By John D. McKinnon and Brent Kendall
WASHINGTON -- Bad blood between the U.S. government entities
investigating the giants of the tech industry has grown more
intense with the delivery of a letter from one agency to the other
that might be considered the equivalent of a brushback pitch.
Both agencies -- the Federal Trade Commission and the Justice
Department's antitrust division -- assert authority to investigate
whether U.S. companies are violating antitrust law by squeezing out
competition. In recent months, the two entities, as well as a
number of state attorneys general, have launched high-profile
scrutiny of tech giants such as Alphabet Inc.'s Google and Facebook
Inc. that have come to dominate nearly every aspect of Americans'
digital lives.
Now, in the letter sent late last week to the Justice
Department, the FTC complained about the department's behavior and
raised concerns about recent interactions between the two agencies,
according to people familiar with the matter. A turf battle over
government scrutiny of Facebook is a key point of contention, the
people said.
The previously undisclosed letter, signed by FTC Chairman Joe
Simons, raises the prospect that a longstanding power-sharing
agreement between the agencies is fraying. It is also raising
broader concerns that the boiling tension could eventually derail
the agencies' focus on Big Tech -- among the biggest and most
significant undertakings that either of them has conducted in
years.
The FTC and the Justice Department declined to comment.
The chairman of the Senate subcommittee on antitrust matters,
Republican Mike Lee of Utah, said he plans to ask about the letter
and the tensions it reflects at a hearing Tuesday. Both Mr. Simons
and DOJ antitrust chief Makan Delrahim are expected to testify.
"Sen. Lee is aware of the letter and he intends to inquire at
tomorrow's oversight hearing about whether the clearance process
between the agencies is working and, if not, whether the FTC and
DOJ are engaging in duplicative investigations," a Lee spokesman
said on Monday. That clearance process, a longstanding arrangement
between the two agencies, helps determine which of them
investigates particular areas.
Mr. Lee has raised concerns about clashes between the agencies
on several recent occasions -- for example, when the Justice
Department took the unusual step of undercutting the FTC's
antitrust lawsuit against chip maker Qualcomm Inc. this year. He
has even suggested that having two federal enforcement agencies
could be contributing to the problems.
"This kind of dysfunction and confusion illustrates why having
two agencies at loggerheads does not make for effective antitrust
enforcement," Mr. Lee said in August.
The FTC and the Justice Department share antitrust-enforcement
authority in the U.S. While they have at times been rivals and
engaged in turf battles, employees in both agencies acknowledge
that their interactions lately have become abnormally strained.
Tech issues are a major contributing factor. Both the FTC and
DOJ are under considerable pressure to investigate and potentially
challenge a range of actions by a handful of companies -- Apple
Inc. and Amazon.com Inc. are two others -- that dominate online
search, retail and social media.
One central flashpoint now is whether the Justice Department
will conduct its own antitrust investigation of Facebook, according
to people familiar with the matter.
Messrs. Delrahim and Simons earlier this year negotiated
arrangements that cleared the Justice Department to investigate
Google for possible monopolistic tactics and also gave the
department jurisdiction over Apple for similar issues. The FTC
secured for itself the right to explore monopolization questions
involving Facebook and Amazon.
But Mr. Simons then met with DOJ officials, including Attorney
General William Barr, in early July to talk more specifically about
Facebook, people familiar with the matter said. The two agencies
agreed that the Justice Department wouldn't pursue Facebook on a
couple of issues the FTC already was focusing on, but could
investigate the social media giant in other areas that might raise
antitrust concerns, the people said.
In recent weeks, however, the Justice Department and the FTC
have disagreed on the interpretation of the agreement and whether
each side is honoring it, the people said.
The Justice Department in late July announced a broad review of
whether dominant online platforms in general are unlawfully
stifling competition. That raised the rare possibility that both
agencies might probe Facebook at the same time.
The FTC's Facebook probe is investigating, among other things,
whether the social-media giant pursued acquisitions designed to
eliminate potential future competitors. The Justice Department,
meanwhile, also has been fielding complaints about Facebook,
including from people who advocate breaking up the company.
Facebook didn't provide a comment in response. Over the summer,
the company said the FTC was investigating "in the areas of social
networking or social media services, digital advertising, and/or
mobile or online applications."
Google and Amazon declined to comment. Apple didn't immediately
respond to requests for comment.
Still another sore point going on for months is the Justice
Department's decision this year to step into the FTC's antitrust
lawsuit against Qualcomm. The commission won a favorable ruling
from a California federal judge in May that forced major changes to
Qualcomm's business practices, but an appeals court last month
stayed the effect of that ruling for now.
The Justice Department is supporting Qualcomm, saying the trial
judge's ruling was incorrect in several respects. It also argued in
court papers that the ruling would diminish Qualcomm's
competitiveness in 5G innovation and impact national security. The
appeals court cited the Justice Department's position when it
granted Qualcomm a stay last month.
FTC officials believe the department fundamentally
misunderstands their case and that the DOJ didn't properly consult
them before intervening, according to people familiar with the
matter.
Qualcomm has said its business practices were justified and
lawful.
The battles between the two agencies are "a real drag on the
effectiveness of the U.S. [antitrust] system," said William
Kovacic, a former FTC commissioner who is now a George Washington
University law professor. "It doesn't destine the individual
efforts to failure by any means, but it diminishes the prospects of
success. It makes it harder to achieve a good result."
Write to John D. McKinnon at john.mckinnon@wsj.com and Brent
Kendall at brent.kendall@wsj.com
(END) Dow Jones Newswires
September 16, 2019 22:26 ET (02:26 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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