U.S. Clears the Way for Antitrust Crackdown

By Cecilia Kang
Washington Post Staff Writer
Tuesday, May 12, 2009

The Obama administration signaled yesterday that it would take an aggressive stand against companies that engage in anti-competitive behavior, reversing looser policies of the past eight years that critics called friendly toward big firms.

Christine Varney, head of the antitrust division at the Justice Department, announced that the agency would revoke a 2008 report that made it difficult to pursue antitrust cases against corporations. She said the guidelines and lax enforcement over the past decade helped contribute to the economic crisis.

"The recent developments in the marketplace should make it clear that we can no longer rely upon the marketplace alone to ensure that competition and consumers will be protected," Varney said in a speech at the Center for American Progress, a liberal-leaning Washington think tank.

But doing so may prove difficult, observers said. The president's desire to clamp down on big corporate mergers and to guard against anti-competitive behaviors will be challenged by an economic recession that some analysts predict could lead to more pressure for corporations to consolidate, further cutting competition.

"Now more than ever, there is a confluence of challenges for the administration from an antitrust standpoint to stabilize sectors with cash-flow challenges," said Jessica Zufolo, an analyst at Medley Advisors.

While the administration's new enforcement would affect all industries, many antitrust experts said some of the more controversial cases are expected to arise from the fast-evolving high-tech and telecom worlds. Google, for example, has businesses in online video, mapping and mobile services even though its business is still mostly made up of online searches. AT&T provides wireless, video, phone and mobile entertainment services.

Varney, who served as the lead Internet lobbyist for the law firm Hogan & Hartson and was a member of the Federal Trade Commission, already is leading a review of Google's settlement with book authors and publishing companies that would allow the search giant to digitize millions of books.

The FTC is conducting a separate review of whether the boards of Google and Apple violate antitrust laws by having Google's chief executive, Eric Schmidt, sit on both boards.

By evoking an obscure rule on directors of a company, antitrust experts said, the administration is clearly signaling its intent to step up scrutiny.

During the Bush administration, nearly every high-tech and telecommunications merger before the antitrust division at the Justice Department was approved, including last year's controversial union of the nation's two sole satellite radio service providers, Sirius and XM. After a lengthy battle with the Justice Department, the software giant Oracle won approval in 2005 for its merger with PeopleSoft. Also that year, AT&T and Verizon Communications snapped up dominant market shares after mergers with BellSouth and MCI, respectively.

Verizon became the biggest wireless services provider last year with its acquisition of Alltel.

Tom Barnett, head of the antitrust division under President George W. Bush, challenged 30 mergers during his tenure and denied Google's request to join Yahoo in an advertising deal. He said the agency under Obama will face the same complex questions regarding competition on the Web that his staff did over the past four years.

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