washingtonpost.com
Obama antitrust enforcement looking like more of the same

By Jia Lynn Yang
Washington Post Staff Writer
Wednesday, September 8, 2010; A1

When President Obama took office, he promised to undo eight years of what he called the weakest antitrust enforcement in half a century. Consumer advocates held their breath for a dramatic shift that would hark back to the 1990s, when the last Democratic administration pursued a landmark case against Microsoft.

A year and a half later, they're still waiting. The Justice Department's antitrust division has yet to exercise its signature power: to bring a case against a corporate titan suspected of abusing its dominance. In its other central role, as a merger cop, the division challenged in court fewer than half as many deals in 2009 as the Bush administration did in its last year in office, though the number of mergers also declined by about half.

Instead, federal antitrust lawyers have eschewed aggressive litigation against big business in favor of a less-risky approach that works with companies to resolve anti-competitive concerns, according to many antitrust experts.

"They're running a good shop. It's just not markedly different," said Albert A. Foer, president of the American Antitrust Institute, a research and advocacy group. "Anybody that wants to argue the Obama administration is anti-business or socializing America is not going to find much evidence in the antitrust division."

A pattern is emerging in how the administration treats corporate America. In spite of some tough rhetoric, Obama has shown a certain reluctance to radically reshape industries. Rather than break up big Wall Street banks, the White House largely pressed to toughen rules as part of the financial regulatory overhaul. Instead of putting limits on how much bank executives earn, the administration encouraged federal supervisors to push these firms to tie pay to performance.

A scalpel, not a cudgel

Likewise, the antitrust division has shown itself more likely to use a scalpel than a blunt instrument when a merger has crossed its desk. When faced with mergers it worries will hurt competition, the Justice Department has forced companies to make some changes, such as spinning off a business line. But with one exception involving dairy processors, it has not gone to court to block deals, including the controversial marriage of Ticketmaster and Live Nation, the recent United-Continental airline merger and the union of the two biggest makers of voting machines in the nation.

Some consumer groups said that the department's measures didn't go far enough and that they have been disappointed by the lack of big cases so far, pointing to potential antitrust targets such as Google, big health insurers and Monsanto, an agricultural conglomerate. Others say that it's too soon to grade the administration but that the real test will be how it handles, possibly this year, the proposed NBC-Comcast merger, which has broad implications for consumers and industry competitors.

"I think they have yet to prove their mettle in the antitrust area, and I'm still hoping they take on some tough cases and go to the mat," said Sally Greenberg, executive director of the National Consumers League.

Obama's antitrust chief, Christine Varney, said in an interview that the Justice Department should not be judged by how often it goes to court but rather by the results she gets after she confronts companies. The antitrust division also has several ongoing investigations into suspected monopolies, Varney would not comment on any particular companies.

In the area of merger enforcement, firms have walked away from six deals after hearing the department's concerns. In other cases, Varney said, Justice has been able to extract tough concessions that resolved the division's concerns, getting better terms than lawyers might have achieved had they gone to court.

And with the economy's slowdown, there have been fewer mergers coming across Varney's desk - and fewer chances to challenge deals, justice officials said.

"I'm happy to litigate. I think everyone knows that," Varney said in a recent interview.

Campaign promises

Still, the department's performance so far has fallen short of the high expectations among antitrust watchers when Obama took office. On the campaign trail, he gave an unusually detailed statement on antitrust policy, promising: "As president, I will direct my administration to reinvigorate antitrust enforcement. It will step up review of merger activity and take effective action to stop or restructure those mergers that are likely to harm consumer welfare, while quickly clearing those that do not."

Then Obama picked Varney as his antitrust chief at the Justice Department. (The Federal Trade Commission also handles antitrust matters, but is an independent agency from the administration.) Varney had raised her profile by representing Netscape Communications - the once-dominant provider of Web browsers - during the government's antitrust case against Microsoft. She further stoked excitement among antitrust advocates - and jangled nerves in the business community - after a tough speech in May 2009.

"It is time for the antitrust division to step forward again," Varney said then. "We must change course and take a new tack."

In an early signal that enforcement would probably be tougher under Obama, the Justice Department rejected guidelines issued by George W. Bush's administration on how to enforce antitrust offenses, saying the guidelines went too far in limiting the government's power to prosecute big companies that abuse their market dominance. Fines on companies for violating antitrust laws also sharply increased during the division's first year.

But in the eyes of some consumer advocates, the line in the sand between the antitrust division's current lawyers and their predecessors is less clear. They say nowhere was this more apparent than in the first big test of the administration's antitrust muscle: Ticketmaster's merger with the world's biggest concert promoter, Live Nation.

To consumer groups, the deal was clearly egregious, because it would give one firm enormous power to dictate what prices consumers pay when they buy tickets and because it combined different businesses related to live entertainment under one roof: ticket sales, concert promotion and even the management of artists such as Miley Cyrus, Maroon 5 and Christina Aguilera.

The advocates asked the Justice Department to go to court and block it. So did 50 members of the House.

Several strings attached

In January, Justice said the merger could go ahead, but with several strings attached, including an unusual provision to set up a committee to monitor the new company for certain kinds of bullying. The agreement also required the firm to license Ticketmaster's technology to rival concert promoter Anschutz Entertainment Group. Ticketmaster also had to sell one of its ticketing businesses to competitor Comcast-Spectacor.

But the solution disappointed some opponents of the deal. "They chose to take the safe consent decree rather than to be aggressive and block the merger," said David Balto, an antitrust lawyer. "I don't think there's any reason this consent decree fully restores competition."

Seth Hurwitz, co-owner of the District's 9:30 Club, a Live Nation competitor, said: "Given the tough talk that came from them, yes, I expected and hoped that finally things would be different. But they're not."

But justice officials said it wasn't clear that the antitrust division's lawyers could have achieved an equally tough result by taking Ticketmaster to court.

Now, all eyes are on the proposed merger of NBC and Comcast, a case with echoes of the Ticketmaster deal because the two companies will combine businesses - in this instance, cable and media properties - that typically sit on opposite sites of the negotiating table but that if combined could help each other.

"I think, ultimately, the administration will be judged by its signature events," said Gary Reback, an antitrust lawyer who formed the Open Book Alliance, a group that has challenged Google's settlement with authors and publishers over electronic books. "The signature events have to be a willingness to go to court and fight about it and win, or at least go down swinging."

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