administration’s approach to antitrust will be based on theunderstanding that the marketplace alone should not dictate what isfair competition.
Nor should the courts use this Bush-era policy as support for its opinions, she added.
Varney took pains not to single out any particular company in herspeech; however, she suggested that the financial crisis of 2008 mighthave been averted if antitrust enforcement had been more rigorous.
Despite the lack of specifics, top players in all industries are no doubt privately assessing which behaviors and actions might come under DoJ scrutiny.
In the tech sector, those top players include industry behemoths Microsoftand Google, Don M. Tellock, a partner with SchiffHardin, told theE-Commerce times.
“The Obama Justice Department is putting techindustry leaders on notice that the era of relaxed antitrustenforcement under the previous administration is officially over,” Tellock said.
For Google and others, it means actions that could “decreasemarket competition, create barriers to market entry, impact pricing,or otherwise could be considered monopolistic will be scrutinized muchmore closely than in the recent past,” he added.
Indeed, the tech industry has already gotten a taste of this approach;the Obama administration recently opened antitrust inquiries concerning Google on two fronts. One is a Department of Justiceinquiry into a settlement Google recently negotiated withrepresentatives of book publishers and authors to make their worksavailable online. The other is an FTC inquiry into whetherGoogle and Apple violated the Clayton Act by seating the same two people — Google CEO Eric Schmidt and Genentech CEO Arthur Levinson — on both of their boards of directors.
More Private Suits
The DoJ’s new position will embolden private plaintiffs and theirlawyers to bring more lawsuits, Tellock noted.
We can “expect an uptick of smaller companies bringing theircomplaints to the Justice Department with allegations of improperactivities by the larger tech companies — who, even though quite carefulin their dealings, will find themselves hauled into court,” said Raymond VanDyke, a partner with Merchant & Gould.
“Similar to the Clinton years, we can expect a slew of marketdominance lawsuits against all of the biggest tech companies, and wehave recently seen other saber-rattling in the Federal TradeCommission about interlocking Boards,” he told the E-Commerce Times.
“Based on Ms. Varney’s pronouncements, in this policy shift, Section 2of the Sherman Act will be retooled to attack companies that engage inany anticompetitive behavior to attain or retain market dominance,” said Van Dyke.
With respect to pending litigation, the DoJ’s new stance may not be as apparent.The Supreme Court has made a number of antitrust rulings that lowercourts must follow, noted Stacey Anne Mahoney, a litigation partner withGibson, Dunn & Crutcher’s antitrust and trade regulation practicegroup in New York.
“These have come out in favor in the defenseposition and narrowed liability,” Mahoney told the E-Commerce Times.
The practical — and most immediate — impact will be on the inquiries and investigations that DoJ and the Federal Trade Commission decide to launch.
“It is likely there willbe more merger deals challenged,” said Mahoney, adding that Varney “specifically referenced vertical arrangements.”
More than likely, the Obama Administration’s new approach to antitrustenforcement and interpretation is going to draw the scrutiny ofpolitical opponents.
The Obama administration is right to step up and reinvigorate antitrust enforcement, said Larry Klayman, former trial attorney in the antitrust division of the DoJ and founder of Judicial Watch and Freedom Watch.
“Under the Bushes and even Clinton, it was allowed to wane,” he told the E-Commerce Times.
However, the new antitrust approach is at odds with certain other Obama economic policies, noted Klayman.
“If you are goingto support free markets and competition,” he said, policymakers have to beconsistent.”