1 Reply Latest reply on Mar 30, 2012 6:05 AM by gb18

    DOJ antitrust head okay with agency model

    Doug_Pardee

      The Wall Street Journal reports today that Sharis Pozen, head of the US Department of Justice's antitrust operation, doesn't seem to have a problem with the Agency Model per se: "We don't pick business models—that's not our job." DoJ's concern is strictly about the process that introduced the agency model: whether there was collusion or not.

       

      Pozen is a "lame-duck" — she's stepping down from her position next month. Whether her eventual replacement will feel any differently remains to be seen... including who her eventual replacement will be.

       

        • Re: DOJ antitrust head okay with agency model
          gb18

          "But Ms. Pozen says the practice clearly violated antitrust law."   By THOMAS CATAN

          WASHINGTON—The Justice Department's top antitrust official says she won't stand by quietly if companies make agreements with rivals on price, signaling a stern stance as the department conducts a high-profile probe into electronic-book publishing.

          The Justice Department's top antitrust official won't stand by quietly if companies make agreements with rivals on price, signaling a stern stance as the department conducts a high-profile probe into electronic-book publishing. Thomas Catan reports on digits. Photo: Getty Images.

          Without mentioning Apple Inc. or the five publishers that are the target of the investigation, Sharis Pozen says she won't hesitate to act against "collusive behavior at the highest levels of companies."

          "Competitors can't join together and make agreements on price," she says in an interview. "We're going to stop that."

          Ms. Pozen's pointed comments come as she prepares to step down as acting antitrust chief next month. The White House has nominated William Baer for the post, but it isn't clear if he will be confirmed by Congress before the presidential election in November.

          The Justice Department is on an antitrust winning streak. It successfully blocked AT&TInc.'s proposed $39 billion acquisition of T-Mobile USA late last year and prevailed against H&R Block Inc. in a proposed merger of tax preparers in the department's first successful antitrust trial in eight years. Also, Nasdaq OMX Group Inc. abandoned its bid to buy rival stock exchange NYSE Euronext after the Justice Department threatened to block it.

          A Matter of Trust

          Some recent Justice Department antitrust matters:

          E-books: Talks under way on possible case against Apple and publishers over pricing

          AT&T: Dropped purchase of T-Mobile last year under government challenge

          H&R Block: Government won trial last year, blocking merger with TaxAct

          Poaching: Government in 2010 reached settlement barring companies from agreeing not to poach workers

          American Express: Trial set for this year on whether company prevents retailers from offering discounts to customers using less-expensive rival cards

          Now Apple and the five publishers are in the cross hairs. The Justice Department has warned that it intends to sue them for allegedly colluding over e-book prices. Several of the parties are seeking to reach a settlement to avert a trial.

          The case centers on a change in how publishers charged for e-books as Apple prepared to introduce the iPad tablet computer in early 2010. Previously, publishers sold e-books in the same way as physical ones: charging booksellers roughly half the cover price and allowing the booksellers to decide the retail price.

          Apple offered publishers the chance to change from that "wholesale" sales model to "agency pricing," in which the publishers would set the retail price and Apple would take a 30% cut. Apple also insisted that the publishers not sell to other electronic bookstores more cheaply. The publishers then imposed the same terms on industry leaderAmazon.com Inc. The result was that many of the discounted titles that readers had grown used to disappeared almost overnight.

          Bloomberg News

          AT&T's Randall Stephenson, left, and Deutsche Telekom's René Obermann testified on competition last year.

          Publishers argue that the agency model promotes competition by allowing more booksellers to thrive. They say Amazon had sold e-books below cost and that agency pricing saved book publishers from the fate suffered by record companies.

          But the Justice Department believes it has a strong case that Apple and the five publishers colluded to raise the price of e-books, people familiar with the matter say.

          Apple and the publishers deny that.

          The Justice Department isn't taking aim at agency pricing itself. The department objects to, people familiar with the case say, coordination among companies that simultaneously decided to change their pricing policies.

          "We don't pick business models—that's not our job," Ms. Pozen says, without mentioning the case explicitly. "But when you see collusive behavior at the highest levels of companies, you know something's wrong. And you've got to do something about it."

          A 48-year-old Missouri native, Ms. Pozen was one of the first political appointees to take office in the Antitrust Division after President Barack Obama was elected in 2008. She was chief of staff under Christine Varney and became acting head of the division when Ms. Varney stepped down as its head last August.

          One of Ms. Pozen's first decisions as acting chief was to file suit against AT&T's proposed purchase of T-Mobile USA from Deutsche Telekom AG. AT&T lobbied heavily but ultimately abandoned the acquisition.

          To isolate herself from any political pressure over the deal, Ms. Pozen says, she took herself out of the running to be the permanent antitrust chief. "There were a lot of politics swarming around" the deal in Washington, she recalls.

          Ms. Pozen has long specialized in the tech industry. Early in her career, she and Ms. Varney represented Netscape Communications Inc. in its antitrust suit against MicrosoftCorp.

          Yet some people in Silicon Valley criticize the Justice Department for failing to appreciate the collaborative and freewheeling way business is done in the tech sector.

          "For the U.S. government to impose its discipline on the market through antitrust policy would not only be misguided, it could very well make one of America's leading industries one of the world's laggards," James Miller, a former official under President Ronald Reagan who is advising Google Inc. on antitrust matters, said at a conference recently.

          Ms. Pozen says the line is usually clear between what is legal and what isn't. "To actually have collaboration in legitimate ventures, all those great things that lead to innovation—there's no doubt that you can do that," she says. But "there are lines that are crossed and that's where we get involved."

          She points to a settlement that the Justice Department reached in 2010 with Apple and several other high-tech companies that barred them from agreeing not to poach each other's employees. At the time, many companies in Silicon Valley said allegations about the practice were overblown and that the arrangement merely was an example of the sector's style of "co-opetition," in which companies can be friends as well as rivals.

          But Ms. Pozen says the practice clearly violated antitrust law. "The idea that they sat around and made this agreement and said, 'We won't poach each other's employees,' it's per se illegal," she says. "And we challenged it, and we landed it, and they shouldn't do that again."