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12.16.07

The Role of the Federal Trade Commission (FTC) as Industry Observer (Updated)

Posted in America, Antitrust, Asia, Courtroom, Deception, Europe, Finance, Hardware, Law, Microsoft at 3:14 am by Dr. Roy Schestowitz

Ineffective service urges following the money

Any profound technical assessment of competing products is likely to end up considering factors like marketing, competitive/anticompetitive tricks, and even lobbying. Nowadays, it takes more than good (even superior) products to win. Just consider astroturfing which Microsoft used to defeat OS/2.

”Today we turn our attention to another scandalous set of cases where another regulatory body fails to do its vital job.”In an engineering world, from an entirely pragmatic point-of-view one can drift towards (and be distracted by) companies. Therein, certain behaviours ascend to another level, which is politicians.

This would not be the first time that we find irregular and irrational behaviour, especially in the Department of Justice, whose involvements in software antitrust issues is burdened by a long history of failures.

Today we turn our attention to another scandalous set of cases where another regulatory body fails to do its vital job. It’s not the SEC which was mentioned last week, but it’s the FTC, which repeatedly ignores the abuses by Intel, among other large companies with an army of lobbyists.

A case that was brought to the news a few days ago might be that last straw which breaks the camel’s back. There is some exemplary evidence that shows the role of inter-personal relationships. In other words, companies can have insiders in government, which in turn enables them to act viciously without proper scrutiny. The watchdogs are asleep by choice. Blame nepotism, favouritism, or just favours (strategic charity, financial incentives, et cetera).

This time, as usual, it is Deborah Platt Majoras that makes the headlines (mind the fact the many of the links below have expired or will have expired by next week, but articles are quoted verbatim and are no older than one year).

FTC head won’t recuse from Google deal

The Electronic Privacy Information Center and the Center for Digital Democracy said in a petition Wednesday that Majoras’ husband, John M. Majoras, is a partner at the Jones Day law firm.

Isn’t that quite a huge conflict of interests?

Consider another couple of new articles:

1. FTC Chair Asked to Step Down From DoubleClick Review

U.S. Federal Trade Commission Chairman Deborah Platt Majoras is consulting with the agency’s ethics officer to see if she should recuse herself from a review of Google’s planned acquisition of online ad network DoubleClick.

2. Sources: FTC extends Google-DoubleClick review

Antitrust regulators with the Federal Trade Commission have received an extension to review the controversial $3.1 billion Google-DoubleClick megamerger, according to sources.

It is worth adding that Microsoft is the key driver for scrutiny here. Microsoft was caught lobbying in the press, the activist and the political level in order to put this merger under great pressure. Hypocrisy knows no bounds because Microsoft was both willing and prepared to pay twice as much for the same company. It got rejected by DoubleClick investors, so envy and arrogance ought to be considered as possible explanations.

This brings back memories of the blind eye that was turned to Intel just a couple of months ago, despite the decision made in other courts around the world.

Intel dodges formal U.S. antitrust probe – report

Head of F.T.C. nixes Intel probe, despite investigations in Europe and South Korea.

Apart from similar investigations in Europe, China, and Japan, there is always the recent one in South Korea to learn from.

1. S. Korea sends Intel antitrust statement-company

South Korea began investigating Intel’s marketing and rebate practices for computer processors two years ago after similar probes by Japan and the European Union.

2. Korean antitrust probe of Intel ends, penalties to be decided soon

Although neither Intel nor the KFTC provided details on the findings, sources told the Korea Times said that the antitrust regulators did plan to impose penalties on the chipmaker. “The FTC gained some evidence backing up suspicions that Intel has offered discounts to computer makers in exchange for sealing exclusive deals, and coerced dealers not to buy products from rivals such as Advanced Micro Devices (AMD),” said one source.

3. Intel: South Korean Antitrust Probe Over

South Korean media have reported the inquiry has centered on allegations Intel abused its market dominance by pressuring computer makers to avoid using chips made by Intel’s rivals.

Here is the FTC’s response:

1. US FTC staff not held back on Intel-commissioner

FTC Chairman Deborah Majoras, a Republican, has rejected requests by lawmakers, other commissioners and Advanced Micro Devices Inc to open a formal antitrust investigation into its much larger rival Intel, the New York Times reported on Monday.

2. Report: FTC rejects calls for antitrust probe of Intel

The New York Times reported on Monday that FTC Chairman Deborah Majoras has rejected requests to escalate at informal review into a formal investigation, citing unnamed government officials and lawyers involved in the matter.

3. FTC won’t step up Intel antitrust probe

Intel, the world’s biggest maker of computer chips, has been cited for anti-competitive behavior for allegedly offering large discounts to computer makers in exchange for their not using products from AMD, the paper said.

Those faulting Intel include regulators with the European Commission and Korea, the Times said. Japanese officials also made similar accusations in 2005, it said. Intel controls some 80 percent to 90 percent of the microchip market, it said.

On the same note, when Intel came under fire for a questionable acquisition, Intel did not require much effort to escape an iron fist.

1. Intel Gets FTC’s OK on Flash Chip Merger

Intel Corp. has received antitrust clearance to form a new flash memory firm with STMicroelectronics NV.

This came after what appeared at the time like symbolic requests, namely:

2. Intel urged to give more data on flash unit deal

…U.S. Federal Trade Commission has requested additional information on the company’s deal with STMicroelectronics…

3. Intel to Reply Soon to Antitrust Queries

It is not common for the Federal Trade Commission, which issued a second request for information to Intel last week, to ask for more information on such mergers.

Other watchdogs have been frustrated with the FTC’s decisions. Consider this one:

US antitrust group urges Intel investigation

The American Antitrust Institute (AAI), a Washington DC lobby group, has written an open letter to the Federal Trade Commission urging an investigation of Intel’s allegedly monopolistic business practices.

[...]

AAI say its insistence of an investigation is based on allegations by AMD in a private case and information obtained by the EC’s complaint, which have not been made public

Remember that the AAI also slammed the Department of Justice for its tactless approach of defending Microsoft a couple of months ago. It seems like the AAI is the only watchdog that isn’t toothless yet.

How is it all possible? Well, in the past we showed financial links between Microsoft and politicians, so the DoJ. Nepotism was hardly a surprise. We have also listed Intel’s abuses against AMD and others (partial list here), but where does Intel get all that power from? In particular, how is Intel able to dodge such investigations? Lobbying might be the answer, so here are some articles to consider:

1. Why Brussels is Abuzz with Lobbyists

As the EU sets more rules, corporations are building their presence and paying for clout

2. Intel Hires Lobbying Firm

Computer chip maker Intel Corp. has hired FBA Inc. to lobby the federal government, according to a federal disclosure form.

Intel was also listed among the companies here:

3. Marketing Group Spent $350,000 Lobbying

The Direct Marketing Association spent $350,000 in the first half of 2007 to lobby the federal government, according to a disclosure form.

There’s also Intel’s involvement with Bill Clinton.

This seems like a normal type of practice, which it should not be. People who are paid to rewrite laws and pressure for political change ruin the spirit of democracy. When it comes to lobbying, the law requires only disclosures, yet does not forbid the activity as a whole. Another example from the beginning of the year:

Micron Opening Lobbying Office in DC

Micron Technology Inc., on Thursday said it has opened a government affairs office in Washington to lead the computer memory maker’s lobbying efforts on patent reform, international trade, research funding and other issues.

[...]

Carroll, 33, worked for the last six years as trade policy director for semiconductor maker Intel Corp., which she joined in 1998 as European government affairs policy manager based in Brussels, Belgium.

Of course, a company like Intel can always use the same excuses as Microsoft, claiming that it merely ‘innovates’ and the whole world is against it for no apparent reason. Case of point:

Intel’s Otellini accuses the EU of being anti-American

Still, he sighed, the worst case scenario is that he might have to write a cheque, even if fines in the current case could be as high as $3.2 billion

The EU may indeed be anti-America, but only is “anti-America” means “against kickbacks”.

The bottom line of this post ought to say that the FTC is a lost cause, so any time it’s mentioned in the context of large monopolistic companies, it ought to be questioned or dismissed promptly. The same goes for the DoJ, but not the AAI. In the context of formats, ECMA is still seen as somewhat a marketing puppet (pay to play), whereas ISO paints itself as a victim which nevertheless lost its spine (and thus its credibility).

Update: going further off topic, the Department of Justice has had other serious issues relating to trust. It goes only several months back. The recent Department of Justice scandal is depicted here.

This was also discussed a couple of months ago.

Try to imagine the picking of federal agents whose inclination favours those who fund them. Here are some references of interest:

Kroes slams US [DoJ] criticism of EU Microsoft ruling

Kroes said that it was “unacceptable” that a representative of the US judiciary should criticise a court of law outside his jurisdiction.

“It is absolutely not done,” she told journalists on Wednesday.

“The European commission does not pass judgement on US rulings and we should expect the same from the US.”

Microsoft sets spinners on court verdict

Microsoft may have lost in court, but it quickly tried to win the war of media reaction via organisations like CompTIA, the Computing Technology Industry Association and ACT (the Association for Competitive Technology) which both intervened in court on its side.

Microsoft Paid Lobbyist $160,000

Microsoft Paid Paid Bingham McCutchen $160,000 to Lobby Federal Gov’t in First Half of 2007

US politicians go to bat for Microsoft

Report Says Nonprofits Sold Influence to Abramoff

E-mails released by the committee show that Abramoff, often with the knowledge of the groups’ leaders, exploited the tax-exempt status and leveraged the stature of the organizations to build support among conservatives for legislation or government action sought by clients including Microsoft Corp., mutual fund company DH2 Inc., Primedia Inc.’s Channel One Network, and Brown-Forman, maker of Jack Daniel’s whiskey.

Politicians in Microsoft’s Pocket

Continuing on the theme of which politicians are receiving money from who. Here is a list of candidates who took money from MSFT.

Politics and tech companies: follow the money

Microsoft took first place with $651,100 given out, while Hewlett-Packard gave only $185,550, and Gateway gave a paltry $2,000. Microsoft’s donations certainly illustrate well the true size of the company and the extent of its political concerns.

Microsoft Finds Legal Defender in Justice Dept.

Nearly a decade after the government began its landmark effort to break up Microsoft, the Bush administration has sharply changed course by repeatedly defending the company both in the United States and abroad against accusations of anticompetitive conduct, including the recent rejection of a complaint by Google.

[...]

In the most striking recent example of the policy shift, the top antitrust official at the Justice Department last month urged state prosecutors to reject a confidential antitrust complaint filed by Google that is tied to a consent decree that monitors Microsoft’s behavior. Google has accused Microsoft of designing its latest operating system, Vista, to discourage the use of Google’s desktop search program, lawyers involved in the case said.

Lessig: Required Reading: the next 10 years

Yet governments continue to push ahead with this idiot idea — both Britain and Japan for example are considering extending existing terms. Why?

The answer is a kind of corruption of the political process. Or better, a “corruption” of the political process. I don’t mean corruption in the simple sense of bribery. I mean “corruption” in the sense that the system is so queered by the influence of money that it can’t even get an issue as simple and clear as term extension right.

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A Single Comment

  1. Noclegi Polsce said,

    December 17, 2007 at 11:09 am

    Gravatar

    The more I am interested it politics, the more I get. Nervous new scandals appear all the time. Does it have to be this way? I think I’ll give up watching it all.

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