During the late 1990s, I spent more time than I like to remember covering the ins and outs of U.S. v. Microsoft, deemed by many contemporary observers to be the defining antitrust case of a generation. Then, in 2001, Republicans replaced Democrats in the White House, and the U.S. Department of Justice promptly decided to drop the case. Just like that, it was all over -- as blatant an example of the politics of antitrust enforcement as one could ever hope to witness. Although maybe "hope" is the wrong word.
So it was with a healthy dose of jaundice that I read this morning that the Obama administration plans to reinvigorate antitrust enforcement:
The new enforcement policy would reverse the Bush administration's approach, which strongly favored defendants against antitrust claims. It would restore a policy that led to the landmark antitrust lawsuits against Microsoft and Intel in the 1990s.
Here we go again! Only, this time around, Microsoft probably won't be a target. The great irony of the Microsoft antitrust trial is that, even though it was clear that the company abused its near-total control of the operating system market to crush Netscape and many other competitors, ultimately it could not win the battle for Internet supremacy. Microsoft still owns the desktop operating system market, but it hardly seems like the resistance-is-futile unstoppable Borg of yesteryear. If anyone exerts monopoly power on the Net right now, it's Google.
Concrete evidence of Microsoft's fundamentally changed circumstances arrived today, with the news that the company will enter the commercial bond market for the first time by selling some $2.5 billion of its own securities. Despite the attempts to spin this as a smart move -- Microsoft plans to leverage its triple-A credit rating to borrow money, and then use the funds for a stock buyback aiming to take advantage of the software company's currently depressed share prices -- the decision to rely on the debt markets still represents a fall to earth for the longtime high-flier. Microsoft previously never needed to borrow money because it was always sitting on a ton of cash, or could use its high stock price to pay for its endless shopping sprees. Microsoft still has a lot of cash -- almost $25 billion worth. But the company has also just experienced its first quarterly decline in net revenue and its first significant layoffs. The bloom is off the Redmond rose.
The market achieved what the Department of Justice, despite its best efforts, failed to do. But maybe current economic circumstances require more vigilance. According to the New York Times, Christine Varney, the head of the Justice Department's antitrust division, declared in a speech Monday at the Center for American Progress that a firmer hand on the antitrust tiller is especially important at times of economic stress.
She will assert instead that severe recessions can provide dangerous incentives for large and dominating companies to engage in predatory behavior that harms consumers and weakens competition ... Ms. Varney is expected to say that the Obama administration will be guided by the view that it was a major mistake during the outset of the Great Depression to relax antitrust enforcement, only to try to catch up and become more vigorous later. She will say the mistake enabled many large companies to engage in pricing, wage and collusive practices that harmed consumers and took years to reverse.
Ultimately, I agree with James Kwak at the Baseline Scenario. Any indication that the government plans to actually enforce antitrust laws is a good sign, proof that the Obama administration plans to take its responsibility to govern seriously. But if Varney wants to go after any really big fish, she'd better get started now, because at the rate antitrust actions move through the courts, a Google or, just for kicks, a Citigroup, would be well served to play a delaying game until a new administration comes in and potentially reverses the Obama policy reversal.
And who knows what could happen in the meantime? After all, Google's always just one search engine innovation away from being tomorrow's Netscape.