Antitrust experts: US gov't should avoid enforcement in tech industry

The tech industry is dynamic, making antitrust enforcement a dangerous tactic, some experts say

U.S. government agencies should be wary of bringing antitrust complaints against tech companies such as Google or Apple, because of the ever-changing nature of the industry, some antitrust experts said Wednesday.

The U.S. Department of Justice and U.S. Federal Trade Commission should "think long and hard" before bringing antitrust cases in the tech sector, said Ronald Cass, president of legal consultancy Cass and Associates and a former vice chairman of the U.S. International Trade Commission.

Government antitrust lawyers often assume that dominant companies will stay in power when the tech market changes quickly, he said during a discussion on technology antitrust issues at the Federalist Society, a conservative legal think tank.

When the DOJ brought an antitrust case against IBM in 1969, it believed mainframe computers were the only viable computing platform for the foreseeable future, and when the DOJ brought an antitrust case against AT&T in 1974, it saw landline telephones as the only viable method of voice communications, Cass said. In less than 20 years, both of those assumptions were proven wrong.

"We have a real problem of foresight," he said. "It's a problem that's especially trenchant in the high-technology space. Look at the companies that are targets for antitrust action -- most of these companies didn't exist 10 or 20 or 30 years ago."

The event followed recent news reports that the DOJ is investigating Apple and five book publishers over e-book pricing and the FTC is investigating Google over complaints that it's using its search dominance to drive consumers to its other products. The event focused on whether antitrust is a form of regulation.

Antitrust enforcement is similar to regulation and can have a "great influence" on the progress of an industry, said James Miller III, a senior adviser with the Husch Blackwell law firm and a former director of the U.S. Office of Management & Budget.

"A lawsuit, especially from government, with deep pockets can divert a firm's resources and constrain it's efforts to innovate and introduce new products," said Miller, who is advising Google on antitrust issues. "The mere threat of a lawsuit can have similar results."

Antitrust enforcement can lead to winners and losers in the marketplace, Miller said. If consumers are allowed to choose, "they will make better choices," he said.

Additional antitrust enforcement in the tech industry could "very well make one of America's leading industries one of the world's laggards," he added.

But Charles "Rick" Rule, a partner in the Cadwalader, Wickersham and Taft law firm and lead attorney for Microsoft in the DOJ's antitrust case against the software vendor, argued that other tech companies should face the same scrutiny that his client did. The U.S. government should be consistent in applying antitrust law, he said.

Microsoft argued that it shouldn't face antitrust enforcement because the tech industry changes quickly and the market works better than lengthy enforcement actions, but it lost that argument, Rule said. With the Microsoft precedent, antitrust enforcement agencies should consider new tools for dealing with the tech industry, but should not abandon antitrust action altogether, he said.

Agencies "shouldn't give people a pass, just because their monopoly may be ephemeral and may not last forever, to do whatever they want," Rule said. "The simple fact that markets are dynamic is not an excuse for not enforcing the law."

Rule called for clear, even-handed antitrust rules that companies can follow. The rules "can't be based on who happens to be popular, or who happens to have contributed more to that particular administration in power," he said. "It can't based on superficial political sloganeering."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Grant Gross

IDG News Service
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