Obama's New Trustbuster Sends A Message
But the person he chose to be the nation's top trustbuster telegraphed a message today, saying it was time for the authorities to more vigorously investigate corporations suspected of unfair competition - recession or no recession.
"This country's prior experience raises the question of whether current economic challenges reflect a failure of antitrust," Christine Varney, who heads the Justice Department's antitrust division, said in a speech to the Center for American Progress. "In other words, could United States authorities have done more?"
Varney punctuated her much-anticipated remarks with a brief historical sweep of the history of antitrust enforcement that marked her squarely as more activist than her predecessors in the Bush administration. She said that American companies often have been allowed to self-police themselves and the nation's enforcement authorities were put into the role of waiting until markets corrected themselves.
"It is clear to anyone who picks up a newspaper or watches the evening news that the country has been waiting for this 'self correction,' spurred innovation and enhanced consumer welfare. But these developments have not happened. Instead, we now see numerous markets distorted. We are also seeing some firms fail and take American consumers with them."
Varney also contended that current economic conditions reflect the impact of ineffective government regulation, poor deregulatory measures and inadequate antitrust oversight.
"I believe that these extreme conditions require a recalibration of economic and legal analysis and theories and a clearer plan for action," she said. "As antitrust enforcers, we cannot sit on the sidelines any longer - both in terms of enforcing the antitrust laws and contributing to sound competition policy as part of our nation's economic policy."
So how might the difference in practice between the Obama and Bush-led Justice Departments boil down in terms of different philosophy? Stanford Business professor, Tim Bresnahan,said Varney's speech as well as the withdrawal of the single-firm conduct "report" brings the antitrust division back to the mainstream of pro-market thinking.
"The division will now pursue cases where an established monopoly blocks new competition that would benefit consumers. They have repudiated the extreme view that these problems never happen," he said in an email interview. "What will be interesting to see in the coming months is whether they actually have some enforcement actions in mind or are just making a general policy statemently."
One antitrust lawyer, who asked to remain unidentified, put it this way: "Whereas the head of antitrust under Bush said, 'I recognize that this is hard to do, but I would err on the side of less enforcement, because sometimes government conduct can deter conduct that is pro-competitive.' By contrast, Varney intends to take a hard look at a case and will intervene if she feels it's appropriate."
At this point, it's all jawboning as the antitrust department likely hasn't had time to draw a list of possible targets for investigation. But that hasn't stopped the whisper campaign.
In the last few weeks, Google's name has surfaced in connection with a Federal Trade Commission inquiry into potential antitrust implications of the ties between the boards of Google and Apple. Meanwhile, the DOJ has opened an investigation into a proposed settlement with book publishers and authors related to Google's Book Search service.
After Varney's speech, a Google spokesman said that "it's clear that the U.S. economy needs strong antitrust enforcement, and so Ms. Varney's early efforts in this area are a positive step. Consumers win when companies operate in competitive markets and in a manner that encourages competition rather than forecloses it."
Google can take solace from the fact that the Sherman Act has been interpreted in a way as not to hold in violation a company that attains high market share because it makes a better product. Antitrust enforcers note the difference between hard-nosed competitive conduct that should be encouraged, and behavior that crosses a line and is found to violate the law.
"I would take her seriously," said Burt Foer, the president of the American Antitrust Institute in Washington D.C. "She emphasized at the outset (of her speech) that the fact that there's a recession is not going to be taken as an excuse for allowing undue concentration or collusion."