U.S. Innovation Under Attack By Obama

Gary Shapiro

5/25/2010 1:58:51 PM - Gary Shapiro

The Obama administration has made economic recovery a priority, but unfortunately the Administration is continuing a practice that has the opposite economic effect -- targeting America’s prize technology companies with vague antitrust laws. Last year, it was the Federal Trade Commission demanding Intel license its future technologies to competitors. Qualcomm, Google and Microsoft have also recently received federal antitrust scrutiny.

And now, federal regulators are investigating Apple over equally absurd allegations of antitrust violations. These attacks and aspersions on our best companies are harmful to our national interest on many levels. The very companies under investigation are the same companies fueling the economy and creating millions of jobs. Forcing them to spend resources better used for building the next generation of wealth-creating products is poor policy.

The FTC’s latest tinkering involves Apple’s iPhone, iPad, and iPod – three of the most wildly successful and innovative products on the market. Besides their practical usefulness, the ingenuity behind these products is they allow third-party developers to create their own software applications, or “apps.” In just two years, independent developers have created a majority of the more than 80,000 apps for the iPhone.

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According to one study, there are some $200 million worth of apps sold in Apple’s iTunes store every month, or $2.4 billion a year. Every one of these apps allows users to do something easier, such as track contacts, search for restaurants and even manage their portfolios. Think of all the economic activity these Apple products and their accompanying apps generate, and not just for Apple.

But because Apple has set some conditions on their products, such as requiring developers to use certain Apple tools, competitors are complaining – which is enough to get the FTC and Justice Department to swoop down from their regulatory perches. It is horrifying that the U.S. government would seek to confine a company which in the last few years has produced so much innovation and so many jobs.

Worse still, these attacks on our largest technology companies are not being brought for clear violations of law. If Apple were in violation of antitrust laws, such as price fixing, then it should face the consequences of its crimes. But the government’s current investigation is based on one of the most ambiguous standards in American jurisprudence – that of “attempted monopolization.” Companies pay back massive investments in research and development by selling as many units as possible. If you are good and lucky, you have a hit and everyone wants your product – that’s what makes these companies successful. But in the antitrust world the difference between being merely a successful company and a monopolist company is too often based on your competitors’ say-so. Prosecutors should focus on what is clearly illegal, not that which is legally unclear.

Take the government’s case against Intel last year. Although Intel and AMD were involved in a squabble playing out in U.S. courts and elsewhere, both U.S. and EU regulators accused Intel of unfairly using rebates to persuade computer makers to use its chips over competitor AMD. If you think such business disputes are appropriately addressed in litigation between the parties, then you don’t think like a federal regulator. Our own federal government is insisting that Intel license all of its future inventions to anyone. Intel is a phenomenally inventive company and deserves better than to be robbed of its future success by our. own government.

These antitrust witch hunts of America’s crown jewel companies are also catnip to European regulators envious of U.S. success. At a conference in France I spoke at last year, a French official promised to go after successful U.S. technology companies that used “closed” systems. In other words, foreign governments are using their antitrust laws against American competitors to help their own companies. Intel was forced to pay a $1.5 billion fine to the EU last year – even though the supposed bad behavior did not hurt one European buyer. The U.S. shouldn’t facilitate the EU’s quest to balance its budget on the back of American’s best companies. I submit they should actively decry it!

But in Washington, federal regulators make a name for themselves by going after the biggest fish they can fry, without regard for the economic consequences of their actions. With our nation facing serious economic challenges, these politically and egotistically motivated prosecutions only end up hurting our most successful companies and destroying American jobs.

American companies already have enough government-induced burdens limiting their potential. We have an anti-business immigration policy; a failing education system; union-backed protectionist regulations; and relatively high corporate taxes discouraging investment. Let’s give our most innovative technology companies room to do what they do best: Pull the country and the world forward with their amazing inventions.