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Sunday, 20 April 2014

Trust bust-up

U.S. trustbusting would make a great monopoly

America’s two federal trustbusting agencies would make a great monopoly. The U.S. Justice Department is beating the pants off its rival, the Federal Trade Commission, with pushback on headline-grabbing deals. The FTC has meanwhile scored big points protecting consumers. Leaving antitrust to DoJ would reduce costs and make both agencies more effective.

Of the 90 or so nations with antitrust enforcement, virtually none splits the job in two. But American progressives feared the Supreme Court’s 1911 Standard Oil decision, which gave monopolies legal wiggle room, would limit Justice Department trustbusting. So in 1914 they helped create the FTC, an independent agency that could prevent unfair competition without resorting to the courts.

The DoJ’s budget-starved antitrust division subsisted on criminal actions until President Franklin Roosevelt revived it in the 1930s. Today the division does all those prosecutions while informally claiming jurisdiction over, for example, airline, telecommunications and financial services cases. The FTC’s remit includes civil matters involving the pharmaceutical, hospital and energy sectors. The agencies compete for the rest.

It has recently been no contest, though. The Justice Department squelched Apple’s e-book scheme and the AT&T and T-Mobile USA tie-up while forcing a revamp of AB InBev’s acquisition of Grupo Modelo and US Airways’ merger with American Airlines parent AMR. It also levied a record $1.14 billion in criminal fines last year. The FTC has little to show beyond wrapping up its Google investigation and clearing Nielsen’s acquisition of Arbitron and Express Scripts’ merger with Medco.

In fairness, the FTC’s five-commissioner governing structure encourages collegial decisions aimed at fixing deals rather than opposing them. And aggressiveness has its drawbacks. The modest concessions extracted in the US Airways settlement, for example, suggest the DoJ overreached at first.

What’s more, the FTC has shown impressive consumer protection chops, tackling Twitter, Google and others over unauthorized snooping, and suing Wyndham hotels for credit card data breaches. The commission can’t legally impose meaningful penalties - a mere $22.5 million against Google - and its jurisdiction is fuzzy, but its importance in policing the emerging problem area of data security is beyond dispute.

Duplicating antitrust efforts creates needless expense and uncertainty about the law. While a bickering Congress makes reform unlikely for now, getting the FTC out of trustbusting so it can play exclusively to its strengths is a worthy goal.

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A U.S. district judge on Nov. 20 ordered the Justice Department to solicit public comment on its agreement to settle an antitrust lawsuit challenging the merger of US Airways and American Airlines parent AMR. The settlement with the department, six states and Washington, D.C., was announced on Nov. 12, and the merger is scheduled to close next month.

On Nov. 15, the House of Representatives judiciary subcommittee held hearings to investigate how effective the Justice Department and Federal Trade Commission are at enforcing antitrust laws. The hearings included review of the airline merger and questions about whether the FTC has been as aggressive as DoJ on antitrust matters.

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