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● 09.08.11

●● Cablegate: Former Microsoft Lawyer Thomas Barnett and Majoras Butt Heads With EU Commission Over Microsoft Case

Posted in America, Antitrust, Europe at 4:08 am by Dr. Roy Schestowitz

Summary: Pressure from the US for Neelie Kroes et al. to leave Microsoft alone despite abusive behaviour

THE FOLLOWING Cablegate cable is interesting for several reasons. First of all, Deborah Platt Majoras, whom we wrote about before in a negative context (conflicts of interest, improper job handling, etc.) is seen defending Microsoft just like she let Intel off the hook despite crimes. More interesting, however, is Thomas Barnett appearing there. He is batting for Microsoft of course (we wrote about his professional relationship with Microsoft in the past). This is similar to those cables which show the US politicians pressuring the EU to approve Sun’s takeover, not quite respecting the independence of other parts of the world.

=> ↺ Deborah Platt Majoras | in a negative context | ↺ crimes | his professional relationship with Microsoft

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UNCLAS SECTION 01 OF 02 BRUSSELS 003241

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DOC FOR DEFALCO

FTC FOR JOHN PARISI

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TAGS: ECIN, KIPR, ECPS, EINT, ETRD, EINV, ECON, EUN

SUBJECT: FTC CHAIRMAN MAJORAS REVIEWS MICROSOFT CASE IMPACTS WITH

BRUSSELS ATTORNEYS

REF : USEU BRUSSELS 2933

1. SUMMARY. FTC Chairman Majoras and Ambassador Gray reviewed U.S.

and EU competition developments with nine prominent Brussels

attorneys on Oct. 19. The group focused on the EU victory in its

antitrust case against Microsoft, but also covered pending EU cases

against other tech firms. Majoras and most participants agreed the

Microsoft case underlines a strengthening divergence between U.S.

and EU approaches to dominance cases. Majoras discounted a theory

that U.S. foreign and domestic political difficulties may have

allowed the EU to assume global leadership on antitrust policy. END

SUMMARY.

MAJORAS COVERS MICROSOFT WITH BRUSSELS ATTORNEYS

2. Federal Trade Commission (FTC) Chairman Deborah Platt Majoras,

in town for a European Competition Journal event, met for breakfast

October 19 with nine of Brussels' leading competition policy

attorneys. Also attending for the USG were: U.S. Ambassador to the

European Union C. Boyden Gray; Randall Long, Attorney-Advisor to

Chairman Majoras; and Econoff (notetaker). The attending attorneys

and represented firms included: Ian Forrester, White and Case;

Maurits Dolmans, Cleary Gottlieb; David Hull, Covington and Burling;

Sven Volcker, WilmerHale; Stephen Kinsella, Sidley and Austin;

Hendrik Bourgeois, GE; Jim Venit, Skadden Arps; David Wood, Gibson

Dunn; and Thomas Vinje, Clifford Chance.

3. Ms. Majoras reviewed recent U.S. antitrust developments, noting

a possible trend in U.S. courts to raise the bar for blocking

mergers, but quickly turned to the situation in the EU. She said

she had conferred closely with Thomas Barnett, DOJ Assistant

Attorney General for Antitrust, on potential implications of the

recent European Court of First Instance (CFI) ruling upholding the

European Commission's major 2004 antitrust decision against

Microsoft (reftel). Majoras noted that EU Competition Commissioner

Neelie Kroes reacted strongly to the Barnett/DOJ statement on the

CFI decision, which indicated "it could harm consumers and have a

chilling effect on innovation."

4. Despite Kroes' sensitivity to criticism over the Microsoft case,

Majoras continued, FTC and DOJ, as the two U.S. antitrust agencies,

maintain good relations with their European counterparts. She

stressed the strength of her personal relationships, for example,

with Commissioner Kroes and Director General of the Competition

Directorate (DG COMP) Philip Lowe. She pointed out that FTC and DOJ

will have annual bilateral consultations in 10 days with the

Commissioner, Lowe, and their staff.

5. Majoras said her concern centers on the increasing divergence,

in her view, between the trends of U.S. and EU antitrust policies

and court decisions in the area of single-firm conduct. Even

Microsoft opponents in the U.S., she underscored, are wondering if

the outcome of the case will embolden the Commission to pursue more

aggressively cases against other market-leading technology firms,

most of whom are American. Ambassador Gray noted the contrast

between DG Competition's action against U.S. firms, and timidity in

addressing the anti-competitive nature of aggressive Gazprom efforts

to purchase EU gas distribution networks.

U.S. AND EU DIFFER IN "CULTURAL APPROACHES" TO ANTITRUST

6. Jim Venit of Skadden Arps agreed that it is striking that most of

the Commission's cases against multinationals (Note: including

existing antitrust cases against Intel, Rambus and Qualcomm, and an

investigation of Apple. End note.) involve U.S. firms. He

explained, however, that it is important to look at Commission

actions in the context of the "cultural differences" across the

Atlantic - a greater tradition of regulatory intervention in the EU

as compared to the U.S. This manifests itself in both Commission

action and greater EU court eagerness to intervene, he said.

BRUSSELS 00003241 002 OF 002

7. The best way to approach antitrust cases, Venit continued, would

be to stand back and weigh the relative economic impacts of both

alleged abuses and potential remedies. Majoras agreed that this is

important, but stressed that it is difficult to determine. She

noted that applying EU and U.S. antitrust laws pertaining to

single-firm conduct (Article 82 of the EC Treaty and the relevant

part - "Section 2" - of the U.S. Sherman Act, respectively)

correctly is the hardest job for an antitrust enforcer. It is a

challenge to avoid both overenforcement and underenforcement, she

concluded, and a jurisdiction's tolerance for one or the other

determines the level of enforcement.

8. David Wood of Gibson Dunn agreed with both Venit and Chairman

Majoras, saying that the different cultural approach to antitrust in

the EU underlies the divergence here from U.S. action. Article 82,

he noted, in looking at dominance cases, does not address how

companies achieved monopoly status. He contrasted the case of firms

which came to dominate markets through innovation and business

acumen, versus those arriving via privileged position as a

state-owned firm. The distinction is important in U.S. decisions on

antitrust, he said.

9. Maurits Dolmans of Cleary Gottlieb (Note: who represents both

IBM and Google, Microsoft opponents in its EU case. End note.)

argued that the CFI ruling and 2004 Commission decision against

Microsoft actually brings U.S. and EU law closer together, rather

than representing a divergence. He said the bases for the CFI

decision closely resemble findings of the DC circuit court from the

U.S. case against Microsoft several years ago. He noted that EU

competition law, in the form of Articles 81 and 82 of the founding

EC Treaty, were written by a U.S. lawyer and based on the relevant

Sections 1 and 2 of the FTC Act. It is important to remember the

similarities in legal bases, Dolmans said, and maintain a positive

tone in responding to EU antitrust actions.

MAJORAS DISAGREES THAT EU HAS ASSUMED ANTITRUST LEADERSHIP

10. Ian Forrester of White and Case (Note: who has represented

Microsoft in its EU case. End note.) then asked Chairman Majoras

her view of the theory, which he said is favored by some in

Brussels, that political difficulties faced by the U.S.

administration in foreign policy (e.g. Iraq) or domestically have

weakened U.S. antitrust enforcement. This, according to theory

proponents, has allowed the EU to assume the mantle of antitrust

leadership and let the EU set the global standard for antitrust

actions.

11. Hendrik Bourgeois of GE agreed that this idea has taken root in

Brussels, noting that a "senior DG COMP official" told him recently

that the U.S. and EU are competing over antitrust policy - "and the

EU is winning."

12. Majoras vigorously disputed the idea, saying that FTC under her

tenure has initiated more merger cases (as a percentage of H-S-R

filings) against firms than had the Clinton Administration.

Moreover, Majoras emphasized that the number of cases brought is not

as important as bringing analytically sound cases. The Ambassador

called the idea an "extraordinary," unfounded assertion. Majoras

added that the U.S. doesn't consider itself in competition with the

EU over antitrust policy, but rather wants to continue dialogue to

ensure that actions are in the best interest of consumers and firms.

Nearly all of the participants agreed that continued U.S.-EU

dialogue is vital to prevent future problems.

13. FTC Chairman Majoras has cleared this cable.

GRAY

The emphases above are ours. █

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