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Obama's Antritrust Warriors Get Ready to Keep Private Companies from Getting Too Big

Samuel Staley
July 28, 2009, 8:51am

The New York times has a feature on the new philosophy driving the antitrust division of the U.S. Department of Justice under Christine Varney. Some of the new aggressiveness is predictable. We would expect a populist progressive president to appoint officials who are skeptical of market dynamism. Indeed, they are opening cases on major companies that they believe are engaged in "anti-competitive" behavior according to their competitors.

"The offial, Christine A. Varney, the antitrust chief at the Justice Department, has begun examining complaints by the phone companies Verizon and AT&T that their rivals — major cable operators like Cablevision and Cox Communications — improperly prevent them from buying sports shows and other programs that the cable companies produce, industry lawyers said.

"At the request of some lawmakers, notably Senator Bernard Sanders, independent of Vermont, Ms. Varney is examining whether small agricultural operations are being hampered unfairly by large food processors, particularly in the milk industry, congressional aides said.

"Ms. Varney has also challenged agreements that the Federal Trade Commission and consumer groups say discourage pharmaceutical companies from marketing more generic drugs. And she is examining a settlement between Google and book publishers and authors to make more books available online."

This isn't surprising. What caught my eye was the following pasage:

"In a third area, a White House effort to overhaul financial regulation, officials weighed but rejected a significant antitrust role as a way to reduce the size of large companies considered too big to be allowed to fail.

“The struggles between the expert agencies and the Justice Department get to the heart and soul of exactly what the competition policy of the Obama administration will be,” said Mark Cooper, an antitrust expert and director of research at the Consumer Federation of America, an advocacy group.

"He added: “Now you have an antitrust division that cares about competition, and it is running up against the expert agencies that haven’t changed their attitudes yet.”

Thus, the Justice department may well be pursuing a conscious policy of keeping companies small so that their economic (and political) impact (and influence) will be smaller. This fits a populist approach to managing the economy--taxpayers don't like bailing out companies, so use regulation to keep companies from getting too big so politicians can resist the temptation to use tax revenues to bail them out.

A better approach would be to simply let the companies fail and be disciplined by the market place. But this apparently is no longer a politically acceptable option. So, the "solution" is to regulate the problem out of existence, even if it undermines the global competitiveness of our domestic firms.


Samuel Staley is Research Fellow


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