The Antitrust Dual-Edged Sword: How Obama Could Destroy the Tech Industry

Rob Enderle

One of the most frightening sentences in business is "We're from the government and we're here to help." This is because, over the years, we've learned that while governments often have the best of intentions (and often not), their ability to deal with problems surgically is almost non-existent. They have the tendency to destroy what they want to help, and to be so slow in responding to a problem that when they do get something right, it often comes far too late.


The current U.S. administration is suddenly focused sharply on the technology and telecommunications industries and unless this focus -- or the government's traditional approach -- to antitrust problems is moderated, it could end up destroying the industries it intends to save.

Scary Governments


The scariest governments try to get in and fix stuff. You can certainly see that with the financial and automotive industries at the moment. The Cash for Clunkers program replaced one set of problems with a new set by removing buyers from the market and leaving behind new car inventories that aren't selling because most of the available buyers just bought. This is largely because governments think tactically; they act to address symptoms of a problem, but don't think strategically to go after the cause.


If you look at health care, for instance, the core problems are that it costs too much and neither the government nor its citizens can afford it. The primary initial cause is economic: The cost has to go down and income up. Instead, government is focused on a path that tries to force a fast solution that may, for many, reduce the quality of their health care by materially damaging existing systems.


This suggests that the U.S. government is focused on doing things fast rather than doing them right. What is particularly troublesome for us are recent comments that antitrust actions will be focused on the technology and telecommunications industries.


Killing Industries


With the recent consolidation in a number of industries thanks to the economic downturn, the opportunity for monopolies to emerge and then misact is very high. On the other hand, U.S. industry could also emerge vastly stronger than before, and in a world market, having the most powerful industry isn't a bad thing. Ask the oil or diamond cartels.


But excessive government intervention could eliminate that advantage and shift these industries to places like China or India, much like previous governments did with the consumer electronics, railroad and naval industries. I think you could argue that government intervention has been instrumental is crippling the auto industry as well, though it must be noted that organized labor was probably as big, if not a bigger problem here.


In addition, the European industry focused like a laser on U.S. industries as well as the combined impact of two major governments both working to cripple large industry players could go well beyond corrective action and hurt what otherwise could be a very strong industry driver during the recovery.


What's Needed


Big companies misact and there is a need for timely and effective government response. But much like you wouldn't approach a sick patent with a chain saw -- at least I hope you wouldn't -- the tools the government has to take corrective action are too general, too imprecise and too slow to correct the bad behavior in a timely fashion or to protect the industry as intended.


What is needed is the business equivalent of a scalpel coupled with people highly trained in how to use it. This might be as simple as changing the mission of the enforcement bodies from being focused on penalties to being focused on finding a solution that will make both parties healthier. It could be that after a company gets to a certain size and power, a board seat must go to the government so that oversight is made part of the business practice and behaviors that could land the company in trouble are avoided (think of Al Gore on Apple's board), and if they aren't, corrective action is taken with knowledge of the company and surgically rather than without knowledge of the company and catastrophically.

Wrapping Up


I'm getting increasingly worried that the Obama administration is trying to do too many big things at once and that most are very low quality both in approach and execution. I'm a big fan of speed, but it needs to be balanced by prudence. Otherwise, you simply run around doing more bad things. One of those big things is to bring overly powerful companies that seem to be misacting down without apparently realizing that the impact on the technology and telecommunications industries and the country could be catastrophic if this isn't done carefully.


A business enforcement program focused on one or two industries is wrong. Focus should be on the source of the problem and where it is most pronounced, it should be surgical in nature to prevent collateral damage, and it should be fast enough to protect the victims. The current stated goal targeting two recovering industries doesn't appear to meet any of those tests and should be reconsidered. From my perspective, our biggest problem with monopoly power remains with energy and that is likely where the initial focus would better be.

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