By DEVLIN BARRETT
Associated Press

WASHINGTON - The Obama administration warned corporate America Monday that the government will more aggressively investigate big firms that hurt smaller competitors, contending that lax enforcement by the Bush administration contributed to the current economic troubles.

Assistant Attorney General Christine Varney said the Justice Department is abandoning legal guidelines established by George W. Bush's administration in September 2008. Critics complained that the earlier instructions made it difficult to pursue antitrust cases against big corporations.

The move could have serious implications for two corporate giants, Intel Corp. and Google. Intel is already enmeshed in an antitrust case with European Union regulators, and Monday's change is seen as shifting the U.S. toward the European approach to anti-monopoly enforcement.

Varney laid out the new policy in a speech to the Center for American Progress, a left-leaning think tank.

She said some of the economy's problems were due to the lack of enforcement in the previous 10 years - a clear jab at the Bush administration, which, she said, raised too many hurdles to antitrust investigations.

"There was a high cost to standing aside. We must change course and take a new tack," said Varney.

Thomas Barnett, who helped craft the Bush guidelines as the then-head of the antitrust division, disputed the claim that his office had taken a passive role in enforcement.

"We were involved and engaged," said Barnett, who added that the Obama administration should issue new guidance to explain where officials will now draw the line on corporate conduct.

The new rules mark a return to the antitrust policies of the Clinton administration, which brought a major action against Microsoft Corp. These days, similar questions are being asked about the market dominance of Google.

The Justice Department is reviewing a proposed legal settlement with authors and publishers that would expand Google's digital library of books, after some librarians and consumer activists complained that the proposed settlement will give Google a digital monopoly on millions of books.

Asked about Google, Varney insisted that her remarks were not aimed at any particular company or industry, but wanted all companies to get the message.

"Look, when you become successful and you have market power, however you define it, you need to pay attention to the rules," she said.

Bruce McDonald, a lawyer and former antitrust official in the Bush Justice Department, said Varney's comments gave no clear indication as to whether the government will challenge Google's conduct.

"We now know what direction Ms. Varney wants to take the antitrust enforcement, but exactly how far she will go will only be known when it's played out in particular cases," he said.

Ed Black, president of the Computer and Communications Industry Association, said Varney's remarks showed that firms should "do some self-correcting before they get corrected" by the government.

"It's clear we have a new sheriff in town, and I think there is so much that has been left ignored and not dealt with," said Black.

The Justice Department is following up on a campaign pledge by President Barack Obama, who said the Bush administration had "what may be the weakest record of antitrust enforcement of any administration in the last half-century."

Varney said the Obama administration would try to follow the historic lessons of The Great Depression of the 1930s in pursuing antitrust cases even in a troubled economy.

Varney, 53, served as a Federal Trade Commissioner during the Clinton administration, specializing in Internet-related competition issues.

Last month, the government asked a judge to extend its oversight of Microsoft to May 2011, following a 2002 settlement over antitrust issues.

Ineffective government regulation, she argued, is contributing to the current economic problems.

"As antitrust enforcers, we cannot sit on the sidelines any longer," she said, adding that new legislation may be needed to improve policing of the marketplace.

Her division has also launched a program designed to find fraud or anticompetitive collusion surrounding the government's $787 billion economic stimulus package.

Tech firms could see fallout from shift on antitrust enforcement

If the Obama administration is serious about responding more aggressively to antitrust complaints, some of technology's biggest companies could have to rethink their business strategies or expansion plans.
The administration said Monday it has abandoned Bush-era policies that it criticized as too friendly to companies that dominate their markets. The Justice Department didn't call out any companies by name, and its shift in approach will affect all industries. But it raises the stakes for tech heavyweights whose practices have been questioned elsewhere more than in the United States.
For instance, Intel Corp. could face a steep fine in Europe this week over its behavior in the microprocessor industry. An IBM Corp. competitor is accusing the company in Europe of manipulating the market for mainframe computers. Microsoft Corp. - a marquee antitrust defendant during the Clinton administration - has been battling other charges in Europe in this decade as well.
Tougher antitrust enforcement could also focus on Google Inc., whose leading market shares in online search and advertising markets were already drawing scrutiny in the waning days of the Bush administration.
It remains to be seen whether the Justice Department's different approach will lead to more court cases or more challenges to proposed business deals. But antitrust lawyers say a more aggressive antitrust philosophy likely would make the Obama administration resemble the Clinton years far more than the Bush years.
"This is back to the future," said Stephen Bomse, partner in the antitrust group of the Orrick Herrington & Sutcliffe law firm.
Under Clinton, the Justice Department brought 12 anti-monopoly cases that didn't involve mergers or acquisitions. That included the long-running case against Microsoft in which a judge at one point ordered Microsoft split into two. (The case eventually was settled with the Bush administration, though it lives on: The Justice Department recently extended its oversight of Microsoft's compliance with the settlement for another 18 months, into 2011).
Under Bush, the department brought three anti-monopoly cases, but none outside of mergers and acquisitions. The targets in those cases were Chicago-based industrial component supplier Amsted Industries Inc., newspaper publishers Daily Gazette Co. and MediaNews Group Inc., and chip maker Microsemi Corp.
Robert Pitofsky, chairman of the Federal Trade Commission from 1995 until 2001 and now an attorney with the Arnold & Porter law firm, said he doesn't think the U.S. will entirely match Europe's zeal for antitrust cases.
One reason is that the U.S. is still more likely to have a free-market bent than Europe, he said. And it can be tricky to regulate technology from an antitrust perspective. Technological innovations can create monopolists very quickly by cornering or creating specific parts of a market. If regulators are too aggressive, they run the risk of stifling innovation.
"The vast majority of activity in Silicon Valley is innovation, trying to make a better product - that was not viewed as anticompetitive under Bush or Clinton," said Jonathan Jacobson, a partner in the antitrust practice at the Wilson Sonsini Goodrich & Rosati law firm. "Technological innovation is supposed to keep you out of trouble."
But the standard that tech companies are judged by - whether they are engaging in "exclusionary" or "predatory" conduct against competitors - is the same as everyone else. Viewed through that lens, tech companies can be at a disadvantage because they grow so fast and can get on regulators' radars much more quickly.
Already, fears of a tougher antitrust regime under Obama might have played out in Silicon Valley. When IBM was discussing a proposed $7 billion takeover of rival Sun Microsystems Inc. this spring, Sun sought detailed assurances that IBM would see the deal through an antitrust review. When the talks collapsed, Sun ended up agreeing to be acquired by Oracle Corp., a company with less overlap with Sun, meaning the deal is perceived as less likely to generate antitrust questions.
Intel's antitrust challenges arose from complaints by smaller rival Advanced Micro Devices Inc. According to AMD, Intel boxed AMD out of certain accounts by paying computer makers and retailers to avoid AMD's products. AMD claims that Intel would drop this hammer when AMD's market share would get too big.
Intel, which owns about 80 percent of the worldwide PC microprocessor market, argues that the rebates it offered were legal, and are a common way to reward buying in very high volumes.
European regulators don't buy Intel's argument. They have charged Intel with engaging in a coordinated strategy to limit AMD's reach, including by selling server chips below the cost of making them. The European Commission is expected to formally fine Intel this week. The fines can be up to 10 percent of a company's annual revenue, and in 2008, Intel had $37.6 billion in worldwide sales.
The U.S. initially stayed on the sidelines while Intel and AMD began duking it out overseas in 2003. Last year U.S. regulators stepped up their inquiries, with the Federal Trade Commission opening a formal probe into Intel's sales tactics. The FTC's two-year investigation had been considered "informal" until that point. So far, the U.S. Justice Department has not taken action.

- Jordan Robertson, Associated Press