Friday, May 28, 2010

Watching the Wrong Henhouse for Foxes

There’s one very odd aspect of regulatory law under the Obama administration: namely, its focus. I think it’s pretty clear at this point that the Obama administration’s regulatory apparatus is focusing much more strongly on the tech industry than previously: why, you’ve got the DOJ investigating antitrust claims on Apple’s iTunes, the DOJ investigating Apple for its banning Flash and third-party development packs in the App Store, you have Sen. Herb Kohl trying to get Comcast to spin off Hulu, you have the FTC waiting 6 months to approve Google’s AdMob acquisition (while dithering  over Apple’s Quattro Wireless acquisition), and you've got  the investigation over a “gentleman’s agreement” for big tech firms not to poach talent from one another.

I’m not a lawyer, so I can’t really comment about the legal justification for each of these actions; nor do I think all of them are wrong—I like Kohl working on Comcast and I like the investigation into the gentleman’s agreement. That said, you can’t ignore what the trend is: increased scrutiny of the tech sector.

And I suspect the increased scrutiny is not merely the average increase that accompanies the change from the Bush administration to the Obama administration; it seems to me that the increase is relative too. Recall that this entire Deepwater Horizon spill was precipitated by…a lax regulatory environment. The SEC has made some cases (besides Goldman, it just shut down a large hedge fund), but has declined to make some other cases (e.g. AIG). In fact, in this column asking “Will Wall Street Go Free?”, William Cohan demonstrates that there’s been a laxity in pursuing justice at Wall Street firms.

This, I’m sure you’ll agree, is pretty strange. Because if there’s any sector of the American economy that’s doing a relatively good job these past few years, it’s the tech sector, no? And yet it appears that it will be subject to relative increased scrutiny. I appreciate that regulatory oversight is as important in good times as in bad, and that sectors that don’t seem to be problems can turn into problems if left unwatched. But still, we know who the problem children in this economy of ours is: I’ll give a geographical hint—look in lower Manhattan and Connecticut rather than Palo Alto—and the competition between the big tech firms has been more salutary than anything else. I just don’t get it.

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