Two Antitrust Watchdogs Go at ItBy
(Changed to clarify Varney's comments in the seventh paragraph.)
The Federal Trade Commission and the Justice Dept. have been arguing since at least 2008 over which agency should take the lead in investigating Google's (GOOG) business operations. The agencies have split antitrust reviews of the Mountain View (Calif.) company's deals, with the FTC scrutinizing Google's acquisitions of AdMob and DoubleClick along with claims that its Buzz social-networking service violated privacy rights. The DOJ examined Google's acquisition of ITA Software, a potential advertising alliance with Yahoo! (YHOO), and Google's plan to create a digital library.
The rivalry between the two agencies goes all the way back to 1914, when Congress created the FTC in response to complaints that government was doing too little to control monopolies. Until then the DOJ had sole jurisdiction over antitrust enforcement. Nowadays, the decision on which agency will handle a case usually turns on which has more expertise on a company or industry.
The public jockeying between the Pennsylvania Avenue neighbors is reaching new heights. J. Thomas Rosch, a Republican who's one of five FTC commissioners, has warned of a "turf war," while Christine A. Varney, head of the DOJ's Antitrust Division, says Congress "may well want" to intervene and clarify the agencies' jurisdictions. FTC spokeswoman Cecelia Prewett says the agency "works productively" with the DOJ.
The infighting has created uncertainty for business, says Sean Heather, executive director of the global regulatory cooperation project at the U.S. Chamber of Commerce. "No one would design the system we have if we were starting a new antitrust regime yesterday in the U.S.," he says.
Haggling has been contentious over Apple (AAPL). The DOJ is examining the company's iTunes digital music service while the FTC probes Apple's actions in the mobile-advertising market, according to people familiar with the matter. Both agencies are looking at Apple's media subscription service. Adam Kovacevich, a Google spokesman, and Kristin Huguet, an Apple spokeswoman, declined to comment.
In March the FTC's Rosch said the Administration needed to give his agency sole responsibility for reviewing accountable care organizations, the networks of doctors, hospitals, and insurers authorized under President Barack Obama's health-care overhaul. There is a concern that some of these organizations could hinder competition. The agencies ended up agreeing to share oversight.
In an e-mail response to questions, Rosch said he thought lawmakers should give the FTC control over civil competition matters, leaving the DOJ to handle criminal investigations. "I have no problem with Congress reviewing the authority of both agencies," he says. Varney, who is a former FTC commissioner, said "one option" is for the FTC to handle consumer protection while the DOJ deals with competition and monopoly issues. "I think what business needs is clarity, certainty, and understanding of the legal framework within which their deals will be evaluated," she says.
As the Obama Administration looks for ways to streamline the federal government, the time may be ripe for an overhaul. In January's State of the Union speech, the President said he had ordered a review of government regulations "to reduce barriers to growth and investment." A White House official declined to say if the review would include changes to antitrust enforcement.
Some members of Congress are open to the notion of following in the footsteps of other countries, most recently the U.K., in creating a single competition watchdog. "Consolidation is an idea worthy of exploring," Representative Hank Johnson (D-Georgia), who sits on the House Judiciary committee, said in an e-mailed statement.
Antitrust lawyers have long complained that the agencies have different legal standards and procedures. "It's the luck of the draw as to which agency gets the matter, which can affect whether you get the deal through, and what the remedies are, which creates tremendous uncertainty," says Marc G. Schildkraut, an antitrust lawyer with Dewey & LeBoeuf in Washington.
The Justice Dept. is required to try cases in court. By law, when seeking a preliminary injunction to stop a deal, the agency must show a judge that the harm of not doing so would be "irreparable." In contrast, the FTC, to get an injunction, needs to convince a federal judge that a deal raises a "serious" legal question. The FTC can try a case within its own internal court system, where authority lies with the agency's administrative law judge and five commissioners.
Companies usually prefer dealing with the DOJ because they find the FTC process can be long and costly. In a Feb. 10 speech, R. Bruce Josten, executive vice-president for government affairs at the Chamber of Commerce, said his organization supports consolidating merger enforcement at Justice.
"There just isn't an easy solution," says Deborah A. Garza, who headed a bipartisan commission set up by Congress in 2007 to study antitrust enforcement. Garza, now co-chairwoman of the antitrust and consumer law practice at Covington & Burling in Washington, says the commission decided against urging an overhaul because of a lack of consensus on what changes to make and resistance from Congress. Eleanor M. Fox, a law professor at New York University, believes chances are slim that the present Congress will tackle the issue: "This has come up for years and years and years, and there has never been support."
The bottom line: Business would like to see antitrust enforcement consolidated under a single agency. Prior attempts to streamline that have foundered.