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Christine A. Varney, the Justice Department's new Antitrust chief will give a speech today at the Center for American Progress. The purpose of this speech, as reported by the New York Times is to announce the return to Clinton era policies with respect to competetition law enforcement.

This is good news in my opinion. It's definitely a step in the right direction. The Clinton administration, however, was no trust-busting operation by any means. If we are to get serious about furthering competition, we need new a new philosophy and new enabling legislation.

Today's Times reports:

The speeches were described by people who have consulted with her about the policy shift. 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.

Ms. Varney is expected to say that the administration rejects the impulse to go easy on antitrust enforcement during weak economic times.

She will assert instead that severe recessions can provide dangerous incentives for large and dominating companies to engage in predatory behavior that harms consumers and weakens competition. The announcement is aimed at making sure that no court or party to a lawsuit can cite the Bush administration policy as the government’s official view in any pending cases.

In the speeches, Ms. Varney is expected to explicitly warn judges and litigants in antitrust lawsuits not involving the government to ignore the Bush administration’s policies, which were formally outlined in a report by the Justice Department last year. The report applied legal standards that made it difficult to bring new cases involving monopoly and predatory practices.

Reversing the severely regressive Bush Administration's lax policy on competition is a good step in the right direction. We certainly need more enforcement, especially in the areas of media and finance. Ms. Varney's background in intellectual property is a good bet that she understands the issues of modern competetition. She represented Netscape in United States vs. Microsoft. But her role as a Clinton era FTC Commissioner and as an oil and gas lobbyist makes me question her instinctive willingness to take on Corporate America.

If Professor Herbert Hovenkamp is correct, her views will represent a "bad news" for high tech companies like Google:

Ms. Varney’s new policy more closely aligns American antitrust policy on monopolies and predatory practices with the views of antitrust regulators at the European Commission.

Herbert Hovenkamp, a leading antitrust scholar regarded as a centrist between those seeking more aggressive enforcement and those who generally argue for restraint, said the guidelines by the Bush administration were "a brief for defendants."

He said that the repudiation of those guidelines by the Obama administration "will almost certainly have a greater impact than the guidelines themselves had."

"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.

Hoevenkamp and his partner, the late great Professor Phillip Areeda wrote The Book on antitrust law in the United States, so he knows what he's talking about.

Even if her heart is in the right place, will she be able to effective? We all know how United States vs. Microsoft turned out for her client Netscape. Microsoft's strategy worked. The costs associated with three or four years of litigation were worth it, since they effectively destroyed Navigator with blantantly anti-competitive practices. In my view, the problem is more than enforcement. We need to rethink our concept of what antitrust should be all about. And we need new tools that lead to faster resolution of antitrust litigation.

Professor Zephyr Teachout of Duke called for new laws in The Huffington Post last month:

We now have an economy that we don't understand and can't seem to control even when we want to. Having created corporations, we have let some of them become "too big to fail"--a dangerous state of affairs, both economically and politically. Perhaps there are some companies that are simply too big to exist.

One way to avoid a similar problem in the future could be an antitrust law that limits how big corporations can become. This is not a new idea; at the time the modern antitrust statutes took shape in our country about a century ago, political leaders were concerned directly with corporate size and power. In the last several decades, however, legal economists have sharply narrowed antitrust law, leaning heavily on the assumption that larger companies can be more efficient. This view has some merit; after all, efficient companies can produce cheaper consumer products, and everyone shares in the savings. But the recent crisis should make us consider whether these economists have been leading us astray.

...

There are also reasons to think an antitrust policy focused on size and power makes good economic sense. Despite economic theorizing, bigger companies are not always more efficient companies. And even if they were, there are important societal efficiencies that go beyond whether individual companies operate cheaply or produce low-cost products. As Bert Foer of the American Antitrust Institute recently testified before Congress, we can choose to use competition policy to help prevent much of the systemic risk that has crippled our economy. By focusing more on size and concentration, we might be able to avoid collapse, unplanned nationalization, and bailouts.

Emphasis per me. This is right on. Since the mid 1970's competition law has been far to influenced by the likes of Judge Robert Bork which places the consumer at the center of enforcement. Thus we have the philosophy that measures competition sole in the form of the perceived "benefit" to the consumer, usually measured in choice and price.

Bork argued that both the original intent of antitrust laws and economic efficiency required that consumer welfare, the protection of competition rather than competitors, be the only goal of antitrust law.[1] Thus, while it was appropriate to prohibit cartels that fix prices and divide markets and mergers that create monopolies, allegedly exclusionary practices such as vertical agreements and price discrimination did not harm consumers and should not be prohibited. The paradox of antitrust enforcement was that legal intervention artificially raised prices by protecting inefficient competitors from competition.

Bork (1978) p.405

In other words, there is nothing wrong with Wal-Mart because Wal-Mart means cheap goods. We need to get back to seeing the real problem, which is size and concentration stifling the benefits of more competition. This is fundamentally bad for the economy and capitalism in my view. We need an enforcment philosophy that considers the good of the whole society, and not the single consumer of good. Is Wal-Mart good for trade policy? Is Wal-Mart good for small towns? Is Wal-Mart good for wages? Would our society be better off if Wal-Mart had more competitors and was limited in size? I certainly think so.

I agree with James Kwak who recently wrote:

Over the past few decades, in part under the increasing influence of free-market economic theory, antitrust enforcement by the Department of Justice has become more tolerant of size and concentration in themselves, and has focused instead on whether mergers will benefit or harm consumers. On the one hand, increased concentration increases the ability of large firms to raise prices, hurting consumers; on the other hand, or so the argument goes, larger firms gain economies of scale that enable them to reduce costs and therefore reduce prices to consumers. (If you believe that, take a look at the price of text messaging on your mobile phone bill.)

I'm glad the Obama administration is at least going back to "consumer benefit" antitrust enforcement. This is better than the Bush Adminisrtation policy of no enforcement at all. But if the President wants to get serious, we need more.

I propose the we refocus our efforts on breaking up concentrations by establishing new guidelines on market share and number of competitive actors in any particular industry, especially those fundamental to economic or national security. Furthermore, we need a streamlined and more efficient anti-trust court with new procedural rules that prevent cases for dragging on for years. All of these require a modern antitrust law with enabling regulations. But before we do any of that, we have to stop thinking about "whats best for the consumer" all the time. We have to start thinking and acting like a nation and ask "whats best for the United States?"

Originally posted to Triple-B in the Building on Mon May 11, 2009 at 07:51 AM PDT.

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Comment Preferences

    •  Microsoft (0+ / 0-)

      I'll give you (they are by far one of the most corrupt companies on the planet these days), but Google seems less likely.  One thing about anti trust is determining whether the monopolist is abusing their monopoly by, for instance, forcing competitors out of business, pushing suppliers or vendors into anti competitive practices, or otherwise warping the market.

      Google hasn't done much, if any, of that.  They got really, really big by supplying the best online general search engine around, and since then much of their effort in that area has simply been to keep it the best.  Everything they've branched out into has had the same basic attitude applied to it.  Compete simply by being great at what they do.

      MS on the other hand has done everything in the book to get rid of competitors over the years, including signing agreements with most of the large computer vendors to supply systems with nothing but MS products on them, designing the operating systems they sold in a way that deliberately broke competing programs, etc.

      Not all large companies are potential anti trust targets, since anti trust is in part about how the company behaves in the marketplace, and not just it's size relative to it's competitors.

      •  This is exactly the Borkian thinking (1+ / 0-)
        Recommended by:
        Thassa

        that I think we need to change. We need another circumstance to evaluate the benefits of concentration.

        At the moment, the high concentration of Google across a variety of platforms is probably a net plus for the United States. There isn't any reason to believe the failure of Google would lead to economic ruin, or that the service it performs couldn't be quickly taken up by other market actors.

        But Wal-Mart, however, is clearly a problem. It destroys the economic growth in small towns and contributed significantly to the trade imbalance. Its very size creates barriers to entry for competitors and it has unhealthy employment practices.

        By following the Bork philosophy (or the Chicago School phiolosophy), supply siders have ensconsed the idea that that sole evaluator of competition is the lone consumer of goods. This is misguided in my view. We need a much broader understanding, as was the origional purpose of antitrust in the first place.

        Teddy Roosevelt and Robert Taft didn't go after those guys because they weren't serving the American consumer well. They were just too big for this nations own good. Period.

        •  Ok, (1+ / 0-)
          Recommended by:
          brooklynbadboy

          on that I agree.  But again, Walmart's size isn't the whole problem.  It's also Walmart's business practices, which, while legal, tend to be bad for the communities they do business in.  Price shouldn't be the only factor in any decision, but it's the only thing Walmart emphasizes.

  •  Too big to fail (11+ / 0-)

    may just be too big.

    They tortured people to get false confessions to fraudulently justify our invading Iraq.

    by TomP on Mon May 11, 2009 at 07:53:32 AM PDT

    •  Indeed. And also (8+ / 0-)

      even if these firms are not failing, is it an inherent good for any industry to have so little comeptition?

      Since Bork, we've operated under the philosophy that as long as its cheap, its good. We shouldn't care if monopoly results, as long as things are cheap.

      This hasn't worked, as the latest financial crisis illustrates. Less competition, under classical economic theory, does NOT mean low prices. In fact, it probably means prices are higher than they ordinarily would be.

      •  Less competition? (0+ / 0-)

        Are you kidding?  The financial services industry is about the most competitive industry there is.  The problem was not a lack of competition, but instead all the competitors pursuing identical strategies.

        •  Disagree COMPLETELY. (0+ / 0-)

          Any industry where the failure of one competitor can bring down all the others is inherently fucked up. That is the very definition of not having enough competitive actors. Similar arguments were offered by Standard Oil, which also claimed that it was too important to be broken up and faced global competition.

          •  Does not make sense.. (0+ / 0-)

            I am not saying the failure of one competitor brought down all the others.  I am saying that most industry participants drank the koolaid on playing in the mortgage market place, or the CDS market - it was the lemming effect.  

            That does not mean the market is not competitive.  

            •  Even if every financial instution in the world (0+ / 0-)

              played in the mortgage and CDS market, the fact that one company failing in the market can bring all the others playing in that market down is indefensible!

              Secondly, by allowing these positions to becomes SO HUGE, we invite the exact kind of systemic risk that destroys competition in that market in that market.

              Again, had there been the corrective counterbalancing forces of less access to huge pools of capital by a small number of firms, there would have been less capital to pose systemic risks.

              •  Sorry, can't agree (0+ / 0-)

                You want to do a baby/bath water thing here.   Our financial system worked pretty darn well  since the '33 and '34 acts.   Recently the proprietary trading desks of many firms (AIG, Lehman, et al) went nuts on stupid instruments.  Why - specifically a lack of regulation on the insurance companies (AIG) and allowing too much leverage on investment banks (Leh and all the others).  

                The fix is not to destroy the system, but put in place some common sense regulations.  Regulate derivatives.   Impose limits on leverage.  Heck, even put Glass Steagal back.

                But to take apart the system is nonsense, and would only serve to weaken our financial services industry at the expense of global competitors, who you can bet will do no such thing.

                Side bar:  please do not posit that the financial services sector has anything to do with our terrible income inequality.   This whole executive compensation thing is a massive distraction from core problems around job creation and education.  

                •  Why do you think destruction of the system (0+ / 0-)

                  is what I'm advocating? Youre addressing something I'm not talking about.

                  What you are talking about is that its okay if we have 6 financial firms in the United States.

                  What im saying is lets have 100 of em. All doing the same innovative things they do no, but not so highly positioned that 1 of them could destroy the global economy.

                  You think that all these financial firms are just rife with evil. I don't think so. I think they are doing what is advantageous in current market conditions. I've you've got a trillion to play around with, why not risk it for maximum return?

                  My point is, lets have 100 firms playing with $10 billion each rather than 1 firm playing with a trillion.

                  •  So who decides... (0+ / 0-)

                    ..who gets the $10billion?  Are you comfortable having the government this involved in picking winners and losers in a market based economy.  How do you insure that political agendas are not being pursued?   Does our governments recent behavior give you any comfort that they can manage this?

                    But most important, I think, is this a global mandate or are you just disassembling the US institutions?   Where is a U.S. multinational going to go for services if you have taken away the expertise by breaking up the domestic firms?  Bank of China?  Bank of Japan?  CS First Boston?  HSBC?  Certainly not an American bank.

                    btw, we have no where near 6 firms, we have a ton of them.  Why not let the market pick winners and losers?  

                    •  Setting rules on size and concentration (0+ / 0-)

                      is not picking winners and losers. It's making sure there is always a serious game in play, rather than the New York Yankees vs. the AAA Paducah Roosters.

                      Secondly, a regulatory regime that takes into to account size and concentration is perfectly within the powers of Congress as established by the commerce clause.

                      Third, if Bank of China, Bank of Japan, Credit Suisse or anybody else wishes to provide capital to American multinations, I have no problem with this whatsoever. But I suspect that having the American capital pool at their disposal will give our firms a tremendous leg up.

                      Finally, your faith in "the market" to pick winners and losers in the financial industry is OBVIOUSLY misplaced, considering how many of the largest players fucked themselves up. NOW, we are definitely picking winners and losers. Had we had a truly durable, more distributed system, we could have avoided that.

                      If you think in computer terms, you'd rather have 2 or 3 big ass mainframes, and I'd rather have a distributed client/server system like the Internet.

                      •  nope.... (0+ / 0-)

                        Comparing our financial system players to the NY Yankees vs. Paducah demonstrates a complete lack of understanding of our financial system and those who operate within it.  You are just wrong.  

                        Because congress can make laws doesn't mean they should make laws.    And who, exactly will benefit from this law, and why?

                        What "american capital pool" are you referring to?  Most of our capital is coming from China and the Middle East these days.    Is this advantage from some lower cost of capital?

                        Mainframes work great for some applications, client server for others.  You are basically mandating a client server environment for everyone.   Good luck with that, it really works well in computing to mandate solutions doesn't it?

                        •  Yes, it does work well to mandate solutions. (0+ / 0-)

                          I know this: in any normal free market system, when you go out of business, you go out of business and life goes on. In your beloved financial industry, however, one goes out of business and entire economies collapse. Then they find themselves running to the taxpayers for protection. If you think this is a healthy state of affairs, you have a limited view of what a free market is supposed to look like. Privatized profits, socialized losses. Sorry. My politics tells me this is a fucked up scenario.

                          When bankers go running to Congress because they fucked up, that is a textbook case of an industry that doesn't know what the fuck its doing. If you find yourself begging a politician for help in running your business, your a shitty businessman. The government has every right to put you on the right path. With force.

                          So yes, for the financial industry, mandated decentralization should be forced on them. That way they wont come running to the government when they fuck up. They'll simply go out of business and the system will continue functioning.

                          Finally, its a mistake to believe we can properly regulate derivative positions. There will ALWAYS be new financial instruments created by thinkers that will always be ahead of government regulators. What we CAN regulate is size. We can tell you when you are too fucking fat, and youre going on a diet, fuck you you obese piece of shit. So to speak.

                          We need strong, robust, sustained antitrust intervention into the financial system if we want it to be robust and dynamic. The alternative would be to have a few lethargic heavily, heavily regulated firms that function more like utilities (which is the direction we are going in now.) I prefer for the former. But make no mistake...the days of latting 3 or 4 guys at laptops desk move 3 or 4 trillion around into highly risky positions with no oversight and with the government as guarantor of all losses has to come to an end.

                          Now you have to explain to me why you think its healthy to revive the system that got us into this mess.

                          •  I find the use of "fuck" so intelligent... (0+ / 0-)

                            ...don't you?   It really advances your argument.

                            And I think you should answer my questions before you demand I answer yours

                          •  Oh Jesus. What are you a Mormon? (0+ / 0-)

                            If youre a profanity puritan, ill avoid speaking freely. I'm from Brooklyn. "Fuck" is like "the" around here...common speach.

                            Because congress can make laws doesn't mean they should make laws.    And who, exactly will benefit from this law, and why?

                            If this crisis hasn't illustrated to you that Congress needs to make some laws, I don't know what will. Who will benefit? The american taxpayer who wont be on the hook for the fuck-ups of a few bankers. There is absolutely no reason why government needs to be in the position of saving bankers who screw up their investment choices. We have no choice now, because we cant go under. But we should never put the american taxpayer of saving failed bankers ever again.

                            What "american capital pool" are you referring to?  Most of our capital is coming from China and the Middle East these days.    Is this advantage from some lower cost of capital?

                            Pension funds. Mutual funds. Bank savings. You know...the wealth produced by the largest economy in the world. That is, minus that which is sent overseas via the trade deficit. Of course, as you point out, we borrow that back and use that too.

    •  "Too Big To Fail," AKA, Trickle Down Economics! (4+ / 0-)

      Aren't euphemisms, great?

  •  This was great news today. (5+ / 0-)

    Clinton didn't enforce anti-trust either.  I think Carter did -- wasn't that when the breakup of telecoms began?  The Republicans since Reagan -- well what more needs to be said.  

    The one thing I can't forgive Clinton for was the Telecom bill.  Not only did it make a mockery of anti-trust laws, but the political morass in which we now live is a direct result of the media consolidation.  

  •  Let us hope so - (4+ / 0-)

       one of the troubling trends - is that the whole too big to fail, to big to hold accountable, too big to cut off from the public trough - is becoming the inside the beltway conventional wisdom -   even as these bloated, pathetic excuses for actual productive business fail us all.

       Vigorous and effective anti-trust enforcement is a key to allowing the marketplace to efficiently allocate resources to those who do good things (and thereby do well) as opposed to those who use resources to feather their nest and protect themselves from the discipline of the marketplace.

     I share your concerns about the effectiveness of the litigation process when the monsters can devote such vast resources - but what we really need to think about is how to hold the actual individual perpetrators accountable.   There is something very strange - and which has been turned upside down - when the corporate shield is now used to shield protect those looting the corporation at the  expense of the shareholders.

  •  The elephant in the room... (4+ / 0-)

    I saw MS, Google, Wal-Mart discussed but:

    Intel

    The timing of this policy announcement is not coincidental, IMHO...

  •  I Don't Think Obama Ran on Any Sort (3+ / 0-)
    Recommended by:
    Pluto, palantir, Words In Action

    of fundamental change where the biggest money and institutional power are concerned.

    Even universal health is mostly a cleanup of the existing system.

    We'll be near to 40 years of fluctuating around the Reaganism track when Obama's finished. At that point most of the population and braintrust of the country won't have much experience with anything else.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon May 11, 2009 at 08:08:09 AM PDT

  •  i hope the anti-trust comes back full force, and (4+ / 0-)
    Recommended by:
    Larry Bailey, grrr, Pluto, brooklynbadboy

    not a minute too soon. This is heartening.

    One other place to keep your eye on is the apparent WH support to have the Fed be the new super regulator.  This after a meeting with all the financial types.  Is this common practice, too, now, to let institutions decide who they want to regulate them?

    Geesh. The Fed failed to regulate when needed, it can't be controlled by Congress, and now it seems to have the support to get the whole ball of wax?  Somehow this doesn't seem like the moves of an admin. that wants to dilute power, but I'm hoping I'm wrong.  

  •  Nice diary (10+ / 0-)

    To do this....

    But before we do any of that, we have to stop thinking about "whats best for the consumer" all the time. We have to start thinking and acting like a nation and ask "whats best for the United States?"

    We have to make the shift back from Americans being consumers....to Americans being Citizens.

  •  Simply Enforcing the Antitrust Laws on the Books (2+ / 0-)
    Recommended by:
    panicbean, Magnifico

    Would turn America around completely. This single issue, alone, is the root flaw that has lead directly to America's economy crisis.

    However, without a serious change at the Supreme Court level, trust busting will get no traction. And all cases will end up there because so much is at stake. (Not to mention triple damages.)

    Very good to see this Diary on this essential topic.

  •  Very naive.... (0+ / 0-)

    We do not operate in a walled domestic garden.   So either you impose these rules globally, or you no longer compete in a global marketplace.   Who wants to take on global antitrust?  It's just not going to happen.

    •  I think the world would love it. (2+ / 0-)
      Recommended by:
      Jim W, TexasTom

      By fostering MORE and not less competition, I think you will find more global actors looking to get in on U.S. markets and not fewer.

      For example, if we were to break up Wal-mart for being too big, I think you'd see a flood of international retailers looking to get in on the action in America. That would be a good thing.

      Similarly, in other highly concentrated industries, I think you'd see far more complaints. Effective policiing by Justice will send a clear message to industry...when you get big, take your profits and subdivide and sell off. You'll see a more dynamic and efficient marketplace as a result.

      They wont do it now, however. They know Wal-Mart is so massive it's not worth the investment.

  •  Obama needs to take a stand against Microsoft (1+ / 0-)
    Recommended by:
    brooklynbadboy

    Not only are they monopolistic fascists, but they are now banning EVERYBODY in U.S.-embargoed countries from using their services such as MSN Messenger.

    http://arstechnica.com/...

  •  Google should come out with a desktop/laptop OS (1+ / 0-)
    Recommended by:
    brooklynbadboy

    Maybe Google should buy a significant share in Canonical and release commercial versions of Ubuntu with all the proprietary multimedia codecs built infor like $20 each. Sort of like this:

    Ubuntu: for modern PCs with moderate-to-high hardware specs
    Kubuntu: for modern PCs with moderate-to-high hardware specs
    Xubuntu: for PCs with moderate-to-high hardware specs

    And a new version - Ubuntu Lite - which would be great for users of older PCs with less-than-ideal hardware specs, using either LXDE or Enlightenment E17 as the default desktop environment. If E17 were to be chosen, I would model the default look and feel of it after gOS Rocket E...but using a more stable version of E17, of course.

    http://www.youtube.com/...

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