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ANALYSIS – U.S. antitrust chief delivers on aggressive ambitions

By Reuters Staff
July 8, 2009

XM Satellite Radio in Washington    By Diane Bartz
   WASHINGTON, July 8 (Reuters) – Telecommunications companies are being probed for potential antitrust violations. Drug company deals to delay generic entry are declared illegal. Talent-poaching among high tech firms is being investigated.  And there’s more.


   In the two months since Christine Varney took over the Justice Department’s antitrust division, it has also opposed antitrust immunity for Continental Airlines Inc to join UAL Corp’s United Airlines and others in the Star alliance, and began probing a class action settlement that would allow Google Inc to digitize millions of books.
   This is a big change from the Bush administration, when antitrust regulators were criticized for approving deals like the merger of appliance rivals Whirlpool and Maytag in 2006 and the 2008 merger of XM and Sirius, the only two U.S. satellite radios.
   Varney said in early May that she planned to take a more aggressive approach with dominant firms which use their market power to crush competition.
   Smaller telecommunications firms have long complained that the giants AT&T Corp and Verizon Communications  — used their market share to squeeze out smaller rivals by refusing roaming data deals. “What you may not be able to do is get email on a BlackBerry (outside of a certain range),” said Eric Graham, vice president of government relations for Cellular South.
   Sen. Herb Kohl, a senior Democrat on the Senate Judiciary Committee, wrote to the Justice Department and Federal Communications Commission on Monday to reiterate his concerns about a failure of big carriers like Verizon and AT&T to make roaming deals and about exclusive cell phone company deals with handset makers, among other issues.
   “We urge that the antitrust division closely examine the cell phone industry to ensure that dominant carriers do not take action to stifle competition,” Kohl wrote.
   The Justice Department was looking into the industry, according to the Wall Street Journal, which did not say which companies were being scrutinized.
   “I like the general tenor of what I’m hearing (about Varney),” said John Rooney, president and CEO of US Cellular Corp. “I’d like to see her take a look at the concentration of telecommunications resources, mainly spectrum and wireline (landline).”
  
   HERE’S LOOKING AT YOU, GOOGLE
   Even companies with close links to the Obama administration are facing tougher scrutiny.
   Google, whose chief executive, Eric Schmidt, was an avid Obama supporter, is among the big tech businesses now under investigation for possible pacts to refrain from poaching one another’s talent. Search engine rival Yahoo Inc, computer and music player maker Apple Inc and biotech company Genentech, now owned by Roche Holding AG, have been notified of a formal probe.
   Varney has criticized the Bush administration for failing to scrutinize mergers by companies in the same supply chain. While she did not mention it by name, the antitrust division is looking at a proposed merger of Ticketmaster and Live Nation, the world’s largest concert promoting company, in what most consider a vertical merger.
   Pharmaceutical makers are seeing the tide turn against deals in which a brand name company pays a generic rival to delay entrance of a cheaper version.
   The Federal Trade Commission has opposed the pay-for-delay agreements but the Justice Department demurred — until Monday when Varney signed a legal brief which said the deals should be considered “presumptively unlawful.” In that case, now on appeal, Bayer <BAYG.DE> paid Barr Laboratories to stop it from bringing a generic version of the antibiotic Cipro to market.
   Bills pending in the U.S. Congress would prohibit the deals. President Barack Obama supports a ban, which the FTC estimates would save consumers, insurance companies and the federal government $3.5 billion every year.
   In late June, the Justice Department opposed blanket antitrust immunity for Continental Airlines Inc to join UAL Corp’s United Airlines and other carriers in the Star alliance in comments delivered to transportation officials.
   In the comments, Varney said full immunity would “substantially lessen” competition between U.S. cities and Beijing where United and Continental provide substantial connecting service.
   This new aggressiveness has pleased at least some onlookers
   “She’s doing an excellent job,” said a senate staffer who was not authorized to be quoted. “She came in and promised to be a vigorous antitrust enforcer, and has been so.”
   (Reporting by Diane Bartz; Editing by Richard Chang)

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