JOEL KLEIN

Even for fickle Washington, the swift turnabout in the assessment of Joel I. Klein as the nation’s chief trustbuster may set a record--just like the mushrooming number of mergers confronting him.

Denounced last summer by Sen. Ernest F. Hollings (D-S.C.) as “an antitrust fellow here who rolls over and plays dead” for failing to challenge Bell Atlantic’s $21-billion acquisition of Nynex Corp., the 5-foot, 6-inch. Klein is now being hailed as a would-be giant-killer for taking on Microsoft and its larger-than-life chief Bill Gates.

Partly because of his 25 years as a lawyer in Washington, Klein seems to let the brickbats and kudos roll off with equal ease.

The son of a postman, Klein, 51, grew up in New York and graduated magna cum laude from Colombia University and Harvard Law School. He clerked for circuit court of appeals Judge David L. Bazelon and Supreme Court Justice Lewis F. Powell.

Klein’s ties to President Bill Clinton stretch back to Renaissance weekends in the mid-1980s. By 1988, Klein said, he had a pretty good sense that Clinton would reach the White House. When Clinton named Ruth Bader Ginsburg to the U.S. Supreme Court, Klein agreed to take leave from the Washington law firm he co-founded, where he specialized in appellate advocacy, to help with her confirmation. In the middle of that effort, Vincent W. Foster Jr. committed suicide and Klein was asked to take his job as deputy White House counsel. He stayed in that post for two years, until he moved to Justice in the antitrust division’s No. 2 spot.

In addition to the challenges to Microsoft and the Lockheed Martin combination with Northrop Grumman, antitrust under Klein has made news most recently with a record setting fine of $110 million against UCAR International Inc., the nation’s largest producer of graphic electrodes. The company was charged with participating in an international cartel to fix the price and allocate market shares for graphite electrodes, used in steel refining and making products essential to business and consumer items.

While Klein speaks with clarity, certainty and some passion about antitrust issues, he shows genuine fervor when he explains what he means by spending “quantity time” with his 13-year old daughter, Julia, and his wife, Patsy Davis. Klein’s hours with his daughter run from working on various projects alongside her in her room to taking her to the mall for clothes. “In the process of being around them, I think that’s when children do open up and are more likely to share what’s going on,” Klein explains.

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Question: You are running the antitrust division at an unusual time in this country’s economic development: near full employment, low inflation, the stock market continuing to “outbull” itself. Yet the line between the well-off and the not well-off seems to be growing more marked. What role do you see for antitrust in this?

Answer: Antitrust really is the part of the economic team in government that focuses on consumers. Our concern is not simply what’s good for business, but what’s good for America’s consumers. That is as true for the sort of small-time, one-time consumer . . . . We’ve done cases recently involving the price of school milk--you’re talking only about a few cents on a carton of milk--up through some very sophisticated technologies, whether it’s telephones, computers. But I think, in that respect, antitrust is probably the most focused part of the government’s economic analysis in terms of consumer interests.

Q: Couldn’t that have been said of antitrust over the years, and this is really just a shift of rhetoric here? Hasn’t it always been to protect the consumer?

A: When it did what it was supposed to do, it’s always been consumer focused. However, there were times in the history of antitrust where, I think, people worried about competitors. In other words, they were concerned about the successful company versus a weaker competitor. We worry only about competitors in the context of consumer interests. And if there is a stronger or a more efficient competitor, our job is not to hamper that competitor.

Q: With the global economy becoming more of a reality every day, is there a danger that vigorous antitrust enforcement’s going to be a brake on the ability of U.S. companies to compete?

A: I think it’s just the opposite. You started out by saying, look at how strong our economy is right now. I think there’s no doubt the American economy is the strongest in the world. But it’s also the most competitive economy in the world. If you look at what’s going on in Asia and elsewhere, you see some of the problems that these countries face because of regulatory protection, of a model that says let’s protect our domestic firm in the international arena. I think that hurts a country’s businesses. The U.S. economy right now is a very competitive economy, and we need to make sure, through the appropriate enforcement of the antitrust laws, that that competition remains vigorous domestically.

Q: Do you think, in the case of Japan, that that might be what’s happening with their economy right now?.

A: I think that’s part of what’s going on . . . . People are not used to competing in the rough and tumble. That’s one of the problems I think that we dealt with in the breakup of American Telephone and Telegraph, where you had a long-term monopoly, used to a highly regulated structure, and then evolved it into a very successful, enormously competitive telecom market. And that process is still going forward. But the incentives are different in regulated markets, and the ability to compete against a highly aggressive, unregulated international competitor is greatly diminished when you come out of one of these very protected economic environments.

Q: Do you see the U.S. bringing more of those kinds of cases--that is, reaching cartels?

A: Absolutely. This has been a huge shift in our enforcement priority. Up until two years ago, there were relatively few major international cartel cases. Then starting last year, really, with the Archer Daniels Midland case, in which we secured a $100-million fine, we have expanded our resources and our commitment in that field massively.

Today, as we sit here, we’ve probably got some 25 grand juries looking at cartels involving companies in, I don’t know how many different nations--but all over the globe. We have investigative resources committed to cartels in a large number of international countries.

This has been a sea change in terms of enforcement: Where two years ago, we had $40 million in criminal fines, last year, because of our international efforts, we went over $200 million. This year, we’re on a trajectory to beat last year’s record.

Q: Mergers are at an all-time high. Do the numbers themselves call for greater antitrust enforcement, or is there a change in the nature of these mergers that underscores the need for greater enforcement?

A: I think there are two or three things that lead to this. Obviously, if you see a rise in the numbers, pure and simple, that’s going to mean you’re likely to have more enforcement action just as a percentage.

But there are two things that are really key here. One is that these are strategic mergers. These are not leveraged buyouts. These are not, if you will, economic takeovers. These are people looking either for synergy in their businesses, which would be good for consumers, or looking for market power, which would be not so good for consumers.

The second factor is, if you look at the size of these mergers, up until quite recently, a billion-dollar merger was thought of as huge. Today we’re looking at mergers that are routinely in the billions of dollars. Some of them as large as $10, $15, $20 billion.

Just recently we challenged the Lockheed Martin-Northrop Grumman merger, which is a merger close to $10 billion. Now, when you’re looking at those kinds of aggregations of assets, then the competitive consequences are very important and, obviously, we need to be prepared to do the hard work.

Q: Can you tell me some of the current cases or investigations that illustrate the benefit-for-consumers emphasis?

A: Sure. We recently challenged a merger involving aluminum where our investigation showed this consolidation would have raised the prices of aluminum cans. Now aluminum cans are basically used for soda drinks and for beer. And based on our analysis, the price of those cans would have gone up some and that would have been passed right along to every consumer who drinks a soda pop or a beer out of an aluminum can.

We had a recent case involving a merger between Scott Paper and Kimberly-Clark. These were basic consumer products like Baby Wipes, in which we required divestiture in order to keep the prices down . . . . We did a case in Texas on the cost of white bread, a basic commodity.

Then, of course, we do some much more elaborate and complicated cases like AT&T.; But if you look at the AT&T; divestiture, from 1984 to today, in real terms, adjusted for inflation, the cost of a long distance phone call has come down 60%. You can get frequent flyer miles, you can get this “x” cents a minute kind of deal. Remember when we all had the rotary dial telephones, and you look [today] at the kinds of services. A lot of that is the product of competition that we set in place--the Justice Department did--in the AT&T; breakup. And there are numerous other cases we’re looking at.

I’ve announced this issue of airline pricing in hub cities. This is obviously a real concern for America’s consumers, and we are doing the work to find out whether there are important antitrust issues there or not.

Q: About this job, do you find it more challenging, rewarding or less of a nightly problem when you go home from working here, than in the [White House] counsel’s office?

A: . . . This job suits my temperament. I believe in law enforcement. This is a lawyer’s job. It is a job that involves legal analysis; it involves case law and development of legal precedent, and it involves the application of law through investigation of facts--the things that I think are really where I am most comfortable. So I think I am extremely fortunate to be here now.

Q: Are there other factors that make you glad not to be at the White House?

A: While I’m certainly happy to be here, I also thought I benefited greatly from having had the opportunity to work in the White House counsel’s office. The White House job is a different kind of a job. It is lawyering with a very heavy sort of public dimension, . . . the nature of decision-making, the press of the day-to-day news inquiries. So much of what you do in that job has those kinds of dimensions to it.

I enjoyed my time in the White House. I thought it was a very valuable time. I believe I made a real contribution there. But it’s a different set of skills and different people, I think, enjoy themselves more or less, depending on the nature of the experience.

Q: On Microsoft, do you see that as the first in a series of actions in that field, in that industry?

A: Well, it’s obviously an industry that’s very critical to our economy. We are certainly devoting appropriate resources to analyze, consider and think about what future actions one would take.

Part of what we’re trying to do is see what the appropriate general principles are for conduct in this very fast-moving, high-tech industry. But it’s also an industry that involves a huge number of consumers who essentially are often interconnected with respect to a single product--so there are issues of market power in this industry.

I think it’s very hard to anticipate when you have ongoing investigations what the ultimate outcome will be. But it’s hardly surprising to me that people in the antitrust area will, I think, as we move into the 21st century, certainly be focused on the relationship of antitrust to high-tech society, and an economy that’s essentially an information-based economy. So I would expect those issues will be with us for some time.