Last Updated May 18, 2009 3:50 PM EDT
Financial services aside, there probably isn't a more tempting target for regulators than high tech companies, especially given their propensity for outsized mergers, the relatively important role of stock options in compensation packages (particularly for start-ups) and the increasingly dominant role IT plays in the lives of both individuals and businesses. Indeed, regulators would be remiss in failing to keep a close eye on players in such a crucial field; what executives fear is that they will go too far.
Scandals, including malfeasance at Lehman Brothers and the Madoff Ponzi scheme, have exacerbated public outrage over the roots of the current financial crisis, greasing the wheels for a new Administration eager to demonstrate its vigilance in these matters. Craig Carpenter, vice president of marketing at litigation support software vendor Recommind, told me this morning that "The economy has done what it has done, and there seems to be a need for blood to be spilled on the streets... There seems to be a green light on both sides of the Atlantic for more heads on spikes."
Christine Varney, the newly minted assistant attorney general in charge of the Department of Justice's antitrust division, said just last week that the agency will repeal a policy established under George W. Bush that "raises many hurdles to government antitrust enforcement."
The Federal Trade Commission also signaled that it will take a more activist stand when it comes to consumer protection, telling the House Energy and Commerce Committee Subcommittee on Commerce, Trade and Consumer Protection that it "strongly supports" the Data Accountability and Trust Act, which would give the Commission the authority to obtain civil penalties if companies fail to put reasonable data security policies and procedures in place, and to notify consumers when there has been a data security breach that affects them.
Busiest of all the regulators at this point, the Securities and Exchange Commission has filed complaints or won convictions against Monster, Marvell Technologies, Take-Two Interactive, Quest Software, iBIZ Technology, Research in Motion, and ITT (for bribing Chinese officials) -- all since President Obama took office.
EU commissioner Neelie Kroes, on the other side of the Atlantic, explicitly warned companies not to try to use the current economic malaise as a pretext for running afoul of EU competition policy, in a speech she gave to a European small business association in late April.
In case you had any doubt, let me insist that I do not intend to stop enforcing the rules. I will not be intimidated by large Member States or large companies who use the pretext of the crisis to try and escape the rules of competition.Indeed, collusion between companies may be illegal, but that's exactly what might be going on in those Transatlantic diplomatic cables. Carpenter told me he didn't think the EU would have levied such a huge fine on Intel unless "they had some level of support in the US."
I'm not sure whether there even has to be collusion for governments on both sides of the Atlantic to react to pressure from their citizens to punish those whose excesses have led to the current deep recession, whether or not they are directly responsible for it. Companies like Intel (Cisco, Google, Oracle -- are you paying attention?), which are so dominant as to create a "too big to fail" scenario, should know they're under the microscope. The question is, will that stop them from making more acquisitions as opportunities arise?
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