Antitrust Turf War Brews on Tech Front -- WSJ

Date : 08/06/2019 @ 8:02AM
Source : Dow Jones News
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Antitrust Turf War Brews on Tech Front -- WSJ

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By John D. McKinnon and James V. Grimaldi 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 6, 2019).

WASHINGTON -- The Justice Department and the Federal Trade Commission are clashing over their oversight of the Trump administration's antitrust agenda in the technology industry.

The Justice Department's antitrust division has flexed its muscles in ways that have rankled staff at the FTC, most particularly in an antitrust lawsuit against Qualcomm Inc. After the FTC prevailed in a 10-day trial in federal court in San Francisco in May, FTC lawyers were taken aback when Justice Department lawyers sided with Qualcomm in the appeal phase of the litigation.

The two agencies, which have divvied up antitrust enforcement for more than a century, have been known to skirmish over their shared responsibilities in the past. But some observers say it has reached new heights just as the scrutiny of companies such as Alphabet Inc.'s Google unit, Amazon.com Inc., Facebook Inc. and Apple Inc. has become a priority in Washington.

The tensions are raising alarm, from the antitrust legal community to Congress, that the continuing feud could disrupt the coming probes into large technology companies, sometimes called Big Tech, or could place an unfair burden on the companies under review.

"What's evident from this latest institutional tug of war is that the Antitrust Division and FTC are now actively battling each other to take the lead in pursuing Big Tech," Sen. Mike Lee (R., Utah), the chairman of the Senate antitrust subcommittee, said last month.

The jurisdictional skirmishing is raising the possibility that individual companies could face different and possibly duplicative investigative approaches and civil subpoenas, depending on which agency winds up probing a particular company or practice.

The tussling over jurisdiction was on display last month when the Justice Department said that it was conducting a sweeping review of "whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation or otherwise harmed consumers."

The announcement caught by surprise some senior staff at the FTC bureau of competition, though the commission chairman himself was informed ahead of time, according to people familiar with the matter. Before opening investigations, the agencies usually consult with one another and negotiate agreements to avoid duplicating efforts.

And yet, the announcement muddled aspects of an agreement the two sides had reached just a few weeks earlier. In that earlier agreement, described by multiple people familiar with the matter, the Justice Department was to focus on issues surrounding Google as well as Apple, while the FTC was to take on certain issues surrounding Facebook and Amazon.

In its statement last week, however, the Justice Department signaled its review would explore "the widespread concerns that consumers, businesses, and entrepreneurs have expressed about search, social media, and some retail services online."

The reference to social media and retail services was widely interpreted by the legal community to mean Facebook and Amazon, two companies that under the earlier agreement stood to have at least some of their conduct reviewed by the FTC.

"For the outside observer, such internecine warfare can only undermine confidence in the agencies and lead to public distrust," said Andrew Gavil, a Howard University antitrust law professor. "It will also needlessly complicate any investigations and leave the wider technology community guessing as to where the line is between lawful and unlawful business strategies."

The head of the FTC's competition bureau, Bruce Hoffman, said that the agencies have sorted jurisdictional issues through "a process that has generally worked very well, and been respected by both agencies, for decades (with, of course, rare hiccups that always get straightened out)."

The Justice Department declined to comment.

FTC Chairman Joe Simons said in a brief interview last month that the FTC, like the Justice Department, is looking into areas where individual companies enjoy market power. He said he wasn't worried about the possibility of overlapping with the Justice Department when it comes to investigations into specific companies.

Mr. Simons added that the Justice Department-FTC agreement -- first reported by The Wall Street Journal in late May -- didn't foreclose the possibility of the Justice Department looking into some aspects of a tech giant while the FTC focused on other aspects of the same business.

For instance, the Justice Department could look into Amazon's book publishing, where the antitrust division has always had expertise, while the FTC could focus on Amazon's grocery-store operations, since the commission has traditionally handled retail investigations.

The FTC announced its own high-tech task force early in the year to conduct a similar wide-ranging review. But that was before the agreement announced in late May.

Makan Delrahim, assistant attorney general for the Justice Department's antitrust division, said in an interview in June that he favors taking a broad view of whether Big Tech dominance is harming innovation, product quality and consumer choice. His boss, Attorney General William Barr, also has signaled interest in potential antitrust issues in the Big Tech area.

Sen. Lee, a critic of the Big Tech investigations, urged better coordination and said he planned to explore the jurisdiction issue at a coming Senate hearing. "Their duplicative reviews will inevitably waste government resources and lead to the agencies taking contradictory positions on the same issues," Mr. Lee said.

Mr. Lee's Democratic counterpart on the House antitrust subcommittee, Rep. David Cicilline (D., R.I.), who is more sympathetic to the investigations, raised similar concerns in a letter to Mr. Delrahim in May. Mr. Cicilline was troubled particularly by the Qualcomm intervention.

"It is especially striking that the Division would think it appropriate to broadly channel this view through unprecedented interference in a sister agency's case," Mr. Cicilline wrote. "The fact that the defendant in the Commission's case is a former client of yours also raises a serious ethics question about the degree of involvement in the decision to file this statement."

Mr. Delrahim, who was a registered lobbyist for Qualcomm from 2014 to 2016, didn't sign the two briefs that have caused consternation at the FTC. He has criticized the FTC's legal theory in a speech, but didn't mention Qualcomm. He recently signed another Justice Department brief siding with Qualcomm on a related private case before the same federal judge.

A Justice Department spokesman said Mr. Delrahim followed the advice of the department's ethics officials. "He was recused from all matters involving Qualcomm until Jan. 21, 2019, when his recusal period was over, " the spokesman said. "Moreover, out of an abundance of caution he has recused himself from the specific matter of FTC v. Qualcomm."

One Justice Department filing that particularly stung attorneys at the FTC, according to people familiar with the matter, was a brief that openly questioned the merits of the FTC case and stating that Qualcomm was likely to succeed on appeal.

While not directly related to the broader technology investigations, the Qualcomm dispute could make it difficult for the attorneys to cooperate as they embark on parallel investigations, said Herb Hovenkamp, an antitrust law professor at the University of Pennsylvania Law School.

"I think the FTC is rightfully feeling injured and somewhat abused by this," Mr. Hovenkamp said. "That could certainly muddy the waters and create some hard feelings."

Write to John D. McKinnon at john.mckinnon@wsj.com

 

(END) Dow Jones Newswires

August 06, 2019 02:47 ET (06:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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