From the May issue of Barnett's Notes on Commercial Litigation:
Teddy Roosevelt's Department of Justice sued to bust up Standard Oil .
The signs of a tougher approach to bigness and badness have grown like . . . Google.
On May 18, 2008, presidential candidate Barack Obama said:
I will assure that we will have an antitrust division that is serious about pursuing cases.
There are going to be areas, in the media for example where we're seeing more and more consolidation, that I think [it] is legitimate to ask . . . is the consumer being served?
We're going to have an antitrust division in the Justice Department that actually believes in antitrust law. We haven't had that for the last seven, eight years.
Some of the consolidations that have been taking place, I think, may be anti-competitive.
Flash forward to April 20, 2009, when the U.S. Senate confirmed President Obama's nominee, Christine Varney, to head the Antitrust Division in the Department of Justice.
Two days later, Ms. Varney named her top aides, all of them sporting pro-antitrust credentials.
But the coup de grace came on May 11, 2009. On that day, Ms. Varney withdrew an antitrust-lite report that her agency had issued only eight months earlier, "Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act ".
The New York Times had called the report "a new set of guidelines that narrow the interpretation of abuse that would justify government intervention against monopolies. It is a deregulatory gift aimed at getting pesky antitrust enforcers off of the back of big business." The Federal Trade Commission had refused to sign it, deeming it "a blueprint for radically weakened enforcement of section 2 of the Sherman Act."
Plainly the mood has changed. What can we expect from Ms. Varney's resurgent Antitrust Division?
1. Merger challenges. The previous administration did not contest any corporate mergers. In her Senate hearing, by contrast, Ms. Varney wondered why the government gave a pass to mergers between XM and Sirius and Maytag and Whirlpool. Last year, she also deemed an abortive Google-Yahoo deal on search ads "fundamentally anticompetitive.
2. Monopoly cases. In dropping the Section 2 report, Ms. Varney said that "the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers." The "Don't Be Evil " guys, among others, likely got the message.
3. ARRA fraud cases. The American Recovery and Reinvestment Act of 2009 set aside $500 or so billion to revive the economy. The Antitrust Division has created its own Recovery Initiative to help prevent "third-party fraud, waste, and abuse relating to the securing and use of ARRA funds." We can also expect prosecutions. We'll have to see whether the anti-fraud work carries over to other stimulus projects, such as the Troubled Asset Relief Program and the impending Public-Private Investment Program .
4. Cartel litigation. While praising the Division's recent record of fighting criminal cartel activity, Ms. Varney warned that, "[w]ith the higher levels of concentration and economic instability, markets are increasingly vulnerable to collusion and other fraudulent activity."
5. Focus on technology. Ms. Varney headed her firm's Internet practice group. She said she wants to look at "other new areas of civil enforcement, such as those arising in high-tech and Internet-based markets." She also opined last year that "Google has acquired a monopoly in Internet online activity".
6. Scrutiny of industries in distress. The top economist in the Antitrust Division, Carl Shapiro, said on May 13, 2009, that "tough economic times . . . are exactly the times when suppliers may be most likely to seek some relaxation of the antitrust laws and most tempted to collude."
7. More doubts at federal agencies on industry structure and pro-competitive arguments. Ms. Varney rejected the Section 2 report in part because it "sound[ed] a call of great skepticism regarding the ability of antitrust enforcers – as well as antitrust courts – to distinguish between anticompetitive acts and lawful conduct, and raises the related concern that the failure to make proper distinctions may lead to 'over-deterrence' with regard to potentially procompetitive conduct." We can expect that her aversion to the skepticism will carry over to other agencies. The acting Chairman of the Federal Communications Commission, Michael Copps, spoke recently about "[t]wo decades of mindless deregulation" and "a veritable tsunami of consolidation across not just communications, but most business sectors . . . ." And the new FTC Chairman, Jonathan Leibowitz, decried the Section 2 report as "chiefly concerned with firms that enjoy monopoly or near-monopoly power".
8. An up-tick in follow-on civil cases. Antitrust actions by government agencies tend to produce private civil actions also. Expect to see more of both.
One thing Blawgletter would like to see but probably won't: More attention in judicial nominations to views on competition law. Although comments in the business press about Supreme Court nominee, Second Circuit Judge Sonia Sotomayor, do imply at least some interest in that area.
