Posts Tagged ‘U.S. Justice Department’

New Sheriff in Town: Exclusive with Obama Trustbuster Christine Varney

August 1, 2009

Check out my BusinessWeek story, based on the first extensive interview with the Obama Administration’s new head of antitrust enforcement, Christine A. Varney. Techies haven’t quite come to grips with the fact that there are new sheriffs in town. Big changes are coming with the way this and other industries are regulated, as you can see with the reaction to the Microsoft-Yahoo search deal and the FCC action on Apple. Read on.

The Antitrust Cop and the Tech Industry
Christine Varney aims to reinvigorate antitrust policy without stifling U.S. business, but Google and Intel could be among her targets

By Spencer E. Ante

Christine A. Varney, the nation’s top antitrust cop, is trying to pull off a delicate balancing act. She wants to reinvigorate antitrust policy after the laissez-faire years of the Bush Administration. Yet she also wants to avoid interfering with companies that compete vigorously but fairly. “This job is making sure the competitive marketplace is free from obstacles and barriers,” says Varney, whose official title is Assistant Attorney General at the Justice Dept. “We are thinking a lot about where bottlenecks might be in certain industries. If we can break through them it would be good for consumers.”

In her first extensive interview since taking office in April, Varney described an antitrust philosophy that is clearly more aggressive than in the recent past yet also less ideological than many businesspeople may expect. Varney says her goal is to bring antitrust law back to its historical center, not simply to go after giants because of their size. “We are not anti-big in any way, shape, or form,” says Varney, a former Federal Trade Commissioner who spent the past 12 years representing corporations as a partner at the Washington law firm Hogan & Hartson. “But with enormous success comes responsibility.”

Varney says the Justice Dept. will be taking a look at a range of industries including transportation and technology. Antitrust officials have also opened inquiries in agriculture, financial services, telecom, and health care, say sources familiar with the Justice Dept.’s activities.

Check out the rest of the story here.

Microsoft-Yahoo: Antitrust Hurdles Loom

July 30, 2009

The Microsoft-Yahoo search deal is no slam dunk, when it comes to antitrust matters. Check out my BusinessWeek story, out this morning.

Microsoft-Yahoo: Antitrust Hurdles Loom
The weak Web search-ad companies want to team up against No. 1 Google, but regulatory tradition and practice have long blocked such deals
By Spencer E. Ante

Don’t expect the Microsoft-Yahoo search deal to sail through a regulatory review. Sure, it’s tempting to think Justice Dept. officials won’t quibble much over a deal aimed at helping two struggling companies get a leg up against a market-leading competitor. That’s essentially the line taken by executives at Microsoft (MSFT) and Yahoo! (YHOO) to explain why their 10-year pact shouldn’t be held up by an antitrust review.

But legal experts say the deal is no slam dunk—especially with a new team of regulators in Washington eager to flex their antitrust muscles. Some lawyers and former regulators say the deal may even be quashed, or at least be subjected to revisions, before getting a green light. “Microsoft and Yahoo have a tough battle on their hands with the antitrust regulators,” says David Balto, former policy director of the Bureau of Competition at the Federal Trade Commission under the Clinton Administration. “We don’t want markets to become concentrated. It is like prescribing ice cream for someone who is overweight.”

The agreement is also likely to draw attention from European Union regulators who in recent years have been more aggressive than their U.S. counterparts in scrutinizing mergers and joint ventures. Google (GOOG) is the largest player in the search-ad market, with a 65% share. Together, Yahoo and Microsoft have about 28% of the market.

Under the pact outlined on July 29, Microsoft will provide the underlying search technology on Yahoo’s Web sites while Yahoo will take exclusive charge of search-related ads for both companies.

WALL STREET SEES “MATERIAL RISK”
Some legislators didn’t wait long before threatening to examine the deal closely. Senator Herbert Kohl (D-Wis.), who chairs the Senate antitrust subcommittee, said that the deal “warrants our careful scrutiny,” in a July 29 statement. “Our subcommittee is concerned about competition issues in these markets because of the potentially far-reaching consequences for consumers and advertisers and our concern about dampening the innovation we have come to expect from a competitive high-tech industry.”

Some Wall Street analysts are also sounding alarm bells. “We believe government approval is doable, but we continue to believe there is a material risk that the deal would be blocked or conditioned,” wrote Rebecca Arbogast, analyst with Stifel, Nicolaus (SF).

Microsoft and Yahoo are up against decades of antitrust policy and law that have rarely if ever allowed combinations of the No. 2 and No. 3 players in a given market. To win approval the companies will need to prove that eliminating one top player in the search-ad market will enhance competition and thereby benefit consumers and innovation. “The obvious fear of the antitrust guys is that instead of strengthening the runner-up, it reduces competition between No. 2 and No. 3, and that lessens competition,” says Lawrence J. White, a professor of economics at New York University who served as director of the Economic Policy Office of the Justice Dept.’s Antitrust Div.

Read the rest of the BusinessWeek story here, along with a video of me discussing the story with Peter Elstrom.

Letter: Read the Terms of the Google Book Settlement Agreement

April 29, 2009

Today, the New York Times published a story reporting that the U.S. Justice Department has begun an inquiry into the antitrust implications of Google’s settlement with authors and publishers over its Google Book Search service.

The settlement, announced in October, gives Google the right to display the books online and to profit from them by selling access to texts and selling subscriptions to its entire collection to libraries and other institutions. Revenue would be split among Google, authors and publishers. But critics say that Google alone would have a license that covers millions of “orphan books,” whose authors cannot be found or whose rights holders are unknown.

The news gives me the perfect opportunity to weigh in on this issue from the perspective of an author. I am inclined to participate in the program, thereby forgoing my right to sue Google. The main reason is that listing your book in the Google index would make its existence known to lots of people, which would presumably boost sales. But I still have a few concerns.

Among them:
1. How much money could Google Books bring an author? That is one big unknown here. And it makes it hard to come to a decision without knowing the potential return on on a Google Books licensing deal.

2. Authors need more time to figure out the deal and its implications. On that note, I was happy to hear that this Tuesday Judge Denny Chin of Federal District Court in New York, who is overseeing the settlement, postponed by four months the May 5 deadline for authors to opt out of the settlement and for other parties to oppose it or file briefs. The decision follows requests by groups of authors and their heirs, who argued that authors needed more time to review the settlement. My colleague Rob Hof wrote on TechBeat that he expects Chin to take a month deciding whether the settlement should go forward.

3. Is there any way to make the program easier to understand and practice? I write about these issues for a living and I am having a hard time getting my head around all the structure and mechanics of the program. Apparently, authors need to create a user account in order to dictate what licenses they grant to Google. Yet I still have no idea where I would go to create that account or how that process works.

I look forward to hearing comments on this post, especially from other authors. I haven’t found a water cooler yet where authors are debating these issues. Perhaps my blog can serve as one little forum.

Here’s the copy of an email I got from my agent detailing the terms of the Google Book Settlement:

In response to the formation of Google’s Library Program, involving copyright-infringing activity, the Authors Guild has taken a class action against Google, resulting in a settlement and the intended creation of the Book Rights Registry, a subsidiary organization that will represent the interests of authors and publishers and will enforce the decisions of the Google Book Settlement and audit Google as necessary.

Google’s Library Program will contain books that are out-of-print (unless rights-holders say otherwise), not books that are currently in-print (unless rights-holders offer their inclusion), and with the exception of children’s/picture books, there will be no pictures included.

For out of print books that are included in the program, rights-holders may grant any of the following licenses if they choose to stay included in the program:

1. Public Access License – free online portal to view database of
out-of-print books, such as at a public library. However, it is a “see only” policy here, and if the pages are to be printed, there will be a per-page fee.
2. Preview License – (comparable to Amazon’s “Search Inside the Book”
feature) online preview of selected pages of the book (but is non-printable).
3. Outline Editions – not a pdf, download, or ebook – this is an
online-only edition that charges a price between $1.99 – $29.99 with a median price of $5.99. The book can only be viewed after purchase, and can be printed as well.
4. Institutional Subscriptions – Google can license institutions the
entire database for a flat fee/annual subscription. This is where they expect their greatest monetary results.

As the author, you will be entitled to receive $60 for each copyright infringement by making a claim to your work. Not all work has been infringed upon, but making a claim regardless of whether that’s the case or not, ensures that you will have credit in the Book Registry and will further protect your rights. As your agent, we will be able to make these claims on your behalf, but each client is encouraged to create an account in order to dictate which licenses to grant Google per each book or insert or inclusion in an anthology. Clients can change their elections at any point after making claims and activating their account. Clients can make the claims themselves or agents can make claims on behalf of their clients. The client will have to make the specific licensing elections if he/she decides to remain a part of the program, but the agent can file the claim on their behalf while still allowing the client to create an individual account on the Book Rights Registry online system to have control over their licensing elections (which are changeable at any point after setting up an account).

Please note that as clients, you also have the option to opt out of the settlement, retaining the right to sue Google separately. Please also note that in order for books to be covered in this settlement, they must have been published and copyrighted before January 5, 2009.

The money flow for books in the Google Library Program will be as follows:

- Out of-print, Reverted Rights = 100% to Author
- Out-of-print, No Reversion of Rights = 50/50 to Author/Publisher
- Out-of-print, No Reversion of Rights, Contract Pre-1987 = 65/35 to
Author/ Publisher
- In-Print, Chosen to License = Almost all cases, $ to Pub, Pub pays
Author per contract terms (can be exceptions, but for most part, split as decided in contract)
- Institutional Subscription = Google collects $, keeps 37% and passes
63% to the Registry. The Registry keeps 10-20% of the 63% (exact %
TBD) and the remainder is passed to the rights-holder.

Please let us know if you would like to participate in the program before April 10, 2009. If we do not receive a response from you by April 10, we will assume that your wish is inclusion in the program.

You will still be responsible for making your individual accessibility elections and maintaining your active online account with the Book Registry. If you would like to file the claim yourself and set up your account simultaneously, this must be completed before January 5, 2010.
Once you do this, you will have the freedom to change your elections and even to withdraw your book(s) from the program up until January 2011.

Should you have any questions about the settlement or the process outlined above, please visit http://books.google.com/booksrightsholders/ for further explanation, details, and directions.

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