Soon after graduating from law school, Bill Clinton headed back to his home state and taught law at the University of Arkansas. One textbook he assigned was written by antitrust authority Robert Pitofsky of Georgetown University.
When Clinton won the presidency two decades later, Pitofsky was tapped to advise the transition team. His opinion, which he summarized in a subsequent law journal article, was that Clinton's recent predecessors had mounted "about as minimal an antitrust program as can be imagined."
Pitofsky suggested that under Clinton "antitrust enforcement would be more vigorous. Close questions in all areas would more often lead to government challenges. Unjustified nonenforcement at the federal level would end."
Eight years later, Clinton's team has followed that blueprint to the letter, making antitrust enforcement one of the administration's signal achievements.
Government lawyers have blocked selected high-profile mergers, as in this week's Justice Department challenge of the $129 billion WorldCom-Sprint deal. But the administration's more dramatic and controversial turn has been its crackdown on monopolies, highlighted by its successful lawsuit against Microsoft Corp.--the litmus test of whether 110-year-old laws apply in the "new economy."
The Clinton antitrust team "has certainly brought antitrust to the forefront of public policy," said James Rill, who was antitrust chief during the Bush administration.
Now, with an election looming, the government's antitrust efforts will soon be at a new crossroads. The next administration could change the direction of antitrust enforcement and perhaps alter the course of the Microsoft case.
Pitofsky, who became Clinton's chairman of the Federal Trade Commission, and Joel I. Klein, who took over the antitrust division of the Justice Department, have aggressively targeted companies suspected of abusing market dominance at the expense of consumers, innovation and competition.
Before Clinton, oversight of monopolies was lax. From 1992, the last year of the Bush administration, to 1994, the second year of the Clinton administration and the first full year with his appointees, the number of Justice Department investigations of monopolies increased more than sevenfold.
During the 12 years of the Reagan and Bush administrations, the Justice Department filed just three lawsuits dealing with the conduct of monopolies, the fewest cases filed in any period since the Sherman Antitrust Act was passed in 1890. In eight years of the Clinton administration, 12 lawsuits cracking down on monopolistic behavior have been filed.
"The agencies have reinvented themselves as litigation machines," said George Cary, a former FTC antitrust enforcer. "They have mastered the art of litigating antitrust cases."
William Kovacic, an antitrust enforcement scholar at George Washington University, said the Clinton team was well matched. "Pitofsky was sort of the intellectual champion," Kovacic said. "Klein was the litigator."
In the past 20 years, views on many aspects of antitrust policy have grown less ideological. For example, a broad consensus has emerged on how to bust up price-fixing cartels. And enforcement officials and scholars tend to agree on guidelines developed during the Reagan administration about how to evaluate giant mergers that could result in monopolies.
The Clinton administration has approved the vast majority of mergers, but because of the enormous volume of corporate combinations, the government has chalked up the highest level of merger-enforcement activity in history, more than 100 mergers blocked in the past two years.
But a policy dispute continues to roil over whether government can be trusted to root out predatory and illegal actions by monopolies and then take the appropriate action to repair the marketplace.
Behind the administration's actions is a strong faith in the responsibility of the government to referee. "I'm more skeptical that the market will solve all problems in a reasonable period of time," Pitofsky said in an interview. "While we are waiting for the market to solve and produce new competition and entry, consumers are paying a lot of money--unjustified payments to its owners, improper monopoly rents."
But other scholars believe that the government has become too quick to interfere. "The Clinton administration has spent too much emphasis on investigating and prosecuting winners," said Timothy Muris, a George Mason University law professor who also is a key adviser to the GOP presidential campaign of Texas Gov. George W. Bush.
Muris, who was a consultant to Intel Corp. when it was sued by the FTC, criticized the "enormous" number of federal probes opened into alleged monopolistic behavior. "Most of them did not become public," he said. "There was much too much suspicion in the Clinton administration."
The cornerstone investigation, of course, was United States of America v. Microsoft, the case in which the software giant was found to have illegally engaged in predatory tactics designed to protect its monopoly in operating-system software for personal computers.
The Justice Department sued Microsoft in 1998. This April, U.S. District Judge Thomas Penfield Jackson ruled that Microsoft had illegally used its monopoly to crush competitive threats and innovation, had illegally tied its Internet browser to the Windows operating system and had attempted to monopolize the market for browsers.
Jackson on June 7 ordered the company split in two to restore competition and to prevent the illegal acts from recurring. Other non-merger enforcement cases opened during the Clinton years have included lawsuits against American Airlines, which was accused of using predatory practices to drive out low-cost airlines from Dallas-Fort Worth International Airport; Visa USA Inc. and MasterCard International Inc., accused in a trial that began this month of failing to compete with each other and cutting exclusive deals with banks; and Dentsply International Inc., a manufacturer of false teeth accused of making exclusive deals with 80 percent of the nation's denture distributors.
The FTC in 1998 sued chipmaker Intel Corp., accusing the California company of using its dominance in the microprocessor market to bully corporate customers into giving away patent rights. Unlike Microsoft, however, Intel was able to craft an out-of-court deal on the eve of a potentially embarrassing trial.
A raft of other antitrust questions in the high-tech era loom over the horizon. Can the airlines join forces to sell tickets over the Internet without breaking antitrust law? The Justice Department is investigating that venture. Does a joint Internet venture by the world's automakers to purchase parts amount to an illegal oligopsony--a cartel of buyers that can drive prices down through their market power? The antitrust implications of such business-to-business exchanges are the topic of a public, two-day FTC workshop beginning today.
No matter who wins the presidential election, a new antitrust team is a certainty. So far, despite the hubbub surrounding the Microsoft case, neither political camp has raised it as an issue.
Vice President Gore has said little publicly about the Microsoft matter, leaving the impression that he supports the case, but he has firmly endorsed the application of antitrust laws in the new economy.
On the Microsoft campus in Redmond, Wash., last fall, Gore told several hundred of the company's employees: "You're naturally going to feel put upon if a judge, looking at the antitrust laws and how they apply to a fact situation that involves your workplace, decides in the findings of fact that the law's been crossed. I'm not going to comment on it, but the values that are inherent in the antitrust laws are ones that are sound, in my opinion."
George W. Bush has gotten more specific, saying he would "stand on the side of innovation--not litigation" and that he was "worried" about the consequences "if this company were to be broken apart--this engine of change, engine of growth . . . but we'll see what the courts say on the issue."
Compared with the Gore campaign, where there are no highly visible advisers who are as deeply entrenched in the antitrust debate, Muris, the George Mason professor, stands out.
In the Bush campaign, Muris mainly consults on economic issues outside of antitrust and has avoided taking sides in the Microsoft trial. "Microsoft is a hard case to understand the truth," Muris said, "in part because Microsoft did not try the case very well."
Muris, who is considered a likely Bush administration appointee, is prominent among Chicago School antitrust scholars, followers of a theory that emerged at the University of Chicago law school that advocates applying economic theory to antitrust deliberations rather than simply studying the behavior of firms.
By comparison, Clinton administration trustbusters are largely thought of as "post-Chicago" antitrust enforcers who embrace the Chicago School approach of applying economics to antitrust law but tend to favor more vigorous enforcement or at least place more trust in the government to reign in illegal conduct.
Klein, the Justice Department's antitrust chief, said his view of corporate behavior is based on a pragmatic analysis of the facts informed by economic analysis, rather than dogma.
"The sensible antitrust enforcement program would be to prevent that kind of abuse of monopoly power where there is no pro-consumer benefit," Klein said the day after the judge's order to split up Microsoft. "That's what separates out the theoretical discussions from what actually happened."
Rill, the Justice Department antitrust chief in the Bush administration, rejuvenated antitrust enforcement after the Reagan years but handled cases with consent decrees rather than the lawsuits favored by Pitofsky and particularly Klein. Still, he agrees with Klein's pragmatic approach: "You have to call antitrust issues as you see them at the time and the theoretical possibility that a mistake might be made, you have to live with."
It is a fear that does not inhibit the Clinton administration and has turned the government into one of the most activist antitrust enforcers in a generation. And the reinvigoration of antitrust enforcement is something Attorney General Janet Reno apparently relishes. After suing WorldCom this week, Reno introduced her antitrust chief this way: "Now I'd like you to meet again one of the busiest men in Washington, Joel Klein."
Staff researcher Richard Drezen contributed to this report.
CAPTION: AN EYE ON MONOPOLIES
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