In a brief break between the blizzards that have paralyzed Washington, D.C.,  Main Justice sat down with former Assistant Attorney General Thomas O. Barnett in his office at the Washington, D.C., law firm of Covington & Burling.

Former Antitrust Division chief Tom Barnett at a 2005 news conference. (Getty Images)

Barnett, who led the Antitrust Division from 2005 until 2008, spoke about his tenure at the Justice Department, the Federal Trade Commission’s case against chip maker Intel Corp., and how he believes his successor’s bark may be worse than her bite.

The following is an edited transcript of the interview:

Your successor on the job, Christine Varney, has been at the Antitrust Division for less than one year. Her early speeches criticized your approach and signaled the DOJ would take a tougher line on antitrust enforcement. The Ticketmaster-Live Nation merger, which the Division approved with conditions last month, was closely watched as an early test of the new administration. How would you rate its performance?

I would distinguish between the rhetoric at the division and their actual enforcement and policy actions. They certainly came in with very strong rhetoric suggesting they would be dramatically more aggressive in enforcement actions.

But you look at the specific example of Ticketmaster-Live Nation. What the agency did do was challenge a horizontal overlap that under the market definition that they alleged, indicated that the combination would have led to a very high degree of concentration. They alleged barriers to entry, and then they obtained relief for that. That’s the sort of theory that is perfectly consistent with the enforcement actions that were taken during the previous eight to nine years.

They also adopted some behavioral remedies in the Ticketmaster settlement that affect vertical relationships.

An interesting policy question is, if you look at the merger remedy manual that the Antitrust Division puts out, it very much disfavors behavioral remedies. It indicates that the policy of the division is to seek structural remedies wherever possible.

Because a behavioral remedy is hard to enforce?

It’s hard to monitor, it’s hard to enforce, it can draw the Division and the court into regulating day-to-day operations, and there are some question that I’ve seen raised in the press about what some of the terms mean: you can bundle, but you can’t exclude, and could bundling be exclusion? Those are hard questions, and I don’t think they are answered on the face of the papers.

As head of the Antitrust Division, you issued a controversial report on bundling and other conduct that could raise antitrust concerns under Section 2 of the Sherman Act. The Federal Trade Commission, which shares the responsibility of enforcing federal antitrust laws, did not sign on.

You can think about the report in two aspects. One is the synthesize of, this is what the courts have said, this is what academics have said, this is what people on both sides of the issue have said. The second aspect is, where should we go from here? The prescriptive aspect of it. On the descriptive aspect of it, I really thought that the staffs had done a phenomenal job of collecting all of that information together. At a basic level, I wanted the public to have the benefit of that work.

And on the second, prescriptive, issue?

I viewed it as an important part of our responsibility as public servants to try to move the law forward. And businesses should have as clear guidance as possible about where the line is. If they know where the line is, they are more likely to stay on the right side of it and comply with the law. If the line is clear and they cross it, it’s going to be easier to bring a challenge and challenge the conduct. It did become clear at some point that the FTC was not going to join in either aspect of the report. And my view, I believe very much in a marketplace of ideas. You put it out there, and you let it rise or fall on the crucible of competition, and you allow people to debate it.

But wouldn’t that result in more confusion for businesses?

It revealed that there were some differences of views between at least the Antitrust Division in 2008 and the FTC. The mere fact that that difference became public, is a valuable thing for businesses to know, because it’s not like that difference wasn’t there. It just became public. And transparency is generally a good thing.

One of Christine Varney’s first actions as head of the Antitrust Division was to withdraw the report.

Christine Varney (photo by Main Justice)

If the current Assistant Attorney General does not agree with the report, particularly the prescriptive aspects of the report, then as a matter of transparency, the right thing to do is to make that public, which she did in withdrawing the report. So I would agree with her decision to do it. Now what the FTC did not do at the time, and what the DOJ has not done since it has withdrawn the report, is they’ve not come forward and said, here is our alternative.

I would go further and say I was disappointed that the report was withdrawn in its entirety. I’ve drawn this distinction between the prescriptive side and the descriptive side. I mean that is still out there, and people can still reference it. But one could have at least considered in being more selective about what was withdrawn. I really do think the staff did a tremendous job in pulling all that together.

Now that you are back in private practice, do you care which agency is reviewing a deal you are working on?

Historically it has been the case that the outcome at either agency is likely to be the same. But there is now at least the possibility, based on what has happened with Whole Foods, that the standard for the FTC is significantly lower than it is for the DOJ. The amount of time between when the investigation starts and when you get to an Article III [ie: federal] court is far longer at the FTC than it is at the DOJ. As a matter of policy, it is not clear to me that the standard for seeking a preliminary injunction should be different between the two agencies, because then you end up with a situation where the burden on the parties is significantly different based on the clearance issue.

The FTC recently filed suit against Intel using its authority under Section 5 of the Federal Trade Commission Act, which has not been tested by the courts in recent years.

I’m not in a position to comment on the merits of the Intel case.  As a separate policy matter, I’m very concerned about the expansion of stand-alone Section 5 enforcement because of the inability to set forth clear criteria for where the line is. If the standard is perceived by the courts as being so amorphous that it is effectively an ex-post judgment that was not reasonably foreseeable by the parties at the time they were making their decisions, I think it could be unfair to the parties and harmful to consumers, and I think the courts may react negatively to this approach.

The agencies are now considering revising the guidelines they use to evaluate horizontal mergers. Do you think they should be changed?

The basic framework of the guidelines, and the basic focus on market definition, and competitive effects, entry and efficiencies, is the right framework, I think. There have been discussion about whether the agencies might try to interject some new concepts into the guidelines, but to me it would be a mistake. I think it is a healthy discipline if you are forced to put the theory of the challenge to the merger into the framework of a relevant market, and then explaining within that framework why the merger of these two particular companies would be anti-competitive.

But some observers have said the Justice Department lost its 2004 case to block Oracle’s hostile bid for PeopleSoft, in part because of the merger guidelines’ market definition requirements.

At the end of the day, while the division presented evidence to support its proposed definition of the relevant market, the judge decided that the evidence weighed more in favor of a broader market. If the judge had accepted more of the narrower market, then the analysis of competitive effects and the theory of harm that the division was presenting would have been far more likely to be persuasive to the judge.

Once the judge had decided that the evidence didn’t support the narrow market, then the case basically fell apart. That’s not a matter of following the guidelines or not following the guidelines.

In retrospect, is there anything you would have done differently at the Justice Department?

No. That’s not to say that everything I did was perfect, but what I tried to do is to work hard on each individual matter to understand the facts, to understand the evidence, to understand the law, and to make the right decision. And I feel comfortable that that’s what we did in every case. In that respect, I don’t have any regrets.

You were at Covington & Burling before joining the Justice Department, and you went back there after leaving government. Did you move back into your old office?

No, different office, my old office was occupied. But it is a better view. I can see the Department of Justice from my window!

A public spat between American and European antitrust regulators continued for a third day, as the European Union’s Competition Commissioner Neelie Kroes told Dow Jones it was unusual for the Justice Department to comment on a pending EU investigation.

“It isn’t normal [practice] to publish a statement from colleagues in Washington,” Kroes told the newswire.

Neelie Kroes

The dispute involves Oracle Corporation’s proposed $7.4 billion purchase of Sun Microsystems Inc.

The Justice Department’s Antitrust Division cleared the deal earlier this year, but the European Commission issued a set of objections this week over concerns the deal would decrease competition in the database software industry. DOJ then issued a statement taking issue with the EC’s decision.

The Antitrust Division is still in touch with its European counterparts on the Oracle investigation, according to a source at the Justice Department.

DOJ has issued similar statements in the past that highlight rifts between the two antitrust regulators.

After a European court affirmed in 2007 the Commission’s $613 million fine (according to the exchange rate at the time) on Microsoft, then Assistant Attorney General Thomas Barnett criticized the court’s decision and said it might have the effect of “chilling innovation and discouraging competition.”

And in 2001, Antitrust head Charles James blasted Brussels-based regulators  after they blocked General Electric’s bid for Honeywell International: “Clear and longstanding U.S. antitrust policy holds that the antitrust laws protect competition, not competitors. Today’s EU decision reflects a significant point of divergence,” he said.

Antitrust officials in the Bush administration, including Barnett and James, often clashed with European regulators. When current Antitrust head Christine Varney took over, she withdrew a controversial Bush-era report on the conduct of individual firms outside the merger context, and pledged to work more closely with her European counterparts.

In a September speech at Fordham University, Varney stressed the need for cooperation between the two agencies. “In this context of a global economy, divergence in substantive rules and procedural approaches poses significant difficulties for members of the business community,” Varney said, according to a Dow Jones report.

Which makes the current dispute all the more surprising.

In the context of previous statements, this week’s release about Oracle is more sugar-coated. “At this point in its process, it appears that the EC holds a different view,” said Antitrust deputy Molly Boast. “We remain hopeful that the parties and the EC will reach a speedy resolution that benefits consumers in the Commission’s jurisdiction.”

The heart of the dispute involves different government approaches to free, or open-source, software. Sun owns MySQL, an open source database that programmers can access and build on for free.

Oracle argues that while its databases are used to manage complex back office functions like accounting and payroll processing at the largest companies, MySQL is used for quick web-based operations, like Google searches, and user interactions on social-networking sites like Facebook.

Not only do the two databases cater to different markets, Oracle argues, but the free nature of the software ensures that developers will continue to build on existing versions of MySQL. The Justice Department agreed.

Critics of the deal contend the markets are converging, particularly in Europe where companies turn to open source technology more often. MySQL is starting to compete in the market for the highest end databases, critics argue, and Oracle will stop providing the funding MySQL needs to remain competitive.

“Major customers in the enterprise sector already use MySQL where they previously used Oracle’s product,” said Florian Mueller, an advisor to MySQL’s creator, Michael ‘Monty’ Widenius, who has been pushing the EC to investigate the deal. ”All of this has a certain competitive impact.”

A Deputy Assistant Attorney General in the Justice Department’s Antitrust Division joined Covington & Burling, the Washington-based law firm announced today.

James O'Connell (Covington & Burling)

James O’Connell will be a partner in the firm’s global antitrust and competition law practice. He had been in charge of international, policy and appellate affairs in the Antitrust Division since 2003.

As an antitrust Deputy Assistant Attorney General, O’Connell oversaw the DOJ’s often close working relationship with the European Commission in Brussels. He also helped direct the U.S. government’s talks with advocates of antitrust enforcement in China.  He previously served in the division as chief of staff, deputy chief of staff and counsel to the Assistant Attorney General.

O’Connell is the third Antitrust Division official to come to Covington this year. Thomas Barnett, who led the office from 2005 to 2008, joined the firm in January. Deborah Garza, who became acting antitrust chief after Barnett resigned, was hired by Covington in March.

Barnett’s Senate-confirmed successor, Christine Varney, has stepped up antitrust enforcement after the somnolent years of the Bush administration. In May she withdrew Barnett’s guidance expressing a lenient view of mergers and potential monopoly power.

“Jim brings a wealth of experience in counseling and M&A in a variety of industries, including pharma, high-tech, manufacturing, telecommunications and media,” Covington management committee chair Timothy Hester said in a statement. “His arrival, along with the return of Tom Barnett and Deb Garza to the firm earlier this year, greatly strengthens our practice and will be a tremendous asset to our clients.”