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Changes To Antitrust Laws Could Impact Tech Firms

May 12, 2009

Monday’s announcement by the administration of President Barack Obama to aggressively pursue antitrust cases could force many US technology firms to reconsider the way they plan to grow their business.

The Justice Department on Monday said it was doing away with prior guidelines issued in September 2008 by the administration of President George W. Bush.

The Justice Department’s antitrust chief Christine Varney said the elimination of previous guidelines represents “a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers.”

“The division will return to tried-and-true case law and Supreme Court precedent in enforcing the antitrust laws.”

“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.”

But the Associated Press reported on Monday that many US-based tech firms could face trouble due to the tightening of antitrust enforcement.

Tech firms expected to draw speculation as a result of the policy shift could include Intel Corp, IBM Corp, Microsoft Corp and Google Inc.

“It remains to be seen whether the Justice Department’s different approach will lead to more court cases or more challenges to proposed business deals. But antitrust lawyers say a more aggressive antitrust philosophy likely would make the Obama administration resemble the Clinton years far more than the Bush years,” according to the AP.

During the Clinton administration, the Justice Department carried 12 anti-monopoly cases compared to just three under the Bush administration.

Robert Pitofsky, an attorney with the Arnold & Porter law firm, and former chairman of the Federal Trade Commission from 1995 until 2001, told the AP that the US isn’t likely to ever become as tough as Europe in regard to antitrust regulation primarily because its tough to regulate technology from an antitrust perspective. Too much regulation on new technology could suppress innovation.

“The vast majority of activity in Silicon Valley is innovation, trying to make a better product – that was not viewed as anticompetitive under Bush or Clinton,” Jonathan Jacobson, a partner in the antitrust practice at the Wilson Sonsini Goodrich & Rosati law firm, told the AP. “Technological innovation is supposed to keep you out of trouble.”

The Obama administration is hoping the tighter controls will encourage smaller businesses to bring complaints about larger rivals to the Justice Department.

According to the New York Times, Varney said that periods of economic recession could prove as potential breeding grounds for improper business practices that can result in weakened competition.

 ”There is no adequate substitute for a competitive market, particularly during times of economic distress,” she said. “Vigorous antitrust enforcement must play a significant role in the government’s response to economic crises to ensure that markets remain competitive.”

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