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Business Costs & Regulation

Tighter Scrutiny for Deals,
Business Practices

Christine Varney aims to make a mark as the head of the Justice Department’s Antitrust Division.

There’s a new cop on the antitrust beat, one who’s tougher and more aggressive and who has the solid backing of the White House.

Expect more scrutiny of mergers, especially as merger and acquisition (M&A) activity picks up. More heat, too, on anticompetitive moves, such as collusion, price-fixing or predatory behavior, among and between businesses in markets where few players dominate. That’ll be a big change from the Bush administration, which took a more hands-off approach and only went after companies if there was clear evidence that consumers were being hurt. The Bush administration believed mergers were generally good for the economy and that a light regulatory hand was more beneficial than aggressive inspections of business practices.

Running the crackdown: Christine Varney, who heads the Justice Department’s Antitrust Division. She’s a former member of the Federal Trade Commission (FTC) and a Washington lawyer specializing in the Internet. She’ll soon be a familiar name in many boardrooms.

Varney’s first move was to lower the bar for what will trigger an antitrust inquiry. She’s more willing to look closely at complaints that business practices limit competition, not only that consumers may be put at a disadvantage by a particular business practice.


Big companies will get the most attention, but midsize firms, including restaurant chains, and smalls, such as regional movers, will be tagged if they appear to cut prices to kill off independents, for instance.

Internet and other high-tech firms are high on Justice’s new watch list. Google is already under the microscope for its plans to launch an operating system and provide it free to netbook suppliers; for its close ties to Apple; and for its pact with authors and publishers to digitize millions of books.

“Google will not have a free ride,” says Albert Foer, president of the American Antitrust Institute. “However, keep in mind that antitrust regulators don’t go after a company only because it is big and getting bigger. Google…has become a salient part of the economy.”

Look for clues in the new approach to antitrust, also, in how the FTC handles ongoing allegations against Intel. The chip maker’s settlement with rival Advanced Micro Devices takes some pressure off, but it won’t end probes into allegations of unfair practices.


Also noteworthy is the Justice Department’s investigation into makers of optical disc drives that read DVDs and CDs. Among the big players being eyed are Sony, Hitachi and Toshiba.

Other industries on the patrol list: Airlines, for possible collusion under marketing and ticketing alliances; large commercial truckers, for temporary cuts in prices that may drive independents out of business; and brand-name-drug firms for policies that allegedly delay generic alternatives. Also included are electric power providers, refiners, food processors, packers, ranchers, dairy operators and seed suppliers.

Among the mergers being studied: Ticketmaster and Live Nation…the combination would have a lot of power over ticket prices. The marriage of Denbury Resources and Encore Acquisition, two oil and gas exploration and production companies. Also toolmaker Stanley Works’ plan to buy Black & Decker. Though their focus is different -- hand tools vs. electric -- there are few other toolmakers that can compete.

The new focus on mergers coincides with a postrecession pickup in M&As. The wider scrutiny from Washington will delay some deals, but it isn’t likely to slow down interest.