Legal News

Are Telecoms the Next Government Antitrust Target?

By Ashby Jones

Ever since the DOJ’s antitrust chief, Christine Varney, announced in May that a major shift in antitrust enforcement policy was underway, we’ve been eagerly awaiting the next step. That’s largely because Varney hinted that she might dust off Section 2 of the Sherman Antitrust Act — the section which prohibits “monopolization,” or single-firm anticompetitive behavior. These cases, while brought relatively infrequently, are often huge and political and rile up folks of all sorts of political stripes. Think Standard Oil and Microsoft.

Well, at last we have a bit of news on who, or at least which industry, might represent the next target. It’s telecom. According to a story by the WSJ’s Amol Sharma, the DOJ has begun an initial review to determine whether large U.S. telecom companies such as AT&T and Verizon Communications have abused the market power they’ve amassed in recent years, according to people familiar with the matter. Click here for the story.

According to Sharma’s story, the review of potential anti-competitive practices is in its very early stages, and it isn’t a formal investigation of any specific company at this point, the people said.

Among the areas the Justice Department could explore is whether wireless carriers are hurting smaller competitors by locking up popular phones through exclusive agreements with handset makers, according to the people. In recent weeks lawmakers and regulators have raised questions about deals such as AT&T’s exclusive right to provide service for Apple iPhone in the U.S.

The Justice Department may also review whether telecom carriers are unduly restricting the types of services other companies can offer on their networks, one person familiar with the situation said.

Combined, the two companies control 90 million landline customers and 60% of the 270 million U.S. wireless subscribers. They also operate large portions of the Internet backbone, ferrying data across the country and overseas.

A Justice Department spokeswoman declined to comment.

Some antitrust experts said the government would have a tough time opening a Sherman Act case against telecom providers if it chooses to do so. To bring a case, the government must show that a company is abusing its market power.

“It would be a very hard case to make,” said Donald Russell, a lawyer at Robbins Russell in D.C. “You don’t have any firm that’s in a dominant position. Usually, you need to show a firm has real market power.”

Full post as published by Law Blog - WSJ.com on July 06, 2009 (boomark / email).