"Silicon Valley companies are bracing for a tough new phase of antitrust scrutiny," report Don Clark and Jessica E. Vascellero in the Wall Street Journal, "responding to signs of heavier enforcement by the Obama administration and continued pressure from abroad."
To anyone who remembers the fear and trembling that Microsoft used to inspire in every software startup from Mountain View to Berkeley, the Journal's framing might seem a bit odd. Antitrust scrutiny was what most Silicon Valley companies desperately desired back in the 1990s, as long as it was directed at Bill Gates and Co. The words "tough" and "heavy" make it sound like the Obama administration is going to get all kinds of nasty on the poor beleaguered entrepreneurs of the Valley. When, in fact, the goal of effective antitrust enforcement is to create an environment where there is more competition and smaller companies have a better chance of flourishing.
But if the definition of "Silicon Valley companies" primarily refers to Google and Intel, then maybe the Journal has a point. Google certainly seems to think so; the company is reported as saying "its lobbyists and executives since March have met with about 40 groups, including lawmakers, regulators and advertising agencies, to argue that its business practices don't reduce competition."
The Journal also quotes a pretty well-known Silicon Valley antitrust specialist, Gary Reback, noting that "During the Bush administration nobody was interested in hearing about [antitrust]... As we go forward, we'll hear a lot more about it."
He should know. The news that the Obama administration is planning to invigorate antitrust enforcement couldn't have come at a better time for Reback, whose new book (publication date, April 16!) "Free the Market: Why Only Government Can Keep the Marketplace Competitive" is a primer in the politics of antitrust over the past century, with special attention to the Reagan Revolution's profound impact on government enthusiasm for enforcement. After reading my post "The Great Crash of the 'Chicago School' of Economics" Reback sent me a copy, telling me that "It's right up your alley."
Yup. From the opening page:
"Toxic assets" didn't fell the nation's economy. A toxic philosophy did. Thousands of people lost their homes, tens of thousands their jobs, and even more their retirement savings because of a stupefyingly naive belief in markets that self-regulate with minimal government supervision.
Actually, Gary, I think that should be: Hundreds of thousands of people lost their homes and millions lost their jobs... But why quibble?
Given the sudden prominence of antitrust in the news (the Washington Post's Steven Pearlstein says that the first thing the Obama administration should look into is the proposed merger between Ticketmaster and LiveNation), I decided I should start leafing through "Free the Market" and two chapters into it, I am hooked. The second chapter alone, "Chicago Comes to Washington," describing how William Baxter, Ronald Reagan's appointee to head the Antitrust Division, fundamentally changed the federal government's approach to antitrust is worth the price of admission. But it's not a simplistic anti-Chicago school rant. Baxter was Reback's antitrust law professor at Stanford, and Reback's portrayal of Baxter is nuanced and grounded in economics. This is a meaty book, arriving at the perfect time.