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High-Tech, Telecom Stakeholders Brace For Antitrust Turn High-Tech, Telecom Stakeholders Brace For Antitrust Turn

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High-Tech, Telecom Stakeholders Brace For Antitrust Turn

High-tech, telecommunications and media companies can expect increased antitrust scrutiny in President-elect Obama's administration after eight years of what some believe has been a hands-off approach to marketplace competition within the Justice Department, the FCC and to some extent the FTC. The Democratic Illinois senator made ensuring competitive markets part of his campaign platform, which stated the United States needs "a business and regulatory landscape in which entrepreneurs and small businesses can thrive, start-ups can launch, and all enterprises can compete effectively while investors and consumers are protected against bad actors that cross the line."

Obama pledged to step up review of mergers and stop or restructure mergers that are likely to harm consumers while clearing those that do not pose such risks. According to a campaign position paper, Obama will strengthen antitrust authorities' competition advocacy programs to make certain that special interests do not use regulation to insulate themselves from the competitive process. He pledged to boost competition advocacy domestically and internationally and take steps to ensure that antitrust law is not used to interfere with competition or undermine efficiency to the detriment of U.S. consumers and businesses. Obama has said he will improve the administration of those laws in the United States and work with foreign counterparts to change their unsound laws and avoid needless duplication in enforcement.


During his campaign, Obama criticized the Bush administration for having "what may be the weakest record of antitrust enforcement of any administration in the last half century." Between 1996 and 2000, the FTC and Justice Department under President Clinton challenged on average more than 70 mergers annually on the grounds that they would harm consumers. Between 2001 and 2006, the agencies challenged less than half that number, and Justice did not bring a single monopolization case, he said. This month, Justice and the FCC approved -- with some conditions -- Verizon's purchase of Alltel Corp., a deal which will create the nation's largest cellular phone company. In recent years, the administration has also blessed the $13 billion merger of satellite radio rivals XM and Sirius and the combination of AT&T and BellSouth, valued at $89 billion.

"Everything will flow from who is appointed to head the antitrust agencies and the FCC and what their priorities are within the overall Obama administration," said Barbara Esbin, who runs the Progress and Freedom Foundation's Center for Communications and Competition Policy. "I would fully expect that the administration as a whole will pay more attention and give closer scrutiny to mergers in the tech and telecom fields." While the FTC and Justice Department have been relatively subdued in the Bush era, the FCC has been a "different kettle of fish," she added. She called the priorities of FCC Chairman Kevin Martin "idiosyncratic," adding she expects to see "the FCC's activities in reviewing mergers become more regularized and more economies-based than they have been."

The American Antitrust Institute released a 415-page transition report last month with a range of recommendations for competition policy. The document calls for more empirical analyses of how media markets work and states that any antitrust policy toward media mergers be in furtherance of, and driven by, a congressionally-mandated national media policy. Sole reliance on enforcement by the FCC or antitrust agencies has proven to be "too ad hoc, too haphazard, and not particularly effective," the report said. AAI suggested a combination of legislation and more informed antitrust enforcement to promote the media's contribution to the marketplace of ideas. The document urges the new administration to grasp from a 21st century standpoint, all of the values -- including localism and diversity -- important to preserving a healthy marketplace of ideas. Obama has been outspoken on localism and diversity and wants the FCC to review its policies and ensure guidelines are in place to support a multiplicity of voices as the media landscape changes.


Allen Grunes, a former Justice Department antirust division attorney, said he found it refreshing that Obama had set his view on antitrust early on. Grunes said Obama's relationship with Sen. Byron Dorgan, D-N.D., who has been involved in media and competition issues for some time, might have helped cultivate that curiosity. While there have been calls for the FCC to create a task force on media ownership and diversity, the agency has only dipped its toe into the water, Grunes said. The FCC has not begun "the kind of work that needs to be done to take this issue from tinkering around edges to an important primary agenda item," he said, predicting that will change in the Obama administration. "The door is open for more aggressive enforcement," he said.

At a recent Computer and Communications Industry Association summit, Google competition counsel Dana Wagner characterized the past eight years as a learning experience for antitrust officials who have been confronted with emerging technologies and markets. They have struggled to appropriately apply old-economy policies and the results have been mixed, Wagner said, noting that "procedurally, processes for merger review haven't been nimble enough." The new administration must realize the criticality of international competition authorities, said attorney Robert Rosenfeld, who has represented Microsoft in antitrust actions in the United States and abroad. He said the EU system could carry the day, and has already gotten traction in Asia. "That reflects a failure by the DOJ principally to be an effective evangelist," Rosenfeld said.

Meanwhile, Obama's antitrust officials will inherit several ongoing cases of importance to competition in the high-tech sector. One such case is Advanced Micro Devices' antitrust lawsuit against Intel Corp. AMD claims Intel has created a monopoly in the PC processor industry where the firm has offered deep discounts to equipment manufacturers. A court date has been scheduled for February 2010. Meanwhile, the FTC opened a formal investigation in June and regulators in the European Union, Japan, and South Korea have taken actions against Intel. In recent months, Intel has expanded its Washington presence, bringing on several new senior staffers to deal with competition issues in light of the heightened scrutiny.

Google's intrepid Internet ventures may also face scrutiny in the new administration, even though it has close ties to Obama. The company's buyout of Internet advertising firm DoubleClick and its proposed advertising partnership with Yahoo have already raised regulators' eyebrows. The FTC approved the $3.1 billion DoubleClick deal in late 2007 after an eight-month probe. Last week, Google and Yahoo abandoned their ad-sharing plan after the Justice Department said it would file an antitrust lawsuit to block the deal due to competition concerns. Analysts at Stifel Nicolaus Corp. said they would not be surprised if Yahoo shareholders pressed for an arrangement of some sort with Microsoft. Whatever the terms of any deal, it would be reviewed under a Democratic Justice Department and would likely receive careful scrutiny, they said.

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