The Justice Department is urging foreign competition regulators not to restrain emerging technology markets at the same time it pursues potential anticompetitive deals in more established U.S. markets such as telecommunications.
Practitioners cite the DOJ’s suit to stop AT&T Inc. from buying Time Warner Inc. as evidence of the mixed message. The DOJ sued in November to stop the AT&T-Time Warner deal, saying it would give AT&T too much control over must-have content such as HBO’s “Game of Thrones” and CNN.
“I don’t think the DOJ leadership is signaling a hands-off approach to antitrust enforcement in general,” Mark Ostrau, chair of the Silicon Valley-based antitrust group at Fenwick & West LLP, told Bloomberg Law. “I think what they’re reacting to is a concern that foreign enforcers might presume problems in innovation industries without looking more deeply at the evidence.”
Top DOJ antitrust officials traveled in recent weeks to Europe and China and gave speeches emphasizing the need to protect innovation by being careful about clamping down on digital companies’ practices. They stressed an “evidence-based” approach that doesn’t assume big tech companies with valuable intellectual property are as-a-rule anticompetitive.
The U.S. approach toward companies such as Qualcomm Inc. and Alphabet Inc.’s Google differs from that of other regulators, especially in Europe. The European Commission in June 2017 issued a record antitrust fine of more than $2 billion against Google. China fined Qualcomm $975 million in 2015 for antitrust violations based on its patent licensing practices.
DOJ antitrust chief Makan Delrahim raised concerns about EU antitrust enforcement during a Feb. 21 speech in Brussels. The EU approach “might stifle the very innovation that has created dynamic competition for the benefit of consumers,” he said.
Delrahim urged Chinese antitrust regulators to think carefully about using their powers to curb intellectual property licensing, citing potential costs to innovation in a Feb. 1 speech in Beijing.
Similar innovation themes came up in a Feb. 23 speech delivered in London by Roger Alford, a deputy assistant attorney general in the DOJ’s antitrust division. “The need to ensure evidence-based decision-making is particularly acute when the goal is to protect innovation,” Alford said. “Otherwise, we risk supplanting the functioning of the market with our own judgments.”
Critics of the AT&T suit see mixed regulatory signals coming from DOJ that could undermine its free-market message overseas.
The suit is the U.S. government’s first attempt in decades to stop a deal involving companies that don’t directly compete. Such “vertical” deals are typically cleared by U.S. regulators.
“The government is saying the right things in public about antitrust policy, but I don’t think these public statements can be squared with the government’s stance in the AT&T-Time Warner case,” Larry Downes, an antitrust analyst at Georgetown University’s Center for Business and Public Policy, told Bloomberg Law.
Geoffrey Manne, executive director of the International Center for Law & Economics, said it’s hard to reconcile the DOJ’s call for an “evidence-based approach” with the government’s AT&T suit.
“I’m confident that the uncertainty for companies caused by DOJ’s stance in the AT&T merger will be short-lived because the court will clarify that the department’s position is meritless,” he told Bloomberg Law.
Under former President Barack Obama, the DOJ and the Federal Trade Commission blocked several high-profile mega-deals, including Halliburton Co.’s bid to acquire rival oil-services firm Baker Hughes Inc. and Staples Inc.’s deal with Office Depot Inc. The agencies so far have shown no signs of slowing under President Donald Trump.
“We do expect to see continued vigorous enforcement of the antitrust laws generally from both agencies,” said Logan Breed, an antitrust partner in the Washington office of Hogan Lovells LLP.
Delrahim has only been seated for a short time, and the president’s nominees for the FTC are awaiting Senate confirmation. The DOJ’s AT&T complaint has essentially put companies on notice, he said.
“I think this enforcement action opened some eyes, for sure,” Bill Kucera, an M&A partner at Mayer Brown LLP in Chicago, told Bloomberg Law. “I don’t expect it to be a major impediment to dealmaking. But it’s clearly there, and you can’t ignore it.”