Antitrust Chief Stresses Role of Competition in Digital Economy--Update

Date : 06/12/2019 @ 12:42AM
Source : Dow Jones News
Stock : Alphabet Inc. (GOOG)
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Antitrust Chief Stresses Role of Competition in Digital Economy--Update

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By Brent Kendall, Kristina Peterson and Keach Hagey 

The Justice Department's top antitrust official said he would act to protect competition in the digital marketplace, his first public remarks on the issue since news reports that the department was preparing to investigate Alphabet Inc.'s Google.

U.S. Assistant Attorney General Makan Delrahim, in a speech delivered Tuesday via video to a Tel Aviv University antitrust conference, didn't specifically mention plans for an investigation of big tech firms, but he said a close examination of the digital economy was important in markets where one or two companies were dominant.

"The current landscape suggests there are only one or two significant players in important digital spaces, including internet search, social networks, mobile and desktop operating systems, and electronic book sales," he said. "This is true in certain input markets as well. For example, just two firms take in the lion's share of online ad spending."

Some markets, he said, have few firms "for reasons having nothing to do with a failure of competition. Even so, digital markets are not impervious to anticompetitive transactions, illegal restraints and unlawfully obtained or exercised monopoly power."

Mr. Delrahim's remarks were his most aggressive to date in suggesting large tech firms were ripe for scrutiny, citing comparisons with monopolists from earlier eras, as well as quoting from a recent book critical of Big Tech.

The speech came amid other antitrust developments, including a call Tuesday by Sen. Elizabeth Warren (D., Mass.) -- who is running for president -- for Mr. Delrahim to recuse himself from any matters involving Google and Apple Inc. because he had previously done work for the companies while in private practice. The request prompted private discussions among both Google supporters and critics about whether work Mr. Delrahim did for the search giant 12 years ago was relevant for any investigation now -- and whether either side would benefit if he didn't participate in a Justice Department probe.

Elsewhere on Capitol Hill, a House antitrust subcommittee opened the first of planned hearings examining competition in the digital marketplace.

Senior Democrats said they would be willing to revisit antitrust laws to help address the challenges raised by the dominance of giant technology companies, including the decline of local journalism.

"Congress -- not the courts, agencies or private companies -- enacted the antitrust laws. And Congress must be responsible for determining whether they are equipped for the competition problems of our modern economy," said Rep. David Cicilline (D., R.,I.), the subcommittee chairman.

Witnesses, including David Pitofsky the general counsel of News Corp., the parent company of The Wall Street Journal, raised concerns over the ability of Facebook Inc. and Google to act as a fair gatekeeper between news outlets, readers and online advertisers.

Mr. Cicilline said the next hearing would focus on "the dominant platforms' impact on innovation and entrepreneurship."

Mr. Delrahim's speech, which aired at a conference whose attendees included a prominent Google economist, stressed that dominant companies can raise competition concerns in ways other than higher prices. The issue has particular relevance in the digital economy, where some companies give away their services free.

"Price effects alone do not provide a complete picture of market dynamics, especially in digital markets in which the profit-maximizing price is zero," he said.

Antitrust enforcers are concerned about harms to innovation, product quality and privacy, the DOJ antitrust chief said. He compared today's tech giants to the Standard Oil monopoly of the late 19th and early 20th century.

"Like today's tech giants, Standard Oil was pioneering and generated a number of important patents. Scholars have noted, however, that Standard Oil's innovation slowed as it became an entrenched monopolist," Mr. Delrahim said.

The Journal reported May 31 that the Justice Department's antitrust division was laying the groundwork for an antitrust investigation of Google, after reaching a jurisdictional agreement with the Federal Trade Commission. The department hasn't commented on whether it was planning such a probe.

Sen. Warren on Tuesday sent letters to Mr. Delrahim and a department ethics representative seeking the top antitrust official's recusal. She cited Mr. Delrahim's work for Google in 2007 as it sought approval from the Federal Trade Commission to buy internet ad firm DoubleClick, saying he "should not be supervising investigations into former clients who paid him tens of thousands of dollars to lobby the federal government."

Google in the years since the DoubleClick deal has grown into a force in the digital advertising market.

Legal experts said the matter likely would need to be examined by Justice ethics officials.

"The issue here is, did he get information while representing Google that can now be used against Google's interests," said Stephen Gillers, a professor of legal ethics at New York University. He said Mr. Delrahim may need both Google and the Justice Department's permission to participate.

Both Google supporters and critics were still forming their legal and strategic views on the issue, according to people familiar with the matter. Some of those people said it wasn't clear that Google had any role to play in deciding Mr. Delrahim's status.

--Dov Lieber contributed to this article

Write to Brent Kendall at brent.kendall@wsj.com, Kristina Peterson at kristina.peterson@wsj.com and Keach Hagey at keach.hagey@wsj.com

 

(END) Dow Jones Newswires

June 11, 2019 19:27 ET (23:27 GMT)

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

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