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The Obama Administration is making good on a campaign promise to step up antitrust enforcement. The Justice department's top antitrust enforcement official, Christine Varney, said in a speech Monday morning that the DoJ would be setting aside a policy interpretation developed in 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 the understanding that the marketplace alone should not dictate what is fair 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 her speech; however, she suggested that the financial crisis of 2008 might have 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.
Already Started
In the tech sector, those top players include industry behemoths Microsoft (Nasdaq: MSFT) and Google (Nasdaq: GOOG), Don M. Tellock, a partner with SchiffHardin, told the E-Commerce times.
"The Obama Justice Department is putting tech industry leaders on notice that the era of relaxed antitrust enforcement under the previous administration is officially over," Tellock said.
For Google and others, it means actions that could "decrease market competition, create barriers to market entry, impact pricing, or otherwise could be considered monopolistic will be scrutinized much more 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 Justice inquiry into a settlement Google recently negotiated with representatives of book publishers and authors to make their works available online. The other is an FTC inquiry into whether Google and Apple (Nasdaq: AAPL) 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 their lawyers to bring more lawsuits, Tellock noted.
We can "expect an uptick of smaller companies bringing their complaints to the Justice Department with allegations of improper activities by the larger tech companies -- who, even though quite careful in their dealings, will find themselves hauled into court," said Raymond Van Dyke, a partner with Merchant & Gould.
"Similar to the Clinton years, we can expect a slew of market dominance lawsuits against all of the biggest tech companies, and we have recently seen other saber-rattling in the Federal Trade Commission about interlocking Boards," he told the E-Commerce Times.
"Based on Ms. Varney's pronouncements, in this policy shift, Section 2 of the Sherman Act will be retooled to attack companies that engage in any 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 lower courts must follow, noted Stacey Anne Mahoney, a litigation partner with Gibson, Dunn & Crutcher's antitrust and trade regulation practice group in New York.
"These have come out in favor in the defense position 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 will be more merger deals challenged," said Mahoney, adding that Varney "specifically referenced vertical arrangements."
Political Angles
More than likely, the Obama Administration's new approach to antitrust enforcement and interpretation is going to draw the scrutiny of political 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 going
to support free markets and competition," he said, policymakers have to be
consistent."
