Tuesday, September 09, 2008

Justice Department’s Monopoly Report Sparks Controversy

This posting was written by John W. Arden.

The Department of Justice’s report on Sherman Act Section 2 enforcement—and the critical reaction by three FTC Commissioners—has prompted swift responses in both antitrust and political circles.

The report, “Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act,” was released yesterday morning by the Department of Justice. By yesterday afternoon, three FTC Commissioners had issued a statement, calling the report “a blueprint for radically weakened enforcement” of monopoly law.

Among the findings in the DOJ report were statements that exclusive dealing arrangements foreclosing less than 30 percent of existing customers or effective distribution should not be illegal; that the practice of tying can often promote efficiency and therefore the “historic hostility” towards the practice is unjustified; and that antitrust liability for mere unilateral, unconditional refusals to deal with rivals should not play a meaningful role in Section 2 enforcement.

Details regarding the content of the report and the criticism by FTC Commissioners Pamela Jones Harbour, Jon Leibowitz, and J.Thomas Rosch appear in yesterday’s “Trade Regulation Talk” posting.

Reactions to the report, and the split between the two federal antitrust enforcement agencies, came quickly.

“Failing to Vigorously Enforce Antitrust Law”

“The Justice Department’s report on Competition and Monopoly is yet another example of this Justice Department’s unfortunate record of failing to vigorously enforce antitrust law,” said U.S. Senator Herb Kohl (D-WI), Chairman of the Senate Antitrust Subcommittee, in a statement released yesterday.

“In many respects, the report represents an abandonment of the command of Section 2 of the Sherman Act, which prohibits illegal attempts to monopolize of to maintain a monopoly,” Senator Kohl stated.

“If followed, the Justice Department’s interpretation of this fundamental law written nearly 120 years ago to protect consumers could make it virtually impossible to prevent many forms of abusive conduct by dominant firms, such as predatory pricing and tying.”

Need for More Aggressive Approach

The presidential campaign of Senator Barack Obama said that the Justice Department’s stance in the report reflected the need for a more aggressive approach to antitrust enforcement in the next administration, according to an article in today’s New York Times.

“Four more years of the Bush-McCain approach to antitrust will only lead to higher prices for American consumers and a less competitive environment for smaller businesses to thrive,” said Jason Furman, economic policy director for Senator Obama’s campaign.

“Shared View” of Antitrust Enforcement

However, Thomas O. Barnett, assistant attorney general in charge of the Antitrust Division, said that the report reflected a “shared view” of antitrust enforcement among academics, economists, and others. He maintained that the DOJ views in the report were “pro-consumer.”

Some observers have focused not on the substance of the report, but on how far apart the two federal antitrust enforcers stand on these issues.

For instance, antitrust professor and author Herbert Hovenkamp commented to the Times about the “growing rift” between the FTC and DOJ. “It’s warfare, and the level of rhetoric is pretty high.”

A September 9 New York Times article, entitled "Antitrust Document Exposes Rift," appears here. A story from the September 9 Washington Post, entitled "Justice's Monopoly Guidelines Assailed," appears here.

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