The Antitrust Cop and the Tech Industry
In her first extensive interview since taking office in April, Varney described an antitrust philosophy that is clearly more aggressive than in the recent past yet also less ideological than many businesspeople may expect. Varney says her goal is to bring antitrust law back to its historical center, not simply to go after giants because of their size. "We are not anti-big in any way, shape, or form," says Varney, a former Federal Trade Commissioner who spent the past 12 years representing corporations as a partner at the Washington law firm Hogan & Hartson. "But with enormous success comes responsibility."
Varney says the Justice Dept. will be taking a look at a range of industries including transportation and technology. Antitrust officials have also opened inquiries in agriculture, financial services, telecom, and health care, say sources familiar with the Justice Dept.'s activities.
A veteran of the tech industry, Varney set up the Internet practice at Hogan & Hartson and advised Netscape Communications during the U.S. government's antitrust lawsuit against Microsoft (MSFT). Now she wants to update antitrust law for the Digital Age. Varney says tech businesses are unusually vulnerable to concentration of power because of what are known as network effects. The idea is that the more people join a network, the more powerful that network becomes. She thinks Justice should watch for abuse within such networks, and be ready to act quickly. "In a network setting, you can tip into a dominant player pretty fast," she says. "You want to keep the competitive playing field open and vigorous."
Although Varney would not comment on specific investigations, lawyers expect antitrust officials to take a hard look at Intel (INTC) and Google (GOOG). In a June 2008 speech, before she joined the Justice Dept., she compared Google to Microsoft. Google, she said, was quickly gaining power in cloud computing, where technology is based on the Web instead of the PC, and may be able to block rivals from competing in this key arena. "I think we're going to continually see a problem, potentially, with Google," she said. "Companies will begin to allege that Google is discriminating, not allowing products to interoperate with other products."
Varney's tough talk has spooked technology executives. Google, Intel, and others declined to comment on the record for fear of drawing fire from Justice. So far, Varney has the full support of the President, says Lawrence H. Summers, Obama's chief economic adviser. "Vigorous antitrust policy is a crucial part of economic strategy that unleashes the full power of markets," says Summers.