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Let The Antitrust Games Begin
by Sarah Lai Stirland
The Antitrust Modernization Commission, which begins work on Thursday, has a fairly open-ended mandate "to examine whether the need exists to modernize antitrust laws and to identify and study related issues," and it has three years and $4 million to complete the task.
The 2002 law that created the commission requires the solicitation of various viewpoints when evaluating proposals. The law also calls for a final summary report by the commission to be presented to both the president and Congress. In hearings on the legislation, members of the House Judiciary Committee said they want the commission to focus on the role of intellectual property law in antitrust regulation, the future of antitrust enforcement in the global economy and the enforcement role of state attorneys general.
But the role of technology in the modern economy also appears to be high on the agenda.
Antitrust Law After The Microsoft Case
Observers have noted that many members of the 12-member commission were involved in aspects of the government's antitrust action against Microsoft. Other commission members possess backgrounds important to the technology industry.
Makan Delrahim, a deputy assistant attorney general in the antitrust division of the Justice Department, for example, is a patent lawyer and has a degree in biotechnology. Debra Valentine, a former general counsel for the FTC, is now an associate general counsel for United Technologies. And John Warden, a partner at Sullivan & Cromwell in New York, defended Microsoft against Justice.
The other members of the commission are: Executive Director Andrew Heimert, previously an attorney in the FTC Competition Bureau; Vice Chairman Jonathan Yarowsky, a partner at the Patton Boggs law firm; Stephen Cannon, the general counsel of Circuit City Stores; Dennis Carlton, an economics professor at the University of Chicago and senior managing director at Lexecon; Jonathan Jacobson, a partner at Akin Gump Strauss Hauer & Feld; Donald Kempf, the chief legal officer and secretary for Morgan Stanley; Sanford Litvack, a law partner in the Los Angeles office of Hogan & Hartson; Deborah Majoras, currently a partner at Jones Day and the nominee to become the next FTC chair; and John Shenefield, a partner at Morgan Lewis.
This week's commission meeting will occur a little more than two weeks after the federal D.C. Circuit Court of Appeals upheld the settlement agreement between Microsoft and Justice. Antitrust proceedings against Microsoft also are still underway in Europe.
In many ways, the multiple legal proceedings against Microsoft exemplify the problem of growth in popularity of competition policy among policymakers around the world, academics said.
"High-profile antitrust disputes -- from the prosecution of Microsoft in state, national and international forums to the transatlantic disagreement over the European Union's merger policy -- illustrate the burgeoning difficulties," wrote Richard Epstein and Michael Greve, the editors of Competition Laws in Conflict: Antitrust Jurisdiction in the Global Economy. The book, published by the American Enterprise Institute, notes that almost 100 countries enforce overlapping and conflicting antitrust laws.
Numerous speeches and articles authored by both antitrust officials and experts also suggest that the trends of global mergers between companies working across borders, the supernova of conflicting antitrust laws across the world, and the unique characteristics of "new economy" companies make the job of enforcing U.S. antitrust laws dating back to 1890 a challenge.
The Search For Elusive Long-Term Answers
Some of the issues were addressed in a report on global and high-tech competition the FTC published almost a decade ago. But no long-term answers seem apparent yet.
Summarizing the issues in a 1999 speech, then-FTC Chairman Robert Pitofsky delineated six key differences that characterize the high-tech sector. The first involves how to define a given market.
In high-tech sectors, he said, the possibility of significant competition that can influence market behavior by competitors is often cited as a potential curb on monopolists, but it often takes years for that much-heralded competition to materialize. He cited as an example the competition that satellite services may pose for the cable industry. "The significant question is when satellite transmission will become a real competitive force in the cable market," he said.
Five years later, as Justice sues to block Oracle's merger with rival PeopleSoft, government and industry officials are fighting over how to define the market for database vendors occupied by the two firms. Justice's complaint focuses on the market for technology services in human-resource management and financial management. But in a bulletin published this June, the Software and Information Industry Association challenged that definition.
The group charged that Justice's definition of the market is too narrow and ignores other forms of competition that vendors face. "Platform competition, software as a service, hosting, outsourcing, open source, and 'utility' computing are all fundamentally changing the competitive (and pricing) environment of enterprise software companies," the authors of the bulletin wrote.
The Challenges Ahead
In his 1999 speech, Pitofsky also noted that antitrust law does not progress as quickly as technology markets evolve. He cited the U.S. v. IBM antitrust case, which the government abandoned 13 years after it started in 1969 because IBM had lost its monopoly power.
Other factors that he said distinguish the high-tech world when it comes to antitrust law include: the need for high-technology firms to collaborate; the low barriers to entry into the market because of the idea-driven nature of the industry; the economics of the information industry; and the phenomenon of companies' market dominance being reinforced and reinvigorated as more people use their products and those products become more useful.
The Antitrust Modernization Commission's work is the latest periodic effort by the federal government to review the antitrust process that started in 1938, Albert Foer, the president of the American Antitrust Institute wrote in the Buffalo Law Review. He predicted that the panel's work will not spur immediate legislative action but rather will produce a work of reference.
"Lacking a political membership, a particular constituency or a compelling need, it would seem unlikely that the [commission] will be any more successful than its predecessors at giving birth to specific legislative proposals that will be rushed into law," he wrote.
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