The Antitrust Club: A weapon in Bill Clinton's hands.

Vernon Jordan, the consummate Washington insider, is a board member of American Express, which helped initiate the government's antitrust lawsuit against Visa and MasterCard. He is also a close friend of Joel Klein, who heads the antitrust division of the Justice Department. Klein was responsible for getting Jordan appointed to a committee that advises the department on antitrust cases. On February 26, 1997, after being introduced at a meeting of that committee by Klein, Jordan said, "I'm here very simply because Joel sent for me. Having said that, I want to say I'm happy to be here. I'm glad that he sent for me."

That Jordan, the same man who tried to get Monica Lewinsky a job at American Express to protect President Clinton, has not recused himself from the advisory committee is typical of the Clinton administration generally, and its antitrust regime in particular. Nixonian ethics prevail, and antitrust law is now a political weapon. When Nixon wanted more favorable coverage from the three major TV networks, he raised the threat of an antitrust suit. On a recently released tape, Nixon told aide Chuck Colson: "Our gain is more important than the economic gain. . . . Our game here is solely political. . . . As far as screwing [the networks] is concerned, I'm very glad to do it."

In the Clinton era, not much has changed. Consider the administration's reaction to criticism of a gun-control deal it reached with Smith & Wesson. The company's competitors strongly objected to the deal, ridiculing it as a "sellout." Some gun manufacturers vowed to pull advertisements in magazines that accept advertising from Smith & Wesson. Then Andrew Cuomo, the secretary of housing and urban development, threatened to pursue antitrust litigation against these gun manufacturers. Shortly afterward, the Justice Department launched a full-scale investigation of whether this vow constitutes illegal collusion.

When antitrust enforcement is politicized, it becomes a way for politically connected companies to hobble rivals they can't beat in the marketplace. The Visa-MasterCard case nicely illustrates the point. The credit-card giants forbid their member banks to offer cards other than Visa or MasterCard. Nearly two years ago, the Justice Department filed a suit claiming that these exclusive networks unfairly shut out American Express, and thus hinder competition.

Yet-by all accounts other than those of American Express and the Justice Department-the credit-card industry is in fact already fiercely competitive. According to CardWeb.com, consumers have over 25,000 different credit-card products to choose from. It's hard to maintain that collusion has kept this market from developing and hurt consumers. Kelly Presta, vice president of Visa USA, says that consumers received over 4 billion credit-card solicitations in the mail last year. Almost anyone, including bankrupts, can get a card.

American Express trails Visa and MasterCard in the credit-card market not because of a conspiracy, but because of its own mistakes. Harvey Golub, chairman and CEO of American Express, admits that he underestimated credit-card diversification in the 1980s. "In the early days," he told the New York Times in 1995, "our view of the bank card was that it was a local shopping card that would never be a significant factor on a world scale. We looked down on it. Big mistake." Another big mistake was the company's decision in the mid 1980s to reject an American Airlines proposal to offer a joint credit card with frequent-flier miles. Relishing the opportunity, Citibank stepped in and closed the deal.

American Express has turned to the administration to save it from its own poor decisions. In a 1996 memo, the company described the Justice Department as a tool for undermining its two biggest rivals. Under the heading "Changing the Rules-Finding Allies," the memo suggested that the Justice Department could "accelerate the process" of beating them.

The company, of course, denies lobbying the department or influencing the case in any way. But court testimony suggests that American Express officials enjoyed a cozy relationship with Klein and his subordinates. The CEO, Golub, admitted that he met with department officials "several times," while Stephen McCurdy, a vice president of American Express, met with them twice. John Elliot, an American Express consultant paid $504,000 for his services, had eight to ten meetings with Justice officials.

The American Express memo said that "Visa is the Microsoft of credit cards." Too true. In the Microsoft case, struggling competitors used the government's antitrust enforcers to gain advantage. In the fall of 1997, Netscape's Jim Barksdale invited Klein to his home for breakfast to discuss the case. The Project to Promote Competition in the Digital Age-known as "ProComp" and funded by Netscape, Sun Microsystems, and Oracle, among others-has written that the best way to seek "relief" from Bill Gates was to "encourage DOJ to proceed promptly with its longstanding investigation concerning Microsoft."

Such influence peddling goes hand in hand with the hostility to successful businesses that animates the Clinton antitrust apparatus. Robert Pitofsky, now chairman of the Federal Trade Commission, headed up the 1992 transition team on antitrust, and in 1993 succinctly summed up the Clinton antitrust approach. The Reagan administration had mounted "about as minimal an antitrust program as can be imagined," and antitrust had been stepped up a little under Bush-but under Clinton, Pitofsky suggested, "antitrust enforcement would be more vigorous. Close questions in all areas would more often lead to government challenges. Unjustified nonenforcement at the federal level would end."

The administration has lived up to Pitofsky's prediction. The Justice Department has unleashed the power of antitrust in ways strikingly reminiscent of the anti-corporate fervor of the 1960s and 1970s. From 1994 to 1999, the antitrust division filed a total of 481 cases, vastly increased its investigations of supposed monopolies, and intensified reviews of mergers and acquisitions. Under Reagan and Bush, the department had filed just three cases concerning the conduct of monopolies. Under Clinton, twelve such lawsuits have been filed.

In the Clinton administration's first three years, antitrust-division head Anne Bingaman increased the enforcement section's personnel and budget, and increased the review of mergers and acquisitions. In fact, according to D. J. Armentano, a professor of economics at the University of Hartford, between 1993 and 1996, the number of merger investigations initiated by the department increased from 102 to 237. That upward trend has continued under Klein. According to Robert Levy of the Cato Institute, the division will be handling an estimated 514 antitrust cases this year, an increase of 35 percent over the last two years.

The division has been relentless in stopping major mergers. In July, it effectively blocked a major telecommunications deal between MCI-Worldcom and Sprint. Attorney general Janet Reno said the deal threatened "to undermine the competitive gains achieved since the [Justice] Department challenged AT&T's monopoly of the telecommunications industry 25 years ago."

Not surprisingly, Pitofsky's FTC has been just as aggressive as Klein on the merger front. Over the last few years, the FTC has gone after mergers in many industries. It has especially targeted high-tech, investigating antitrust issues in a long list of companies, including Intel and Cisco Systems. Most recently, America Online's $113 billion buyout of Time Warner has occasioned an FTC investigation of AOL's popular instant-messaging service. Not that traditional bricks-and-mortar companies have escaped scrutiny: In 1997, the FTC nixed the proposed merger between Staples and Office Depot.

Justice and the FTC are not the only agencies assuming antitrust oversight. The Federal Communications Commission, under the stewardship of William Kennard, has acted like a de facto antitrust body, according to Harold Furchtgott-Roth, an FCC board member. Kennard recently played an important role in blocking the MCI-Worldcom/Sprint merger, which he said would be a "surrender" of the robust competition that has driven down long-distance prices.

The administration also has imposed regulatory mandates disguised as antitrust enforcement. Companies seeking mergers or partnerships are subjected to an array of agency-imposed investigations and regulations. "Mergers and acquisitions today go through an endless parade of horribles," says Adam Thierer, a policy analyst at the Heritage Foundation. "Companies are subjected to [the Justice Department], the FTC, and the FCC, and in order to get a deal, they must accede to conditions that amount to regulatory burdens."

The SBC-Ameritech merger is a case in point. The FCC required, among many other things, that the new company compete for local telephone service in 30 metropolitan areas outside its service territory. Failure to do so would result in a fine of $40 million for each violation. Not surprisingly, the company complied.

The administration's antitrust regime, in short, has been hyperactive, politicized, and regulatory. Yet the Republican response has been mixed at best. A Senate Judiciary staff memo distributed in 1998 praised antitrust as a regulation-free alternative to overreaching federal bureaucrats: "The antitrust laws, unlike government regulation, are designed to protect free-market forces, rather than alter them." Similarly, House Judiciary Committee chairman Henry Hyde recently wrote that "antitrust law is the antithesis of government regulation." The budget for antitrust enforcement continues to expand. In 1995, $89.4 million was appropriated for the antitrust division. Five years later, the GOP Congress increased its budget to $110 million. The administration has requested $134 million for next year.

The trend is both clear and troubling. George W. Bush should understand what's at stake, both for the short-term economy and the long-term future of the free market.