Illustration by S. Kambayashi

THE new head of the antitrust division of America's Department of Justice, Christine Varney, sees Thurman Arnold, a predecessor who took office in 1938, as a model. Arnold's appointment created an uproar. His book, “The Folklore of Capitalism”, published a year earlier, was widely seen as a satire on the inadequacy of the country's antitrust laws. He was, in his own words, “responsible for the first sustained programme of antitrust enforcement on a nationwide scale.” This vigorous approach, in Ms Varney's view, was an important part of “that era's legacy for modern economic policy”. In other words, Ms Varney means business.

In recent years “the pendulum swung too far from Thurman Arnold's legacy of vigorous enforcement,” Ms Varney argued in May in one of her first speeches after Barack Obama appointed her. Companies are likely to find themselves scrutinised at least as intensively as they were under the administration of Bill Clinton, when many senior antitrust officials in the justice department and Federal Trade Commission (FTC) cut their teeth on a celebrated anti-monopoly lawsuit against Microsoft. (Ms Varney was an adviser to the software giant's chief victim, Netscape.)

Ms Varney's comments before she got her current job have led to widespread speculation that she intends to make Google her version of Microsoft. “I think we're going to continually see a problem, potentially, with Google,” she said in a speech last year. “Companies will begin to allege that Google is discriminating, not allowing products to interoperate with other products.” The FTC has already begun an investigation into the overlap between the boards of Google and Apple, which doubtless contributed to the resignation earlier this month of Eric Schmidt, Google's boss, from Apple's board.

Yet updating antitrust for the digital age is but one part of Ms Varney's ambitious agenda. She believes that the failure of the administration of George Bush to enforce antitrust effectively contributed directly to the current economic crisis. Whereas Arnold used competition policy to reinvigorate an economy afflicted by central planning, she plans to use it to combat the damage done to the economy by what she sees as excessive deregulation, including, it seems, that of the financial system.

Ms Varney has already thrown out the conclusions of a report published by her predecessor last September on Section 2 of the Sherman Act of 1890, the sacred text of American antitrust policy. The report was widely seen as a last-ditch attempt by the Bush administration to make it harder for its successor to pursue a determined anti-monopoly policy. According to Ms Varney, it “sounded a call of great scepticism regarding the ability of antitrust enforcers—as well as antitrust courts—to distinguish between anticompetitive acts and lawful conduct, and raised the related concern that the failure to make proper distinctions may lead to ‘over-deterrence' with regard to potentially pro-competitive conduct.”

Whether a listless attitude to antitrust on the part of the Bush administration really contributed to the economy's swoon is debatable, to say the least. Although it did not mount a landmark case akin to the prosecution of Microsoft, there was plenty of activity on Mr Bush's watch. As Ms Varney acknowledges, cartels were pursued enthusiastically, with record convictions, jail terms and fines. The break-up of a vitamins cartel was a notable victory.

Mr Bush's justice department also fired a shot across Google's bow, in effect squelching a mooted tie-up with Yahoo! last year. It was passive at times: it waved through mergers such as Whirlpool's acquisition of a rival maker of white goods, Maytag, and the nautical combination of Carnival Cruises and Princess Cruises, which many experts felt it had reasonable grounds to block.

But the FTC was more energetic. Indeed, relations between the two antitrust enforcers were cool, especially after the justice department refused to support the FTC's effort to persuade the Supreme Court to bar drugs firms from striking deals with makers of generics to stop potential rivals from entering the market. (These deals are likely to be revisited by the Obama administration.) The FTC also adopted a particularly sweeping definition of market power when it resorted to the courts to block the organic retailing merger between Whole Foods Market and Wild Oats, only for the deal to go ahead after the firms made modest concessions.

The courts also overruled the Bush administration's attempt to block the acquisition of PeopleSoft by a rival database firm, Oracle. They are likely to be one of the main constraints on the Obama administration's activist urges, especially if it seems to be pursuing a firm simply because it is big (something Ms Varney says she will not do). The Supreme Court, in particular, has made several decisions in recent years that have narrowed trustbusters' room for manoeuvre.

Even if the courts prove unexpectedly pliant, trustbusters may still fall foul of one of the problems that dogged the prosecution of Microsoft: the difficulty of finding a workable remedy. Fines would have had too little impact; breaking up the firm would have been both drastic and not guaranteed to succeed in ending monopoly abuses. Likewise, if Google were found some day to have abused its commanding position, it is hard to imagine how the cure could be better than the disease.

Addressing abuses in the finance industry may also prove difficult. Even the biggest banks have a global market share of less than 10%, so they do not fit the classic definition of a monopoly. Instead, the worry is that some banks have simply become too big to fail.

The other big challenge facing America's antitrust enforcers is possible disagreement within Mr Obama's cabinet. Ms Varney may want to put big firms' feet to the fire, but there are plenty of voices whispering dire warnings in the president's ear. In particular, they say, given the wretched state of the economy, why risk upsetting the few bits that are growing strongly with gratuitous antitrust cases? Already, the Department of Transportation has ignored Ms Varney's recommendation that it block the proposed integration of Continental Airlines into an international alliance. The trustbusters, it seems, do not enjoy a monopoly over policy on business within the Obama administration.