Obama Vows Stricter Antitrust Efforts

Published August 1, 2009

The Obama administration signaled this spring the U.S. Department of Justice would begin to crack down on firms it suspects of engaging in anticompetitive behavior. The new policy emphasis has many in the technology industry worried about potential abuses.

“What is legal or illegal under this new regime?” asked Alex Epstein, analyst for the Ayn Rand Center for Individual Rights in Washington, DC. “No one knows.”

Going After Google?

Google holds nearly 82 percent of the market share in Internet search engines, raising concerns the California-based high-tech giant will be ripe for antitrust litigation. Critics in Washington and beyond have long claimed Google engages in anticompetitive behavior.

But anticompetitive business practices are not the real threat to technology companies, says Rob Power, chairman of the San Francisco Libertarian Party. “These tech companies face far more risk from a couple of college kids developing a new product that makes the old companies obsolete,” Power said.

Epstein says the mere threat of antitrust litigation from the federal government can stifle innovation and growth.

“Can there be anything worse for top tech companies than knowing that if they are too successful, Christine Varney [head of the Antitrust Division at the Justice Department] might come knocking at their door with an endless case that could cripple their company forever?” Epstein asked.

Big Companies Prevail

Varney was quoted at the Center for American Progress in May showing her skepticism toward the free market.

“The recent developments in the marketplace should make it clear that we can no longer rely upon the marketplace alone to ensure that competition and consumers will be protected,” Varney said.

Power says he thinks big tech firms will learn to work the system and protect their domain.

“Powerful interests are always able to ensure that such [strict antitrust] rules are never enforced against them,” Power said. “That’s the very nature of big government. More laws will only further hurt smaller players, while the powerful interests will continue to receive special exemptions from the politicians.”

Government Causing ‘Ruin’

Epstein says government meddling harmed the housing market, and he fears the same fate may befall the tech industry.

“The federal government has already caused trillions [of dollars] in ruin by manipulating the [housing] market in the name of ‘creating prosperity’ and ‘promoting home ownership’,” Epstein said. “The last thing we need is for the government to throttle successful businesses in the name of ‘protecting competition’.”

Andrew Zacharakis, the John H. Muller Jr. Chair in Entrepreneurship at Babson College in Wellesley, Massachusetts, says it might be easier for a tech industry that prides itself on the humble beginnings of many world-changing innovations to try to work with government regulators instead of pushing against the system, to achieve the highest economic output.

“The key thing for entrepreneurs is to understand the rules of the game,” Zacharakis said. “If [the rules] are generally stable, entrepreneurship will thrive.”

James Griffin ([email protected]) writes from San Diego.