Trump’s Trustbusters Bring Microsoft Lessons to Big Tech Fight

(Bloomberg Businessweek) -- Their Yalta moment took place, appropriately enough, at an invitation-only meeting of the world’s top antitrust enforcers in mid-May. As attendees at the Cartagena, Colombia, conference debated competition policy in a digital economy, Makan Delrahim, chief of the U.S. Justice Department’s antitrust division, and Joe Simons, chairman of the Federal Trade Commission, divided four of the five largest U.S. tech companies between them.

After eight months of emails and discussion and decades of laissez-faire policy, they were ready to put Amazon, Apple, Facebook, and Google under the antitrust microscope, according to a person familiar with the matter. That decision, echoing the way Allied leaders carved up postwar Eastern Europe, launched what could be a new era of antitrust enforcement. Tech’s Big Four may not be sovereign nations, but their almost $3 trillion in combined market value exceeds many countries’ gross domestic product, and their power to determine what people read, watch, and buy is immense.

It’s now up to Simons and Delrahim to figure out whether, and how, to rein in the companies. Simons, a longtime FTC hand, kept responsibility for Facebook Inc., the subject of an ongoing consumer-privacy probe at the FTC, and also took on Amazon.com Inc. He agreed to hand to Delrahim oversight of Alphabet Inc.’s Google. The FTC had investigated Google but closed the case without taking any action in 2013. Delrahim also took jurisdiction over Apple Inc. A spokeswoman for Simons declined to comment for this story. A DOJ spokesman says the two agencies “continue to discuss their respective jurisdictions, as they always do.”

It’s no accident that the two, who aren’t close but occasionally meet for dinner, are the Trump administration’s generals in the new antimonopoly push. They were both foot soldiers in the last epic U.S. antitrust battle, the Justice Department’s late-1990s case against Microsoft Corp., then the dominant company in the tech industry. Simons may even owe his job as FTC chairman to his behind-the-scenes Microsoft role.

In a speech on Tuesday, Delrahim said he draws important lessons from the Microsoft case and praised it for opening the door to new competition in the industry from Google, Yahoo!, and Apple. Its central theory, he said, “is broadly applicable to other technology markets.”

A prolific writer of treatises on antitrust arcana, Simons, 61, served two previous FTC stints, once in the late ’80s during the Reagan administration and again in the early years of the George W. Bush administration. “I feel as though I have been essentially training for this job since law school,” he wrote ahead of his 2018 confirmation hearing. The low-profile lawyer pushes to get bipartisan support for the agency’s actions, which has often delayed matters at the commission, according to a person familiar with the matter. He prefers not to bring cases that could be seen as politically driven and seems uncomfortable in the spotlight.

The 49-year-old Iranian-born Delrahim, by contrast, is pleased that antitrust is suddenly front-page news, says a person familiar with his thinking. As a former Capitol Hill staffer, lobbyist, and Justice Department official, Delrahim is politically ambitious, according to those who know him. His path to becoming an antitrust enforcer has also been more circuitous. His background includes three years as chief counsel to the Senate Judiciary Committee in the early 2000s and a job as a patent lawyer. He even dabbled in movie production, taking classes at the UCLA film school and investing in a movie called Trash Fire.

At the beginning of the Trump administration, Delrahim worked for then-White House counsel Don McGahn and helped shepherd the Supreme Court nomination of Neil Gorsuch. For more than a decade before that, he’d been in private practice at Brownstein Hyatt Farber Schreck. There he dispensed advice on mergers and other antitrust issues to companies including Google, which hired him in 2007 to lobby for its acquisition of digital advertising company DoubleClick. He also advised Apple on patent-reform legislation. Because of those roles, Senator Elizabeth Warren of Massachusetts, who’s seeking the Democratic nomination for president, is calling on Delrahim to recuse himself from any investigation of either company.

Both joined the Trump administration as calls for tougher enforcement of technology platforms were beginning to crescendo. The outcry has come from a broad array of consumer and public interest groups, economists, rival companies, former executives, and state law enforcers. It’s also the rare issue that plays to liberals and conservatives alike. Warren, for example, is calling for a breakup of Facebook, while Senator Josh Hawley, a Missouri Republican and former state attorney general, has called for clamping down on the companies’ data-collection practices.

Delrahim’s move to take on Google has the backing of his boss, Attorney General William Barr, who said at his January confirmation hearing that “a lot of people wonder how such huge behemoths that now exist in Silicon Valley have taken shape under the nose of the antitrust enforcers.”

President Trump has sometimes led the chorus in tweets and interviews. In a June 10 call-in to CNBC, he said that “there is something going on in terms of monopoly” and that the U.S. should copy the European Union in suing U.S. tech companies and collecting billions in fines. In an August 2018 interview with Bloomberg, he said there may be an “antitrust situation” because of what he called promotion of liberal over conservative views by Google, Facebook, and Amazon. Civil liberties groups have said there’s no evidence of political bias. The companies say some conservatives have been kicked off their platforms because they violated rules against hate speech and harassment.

The new administration sought out antitrust enforcers who would take a hard look at Google in particular, according to two people familiar with the matter. The acting chairman of the FTC in 2017, Republican Maureen Ohlhausen, campaigned to keep her job by promoting her vision of “regulatory humility,” evidently anticipating Trump would want a soft touch on mergers and business conduct. She sought the support of McGahn and the president’s daughter Ivanka Trump, according to a person familiar with the matter.

But Ohlhausen had voted with four other FTC commissioners to close the Google investigation without bringing charges. That was a black mark in the eyes of Google foes, including Oracle Corp., which jumped on the change in administration as an opportunity to lay the groundwork for the FTC to take another run at Google. The White House ultimately passed on Ohlhausen because she wasn’t seen as someone who would get tough on the world’s largest search engine, say three people familiar with the matter, and soon settled on Simons, then a partner at law firm Paul, Weiss, Rifkind, Wharton & Garrison in Washington. Trump told Simons in a meeting ahead of his nomination not to be afraid to be a tough enforcer, says one of the people. “I’m proud of my time at the FTC,” Ohlhausen says. Oracle declined to comment.

Working in Simons’s favor, a person familiar with the matter says, was his record in the case against Microsoft, which White House advisers had discussed. Among his clients in the early days of the web were airline reservation service Sabre, now Sabre Corp., and Sun Microsystems, now owned by Oracle, both of which raised concerns about Microsoft trying to squelch competition from rival internet browser Netscape. Simons was among those who pushed the U.S. to bring an antitrust case, basing his argument on a 1951 Supreme Court decision that found an Ohio newspaper had violated antitrust laws when it denied advertising space to a company that wanted to also buy ads on local radio.

Delrahim also played a cameo role in the Microsoft case. The company’s chief antagonist on Capitol Hill was then-Senator Orrin Hatch, the Utah Republican who chaired the Judiciary Committee. Delrahim joined the committee’s staff just as the U.S.’s lawsuit got under way. Three and a half years later, when the case was settled, the committee held a hearing in which Hatch said he favored tough antitrust enforcement over heavy-handed regulation of the day-to-day market when the technology industry becomes over-concentrated. Delrahim, then 32, was sitting directly behind Hatch as he spoke.

Almost immediately after joining the antitrust division in September 2017, Delrahim sued to block AT&T Inc.’s takeover of Time Warner Inc. It was a deal Trump had vowed to block as a candidate, sparking speculation that Delrahim had acted at the behest of the White House. Delrahim denies the administration had any involvement.

While Delrahim lost the AT&T fight, the case was groundbreaking for antitrust enforcement. The deal was widely expected to win approval because AT&T and Time Warner didn’t compete directly. The traditional fix for such mergers involved imposing conditions on how the companies could operate post-merger. Delrahim, echoing Hatch, rejected that approach as requiring too much oversight of the company and sued to stop the merger.

Simons, who often points to his record targeting anticompetitive conduct by companies when he ran the FTC’s competition bureau from 2001 to 2003, told senators at a hearing last year that the place to look for antitrust violations is where there’s likely to be potential market power. “That description would describe some of these big tech platforms that we’re all talking about in the news regularly,” he said. “So those are the places you would look. And without commenting on any specific company or any specific investigation, this is something that is a priority for us.”

To contact the editor responsible for this story: Sara Forden at sforden@bloomberg.net, Paula Dwyer Jillian Goodman

©2019 Bloomberg L.P.