After all of these years, antitrust law relevant in age of high-tech economy

From time to time, we hear arguments that antitrust law is outmoded and not well suited to today’s fast-changing, high-tech economy. My experience as chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights has proven to me otherwise. I strongly believe that vigorous enforcement of our antitrust laws is as important now to maintaining a competitive economy and to maximizing consumer welfare as when these laws were first written more than 100 years ago. Those who are strong believers in our free-market system, as I am, recognize that antitrust is essential to ensure that consumers gain the benefit of a truly free market.

In recent years, our antitrust subcommittee has held an array of hearings on important competition issues in the high-tech sector of the economy: our 2007 hearing into the acquisition by Google of DoubleClick, last year’s hearing into the then-planned agreement between Google and Yahoo to collaborate in search advertising, and our 2007 hearing into the merger between the Sirius and XM satellite radio services. Earli er this year, we investigated the state of competition in the wireless phone market. We are now examining the Yahoo/Microsoft search advertising partnership so that we can better understand the potential impact on consumers and competition. These hearings and inquiries have reaffirmed the importance of strong, pro-consumer competition policy in the high-tech sector.

Our investigation and hearing into competition in the cell phone industry is a good example of the need for strong antitrust policy in a high-tech industry. We learned that consumers faced a doubling of prices in text messaging purchased on a per-message basis from 2006 and 2008 — from 10 to 20 cents per message — despite expert testimony that the cost to the phone companies for each message was unchanged at a fraction of a cent. While our hearing did not reveal any evidence of collusion among the phone companies, what we found were numerous barriers to entry and competition in a highly concentrated industry. We raised legitimate concerns about whether these competitive obstacles gave the dominant phone companies the market power to raise prices, and left consumers with little alternative but to accept the price increases. We found what is needed are enlightened competition policies — such as an end to handset exclusivity, an end to punitive early-termination fees, enactment of “roaming” policies that require dominant providers to give access to their networks on reasonable and nondiscriminatory terms for all applications, and more strict scrutiny of mergers and acquisitions among telecom providers — to break open this market. In this industry as many others, policies that foster competition will be the best solutions to millions of consumers rightly frustrated by price increases for basic services.

Occasionally we hear arguments that the fast-changing nature of high-tech markets and rapid technological change in these markets make them ill suited to the application of traditional doctrines of antitrust law. But I agree with the conclusion of the 2007 report of the bipartisan Antitrust Modernization Commission that antitrust laws do not need to be relaxed for high-tech industries. Current antitrust doctrines should, and do, take into account such factors as innovation and changing market conditions. Far from disregarding innovation, a proper application of antitrust law will in fact promote it.

Whether considered in relation to railroad networks in the 1890s or the worldwide computer network we call the Internet today, the role of antitrust in preserving competition and consumer choices remains essential.

As we consider the proper manner in which to apply antitrust law to high-tech industries in a time of economic recession and uncertainty, one lesson is clear to me — now is not the time for government to take a cramped view of antitrust enforcement. In this era of ever quicker technological change, the need for vigorous enforcement of our antitrust laws has never been greater. Antitrust is essential to prevent anti-competitive excesses and monopolies and to encourage the competitive energy so essential to spurring economic growth. Millions of consumers depend every day on the enforcement of antitrust law — in the high-tech sector as all others — to ensure that the they have competitive choices, to spur innovation, and to keep prices low and quality high. Entrepreneurs seeking to break into these markets with new high-tech products or services also need antitrust policy to ensure that markets remain open and barriers to entry low. There can be no doubt that antitrust plays a central role in today’s high-tech economy.

Kohl is chairman of the Subcommittee on Antitrust, Competition Policy and Consumer Rights.