Just Right on Antitrust - Industry Trend or Event

JOEL KLEIN, WHO ANNOUNCED LAST WEEK THAT he will leave his post as assistant attorney general for antitrust, will always be known in Washington as the man who took on Microsoft. In some respects his reputation hangs on whether the Justice Department's extraordinary victory in its case against the software giant survives the appeals process. But even if parts of the verdict are overturned, it will be hard to fault Klein's determined and highly effective pursuit of the case.

Yet the Clinton administration's legacy in this area extends far beyond Microsoft, The Justice Department and the Federal Trade Commission have in recent years brought a whole new energy to antitrust enforcement, blocking mergers ranging from WorldComSprint to Staples-Office Depot and extracting concessions on many other deals. The FTC, in its current review of the AOL-Time Warner combination, is all but certain to impose restrictions on the deal.

There is still plenty of disagreement about whether all of this is a good thing. Our antitrust laws are old and open to a great deal of interpretation, so decisions of enforcement are ultimately based on economics and politics as much as legal theory. Since the workings of the global economy are not really understood very well - hardly anyone thought eight years ago that today's high-growth, low-inflation economy was even in the realm of possibility - it's extraordinarily difficult to determine whether a particular deal will be beneficial for the economy or not.

That said, the Clinton administration's antitrust policies - as well as those of the equally invigorated European Commission - certainly seem to have common sense on their side. The very point of many megamergers, after all, is to increase the combined companies' profitability by reducing competition, and that isn't likely to be a good thing for consumers in the long run. A deal like WorldCom-Sprint, which would have combined the No. 2 and No. 3 players in a long-distance phone industry that's already highly concentrated, looks almost like a test case as to whether any major merger would deserve to be blocked entirely. The caution that the failure of that transaction instilled in deal-hungry investment bankers is surely welcome.

One could easily argue that even though antitrust enforcement has come a long way from the laissez-faire approach of the late Reagan and Bush administrations, it still isn't stern enough: Many people in the Internet business fear that AOL Time Warner will be too dominant for anybody's good. Klein and his counterparts at the FTC have been careful to avoid using mere size as a criterion for intervention, a legally sound position that nonetheless grates on many consumer advocates.

Given all the complexities, it seems to us that the current tenor of antitrust policy is just about right. There's plenty of historical evidence to show that markets, left unhindered, will lead to unhealthy levels of economic concentration. A lot of deal-making is driven as much by opportunities for personal gain as by any kind of real business logic. Microsoft, with it's brazen disregard of even its own agreements with the government, essentially begged to be prosecuted. Let's hope that the next administration walks the antitrust line as well as this one has done.

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