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17th of July 2018

Economy



US antitrust chief signals comfort with tech deals

Kadhim Shubber in Washington

July 12, 2018 Print this page

The US justice department’s antitrust chief has indicated he is comfortable with large technology groups snapping up smaller rivals, arguing that “great efficiencies” can come from such deals in Silicon Valley.

Makan Delrahim, who was given the post by Donald Trump in 2017, told the Financial Times that consumers had benefited from deals such as Google’s $1.65bn acquisition of YouTube in 2006 and its $966m takeover of Waze, the driving app, in 2013.

“You wonder would YouTube be as useful and as a competing force to music or in video had it not been enhanced and improved through the tech resources that Google had?” he said, adding that Waze had benefited from Google’s search technology.

“I think there’s great efficiencies that could occur from a lot of these. You can’t, you know, in retrospect try to second guess that.”

I think you’ve got to get out of the way and let the market decide what competition is

His comments in an interview this week come as lawmakers in the US and Europe increase their scrutiny of big tech companies and progressives push for a rethink of US antitrust rules they claim are ill-suited to the modern digital economy, where services are often free to consumers and paid for by targeted advertising.

Mr Delrahim, who previously worked in private practice as an antitrust lawyer and lobbyist, has argued that no substantial change in the law is needed. He gave little impression he was concerned about the growing might of Silicon Valley technology companies.

He said he had not yet seen evidence that businesses were using their vast stores of consumer data to illegally crowd out competitors and voiced concern that the aggressive stance taken by regulators in Europe could harm competition.

The European Commission is expected to fine Google billions of euros for alleged anti-competitive conduct with respect to its Android mobile operating system and could require changes to how Google operates that business. It will be the second action taken against Google in as many years.

“I think they’re well-intentioned and their law continues to develop there so I don’t think anybody’s looking at it wrong,” said Mr Delrahim. “But I think it’s really important to examine the effect those types of enforcement actions could have.”

Last month, Mr Delrahim lost the first big antitrust case of his time in office when a judge allowed AT&T and Time Warner to merge and slammed the justice department’s case in a 172-page judgment.

AT&T used Mr Trump’s campaign vow to block the deal to accuse Mr Delrahim, who had worked in the Trump White House before his appointment to the Department of Justice, of being politically motivated. He has vociferously denied the suggestion. On Thursday, the DoJ appealed the decision.

The antitrust chief shares responsibility for enforcing US competition law with the Federal Trade Commission, whose new chairman, Joseph Simons, gained a reputation for being an active enforcer when he ran the FTC’s bureau of competition in the early 2000s.

Mr Delrahim has adopted a business-friendly tone, but has made a point of demanding divestitures to solve competitive concerns in mergers rather than imposing regulatory constraints on how businesses can act.

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He held up the epic antitrust battle against Microsoft in the 1990s and early 2000s as a model for the type of case he would pursue. The DoJ sued to break up Microsoft for abusing its dominance in computer operating system software to suppress the threat from new internet browsers such as Netscape. The government eventually lost on appeal and the case was settled.

Mr Delrahim said he would pursue cases where companies use their market power to “disadvantage and discriminate against a new technology that would challenge that monopoly position” and where there are documents showing that executives are attempting to suppress competitors instead of helping consumers.

He said the question for antitrust enforcers was “is that the type of practice that is happening with a Google or anybody else?”. He declined to answer but said “that will be the type of theory we would look to and look for that kind of evidence to examine any type of anti-competitive practice”.

Evidence of his outlook can be seen in his response to the Supreme Court’s decision in June in favour of American Express, which was sued by the Obama administration for the terms it imposed on merchants. The “anti-steering” rules ban merchants from encouraging customers to use cheaper credit cards.

The court found that both sides of the American Express business — merchants and consumers — had to be taken into account when assessing the effect of the restrictions.

Mr Delrahim said he was relieved the court had not ruled in favour of the government in a way that may have negatively affected other companies that run two-sided markets, such as Uber and Lyft.

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“It doesn’t mean that this is a free pass to Uber and Lyft to fix prices, you know we’ll put them in jail if that’s what happens,” he said.

But he said the Supreme Court’s decision allows for “the public good, the efficiency, the increased output they have provided by introducing that technology into the marketplace. That business model is incredible.”

He said his approach is influenced by Robert Jackson, the former Supreme Court justice who was appointed by Franklin Roosevelt and argued against federal price controls on commodities such as steel and wheat.

“I’m not a police of any particular business, I’m a police of the free market system,” he said. “I think you’ve got to get out of the way and let the market decide what competition is and what prices should be.”

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