She means business
One of President Obama’s top antitrust enforcers, Assistant Atty. Gen. Christine Varney, pledged this week to hold big businesses to a tougher standard than the previous administration imposed. Two days later, as if on cue, the European Commission gave U.S. companies a preview of how such a standard might be applied. The commission levied a record-setting $1.45-billion fine on Intel Corp. for trying to exclude competing manufacturers from the market for computer chips. Intel maintains its innocence and says it never sold chips at less than what it cost to make them. That sort of argument might have persuaded antitrust officials in the Bush administration not to sue a company. But judging from her remarks, it’s not likely to sway Varney.
At issue is how aggressively companies can compete after they gain a dominant share of a market (that is, once they’ve captured about two-thirds of the sales). The Bush Justice Department brought relatively few cases against such firms. In fact, in a report issued last year, it outlined numerous reasons why seemingly anti-competitive actions might actually benefit consumers by making the market more efficient. Varney, the new head of the Justice Department’s antitrust division, rejected that approach in her first public speech Monday. Her message was nuanced but still clear: Her team would be far less hesitant to bring cases against dominant firms that try to exclude competitors from their markets.
Varney won’t be taking on Intel; the Federal Trade Commission is already investigating the company, as is the state of New York. Nor did she point to any potential targets in her speech, which should be viewed more as a warning shot to big business in general. Nevertheless, the European Commission’s case against Intel illustrates the type of allegations likely to get Varney’s attention. The commission found that the company offered computer makers discounts on the condition that they used its chips in 80% to 100% of their laptops and/or desktops. Intel denies having done this, but if the commission is correct, that’s the sort of behavior that shouldn’t be excused by noting how fast prices have dropped or how innovative the market has been.
We share Varney’s skepticism that consumers benefit in the long run when companies can take advantage of their dominant market position to grind down competitors or muscle their way into new product lines. Maintaining the opportunity for real competition provides the strongest incentive for companies to innovate. It’s up to the courts to decide whether dominant companies violate the law, but it’s good to have a Justice Department that’s willing to scrutinize them.
