Obama Encourages Antitrust Complaints; Expect Nightmare of Litigation

In a warning to corporate America's largest corporations such as Intel, Microsoft, and Google, the US plans new antitrust effort.

The Obama administration warned corporate America on Monday that the government will more aggressively investigate big firms that hurt smaller competitors, contending that lax enforcement by the Bush administration contributed to the current economic troubles.

Assistant Attorney General Christine Varney said the Justice Department is abandoning legal guidelines established by George W. Bush's administration in September 2008. Critics complained that the earlier instructions made it difficult to pursue antitrust cases against big firms.

The move could have serious implications for two corporate giants, Intel Corp. and Google. Intel is already enmeshed in an antitrust case with European Union regulators, and Monday's change is seen as shifting the U.S. toward the European approach to anti-monopoly enforcement.

Varney laid out the new policy in a speech to the Center for American Progress, a left-leaning think tank.

She said some of the economy's problems were due to the lack of enforcement in the previous 10 years -- a clear jab at the Bush administration, which, she said, raised too many hurdles to antitrust investigations.

The new rules mark a return to the antitrust policies of the Clinton administration, which brought a major action against Microsoft Corp. These days, similar questions are being asked about the market dominance of Google.

Nightmare of Antitrust Litigation Coming Up

The New York times weighs in with Obama Takes Tougher Antitrust Line.

President Obama’s top antitrust official announced on Monday that the administration would restore an aggressive enforcement policy against corporations that use their market dominance to elbow out competitors or to keep them from gaining market share.

Ms. Varney said that the Bush administration policy “lost sight of an ultimate goal of antitrust laws — the protection of consumer welfare.”

“The failing of this approach is that it effectively straitjackets antitrust enforcers and courts from redressing monopolistic abuses, thereby allowing all but the most bold and predatory conduct to go unpunished and undeterred,” she said. “We must change course and take a new tack,”

The administration is hoping to encourage smaller companies in an array of industries to bring their complaints to the Justice Department about potentially improper business practices by their larger rivals. Some of the biggest antitrust cases were initiated by complaints taken to the Justice Department.

My Comment: Asking lawyers to file lawsuits is begging for a nightmare of litigation. Lawsuits will soon be flying on anything and everything.

As a result of the Bush administration’s interpretation of antitrust laws, the enforcement pipeline for major monopoly cases — which can take years for prosecutors to develop — is thin. During the Bush administration, the Justice Department did not file a single case against a dominant firm for violating the antimonopoly law.

Many smaller companies complaining of abusive practices by their larger rivals were so frustrated by the Bush administration’s antitrust policy that they went to the European Commission and to Asian authorities.

“This will be bad news for heavyweights in the tech industries — companies like Google and Microsoft,” said Professor Hovenkamp, who teaches at the University of Iowa College of Law.

Ms. Varney said that the Obama administration was guided by the view that it was a major mistake during the outset of the Great Depression to relax antitrust enforcement, only to try to catch up and become more vigorous later. She said the mistake enabled many large companies to engage in pricing, wage and collusive practices that harmed consumers and took years to reverse.

EU Ruling On Intel Due Wednesday

TMCNet is reporting EU antitrust ruling against Intel due on Wednesday.

The European Commission is expected to make one of the most significant antitrust decisions in its history on Wednesday when it punishes computer chip-maker Intel for stifling competition from smaller rivals.

The official line is that the case is still ongoing, but one person close to the competition department said on condition of anonymity on Friday that the 27 commissioners will conclude the case, which has been under investigation since 2000, at their next weekly meeting on Wednesday.

Intel is the latest giant from the IT industry to be slapped down by Europe's top competition regulator. Like Microsoft five years ago and IBM in the 1980s, Intel claims it is simply doing what any company would, only better.

Microsoft was fined $663.4 million for abusing its dominant position in the software market, plus an additional fine for failing to respect the antitrust ruling.

Intel faces a fine of a similar order of magnitude for illegally handing out rebates to computer manufacturers in return for them buying the bulk of their x86 computer processing chips (CPUs) from Intel, the Commission is expected to say next week.

The company also stands accused of paying computer makers for scrapping or delaying the launch of machines fitted with chips made by its nearest rival AMD, and of selling its chips for server computers at below cost to large customers such as governments and universities.

Last year the Commission added fresh charges, accusing the chip giant of paying generous rebates to Media Markt, Europe's biggest chain of IT stores, in return for it de-listing all computers running AMD chips.

Technically, the Commission can fine a company up to 10% of its global sales the year before a monopoly abuse ruling. Last year Intel generated revenues of $37.6 billion, which means the ceiling for a fine would be $3.76 billion. But the regulator has never applied a maximum fine to date.

Intel faces a potential $3.76 billion fine, and Obama seems to be encouraging it. Lawyers will have a field day.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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