Identifier
Created
Classification
Origin
07BRUSSELS3241
2007-10-26 09:52:00
UNCLASSIFIED
USEU Brussels
Cable title:  

FTC CHAIRMAN MAJORAS REVIEWS MICROSOFT CASE IMPACTS WITH

Tags:  ECIN KIPR ECPS EINT ETRD EINV ECON EUN 
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P 260952Z OCT 07
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC PRIORITY
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INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
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RUEHKO/AMEMBASSY TOKYO
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UNCLAS SECTION 01 OF 02 BRUSSELS 003241 

SIPDIS

DOC FOR DEFALCO
FTC FOR JOHN PARISI
DOJ FOR CALDWELL HARROP

STATE FOR EUR/ERA, EB/IPE, EB/TPP/MTA

PLEASE PASS TO USTR - DAVID WEINER

SENSITIVE BUT UNCLASSIFIED - ENTIRE TEXT
PROPRIETARY BUSINESS INFORMATION - PLEASE PROTECT ACCORDINGLY

NOT FOR INTERNET DISTRIBUTION

SIPDIS

E.O. 12958: N/A
TAGS: ECIN KIPR ECPS EINT ETRD EINV ECON EUN
SUBJECT: FTC CHAIRMAN MAJORAS REVIEWS MICROSOFT CASE IMPACTS WITH
BRUSSELS ATTORNEYS

REF : USEU BRUSSELS 2933

UNCLAS SECTION 01 OF 02 BRUSSELS 003241

SIPDIS

DOC FOR DEFALCO
FTC FOR JOHN PARISI
DOJ FOR CALDWELL HARROP

STATE FOR EUR/ERA, EB/IPE, EB/TPP/MTA

PLEASE PASS TO USTR - DAVID WEINER

SENSITIVE BUT UNCLASSIFIED - ENTIRE TEXT
PROPRIETARY BUSINESS INFORMATION - PLEASE PROTECT ACCORDINGLY

NOT FOR INTERNET DISTRIBUTION

SIPDIS

E.O. 12958: N/A
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