High-Tech Antitrust Cases: The Road Ahead

The European Union’s $1.4 billion fine against Intel on Wednesday, combined with a “fair warning” speech this week by the Justice Department’s antitrust chief, point to a new day for antitrust enforcement in high-technology markets worldwide.
American antitrust policy, legal experts say, will likely be a sharp reversal from the Bush administration, and more in line with Europe and other developed nations. But based on the policy speech by Christine A. Varney, head of the Justice Department’s antitrust division, and past pronouncements by the new chairman of the Federal Trade Commission, the nation’s other antitrust enforcement agency, the shift promises to be mainly a return to the historical norm.

“This isn’t some radical interventionist approach,” said Andrew I. Gavil, a professor of law at Howard University. “It more that the Bush Department of Justice were radical non-interventionists.”

Along with her speech, Ms. Varney also withdrew a report issued last fall by the Bush administration, delineating guidelines for enforcing Section 2 of the Sherman Act, which deals with monopolization cases. It asserted that markets are typically self-correcting and generally sided with dominant firms. Big companies, it said, are agents of economic efficiency that should only be constrained if their behavior “disproportionately harms consumers.”

In an Obama administration, that standard will not apply. And, in fact, the F.T.C. during the Bush years, experts note, was more willing to step in. The F.T.C. tends to move less in lock-step politically because the seven-year terms of the commissioners are staggered. Indeed, the F.T.C. announced that it had begun an investigation of Intel last June, a case that is still pending.

The F.T.C., predicted Herbert Hovenkamp, an antitrust expert at the University of Iowa law school, will be “energized” by Ms. Varney’s speech and the European action against Intel.

Look for the Obama administration, Mr. Hovenkamp said, to scrutinize technology-enabled “networks,” with an eye toward forcing dominant firms to share information and to deal with competitors. Internet advertising systems and personal computer operating software, he said, are examples. “Google is a network, as is Microsoft,” Mr. Hovenkamp noted. “Networks become competitive only if everybody has the same chance.”

Another likely target for enforcement, he said, is exclusivity arrangements and pricing. This is a key allegation in the European charge against Intel. The big chip maker, according to European regulators, offered PC makers and retailers price discounts and marketing subsidies, if they agreed to buy Intel chips instead of microprocessors made by rival Advanced Micro Devices. Intel denies it violated any laws, and is appealing the ruling.

The Obama Justice Department team is certainly familiar with high-tech issues. Ms. Varney, as a partner at Hogan & Hartson in Washington, worked for Netscape, the browser pioneer, in its antitrust battle against Microsoft. The antitrust division’s chief economist, Carl Shapiro, is widely recognized for his research and writings on technology networks.

Digital technology networks, Mr. Hovenkamp said, are more complex than traditional brick-and-mortar markets. The efficient operation of many technology markets, he added, relies on dominant firms both cooperating with rivals and competing against them.

Sometimes, laissez faire does not ensure that outcome. The drift of recent research, Mr. Hovenkamp said, is that “these markets may not work as well as we once thought. We may well need more of government’s hand at the wheel.”

BY Steve Lohr
Source:The New York Times

Copyright 2009 The New York Times Company.



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