This week the ABA Antitrust Law Section’ holds its Spring Meeting. The program offers dozens of sessions, each of which features debate by a panel of experts from government, academia, or private firms on a topic of current interest.
This post reflects my notes from a talk about how well the administration of President Biden has done in making its high hopes for reviving antitrust enforcement, both in the two agencies that have enforcement as a primary mandate—the Antitrust Division in the U.S. Department of Justice and the Bureau of Competition in the Federal Trade Commission—and in other parts of the executive branch.
Shayla Alfonso, Perkins Coie LLP: Let’s have a vote on whether the Biden administration’s antitrust policy, including the Executive Order (EO) on a whole-of-government approach to competition, has had more bark or more bite. I see more hands up for bark than for bite. What do panel members think?
Ian Conner, Latham & Watkins LLP: The idea of no bite in the last 40 years does an incredible disservice to enforcers. The EO covers a lot.
On merger enforcement, the EO reflects hostility to mergers. 65 second requests came in last 4 mos. of Trump and first 8 mos. of Biden. That doesn’t reflect a big shift—only 4 more than previous 12 mos. I expect number to increase in the ensuing 12 mos.
The merger enforcement challenges have dropped a lot. The Federal Trade Commission (FTC) maintained its number of challenges, but settlements have definitely dropped.
As for labor, we’ve seen a big shift in approach to labor effects, including the pending rule-making on noncompete agreements.
The revisions to the merger guidelines the Antitrust Division and the FTC’s Bureau of Competition use haven’t come out, but we expect them in several weeks and anticipate the changes will tighten standards, make some defenses drop away, and expand nascent competition and potential competition concepts.
Matt Stoller, American Economic Liberties Project: You should count yourselves so fortunate. You live in Florence during Renaissance. You have a chance to repair so many things that have gone wrong. Roger Altman on MSNBC says at least 20 percent of deals that normally would have gone through haven’t happened.
The EO came out of a 2016 EO, which in turn responded to the uneven impact of the 2008-09 financial crisis across the income and wealth spectrum. The Biden EO says the President sees monopoly as a real problem. The fact that the President said that matters.
Effects include Department of Transportation’s opposition to the JetBlue deal with Spirit and/or American Airlines and the Commodity Futures Trading Commission’s action to lower overdraft fees.
Biden himself criticized Robert Bork’s consumer-welfare standard framework.* That matters.
Renate Hesse, Sullivan & Cromwell LLP: Biggest goal of EO aimed at aligning agencies with giving priority to competition. Agencies typically haven’t given that issue much attention. Some agencies haven’t fallen in line.
Alfonso: Does the Biden approach create opportunities for business?
Hesse: It gives complainants opportunities. It also enables companies to discuss old rules with agencies.
Stoller: The anti-monopoly movement favors business, but it favors small and medium sizes. They feel under siege by coercive arrangements. The time also offers chances to bring cases, partly because business people have a positive view of antitrust.
Hesse: Can we help small business through antitrust in a global economy. I doubt antitrust will solve income inequality, loss of jobs, and so forth. Merger enforcement won’t do it.
Stoller: No disrespect,** but you don’t know what happens. Pharmacies do a great job, for example, but pharmacy benefit managers (PBMs) squeeze them out with their power over reimbursement. People understand that big companies take advantage of their power. It’s not complicated.
Hesse: I said only that antitrust by itself won’t remedy social and economic ills.
Alfonso: What can we glean from the bad outcomes in labor cases?
Hesse: We gave notice during President Obama’s second term that we might bring criminal cases due to conduct in labor. But juries have more sympathy for small businesses. Case selection matters a lot.
Alfonso: Merger enforcement?
Conner: We see more labor issues in second requests the agencies make under Hart-Scott-Rodin They ask about unionization issues, reductions in force, and the like. They don’t result in challenges that focus on labor, with the exception of Random House, but flavor otherwise viable cases. I think they will go nowhere as a stand-alone basis for contesting mergers..
Stoller: Data show tremendous consolidation in labor markets. People sense that consolidation hurts job choices and compensation. The Microsoft/Activision merger got support from game developers.
Hesse: On the noncompetes rule making, we don’t know what the rule will say, but we infer it will allow rescission and that a sale of business will allow a narrow exception to the ban. It will face challenges, including by the Chamber of Commerce. People should look at the sorts of noncompetes they have with employees and others to prepare for the impending rule.
Michael Lee, JPMorgan Chase Bank, N.A.: The noncompete-ban idea has already happened in some states, notably California. If a ban comes out, people might use nondisclosure agreements, laws against the theft of trade secrets, and other contract terms.
Alfonso: Let’s discuss the Robinson-Patman Act (RPA) and the notion of unfair methods of competition as broader than the Sherman Act.
Conner: The FTC Act’s Section 5 doesn’t ban things that the Sherman Act doesn’t. The FTC errs in thinking that Section 5 doesn’t require market definition, anticompetitive effects, and so forth.
Stoller: The FTC’s policy statement does require an effect on competitive conditions. The statement ties to Supreme Court precedent. Louis Brandeis at the time the FTC Act came into existence cited the moral grounding of the precepts against the abusive conduct.
Conner: The argument proves too much. Some say FTC Act Section 5 plugs gaps, such as price discrimination that the RPA 22 or so years later didn’t prohibit, but I disagree.
Alfonso: What enforcement initiatives can we expect?
Conner: We can anticipate limits on noncompetes.
Hesse: Interlocking directorates will come under increasing scrutiny.
Stoller: I foresee attention in several areas. Look at things on which the FTC has initiated studies, including PBMs and supply-chain issues.
Alfonso: What industries will get attention?
Stoller: Regarding insulin, the FTC might pursue unfair methods of competition cases asserting commercial bribery as per se bad against PBMs and group purchasing organizations (GPOs).
Conner: Look for an RPA theory challenging a buyer’s knowing receipt of a bigger discount than its competitors get.
Alfonso: Why did RPA enforcement decline to almost nothing?
Hesse: I suspect the difficulty of the statutory language and the exceptions it specifies discourages enforcement. Also, people have a general view that RPA divorces cost from price and could lead to higher prices.
Stoller: Commissioner Bedoya said we have no data on the effects of RPA. The RPA has made a comeback due to a sense that monopolization explains the bad effects in the economy during and since the financial crisis.
Alfonso: Recent surveys of employees show a big drop in satisfaction. What accounts for that?
Conner: The claim that the dissatisfaction resulted from unhappiness over finally having to enforce the antitrust laws is untrue. The level of enforcement doesn’t correlate with satisfaction. The drop in satisfaction coincides with fewer enforcement action. Tim Wu, on the other hand, said the recent wins didn’t arise from chickenshit lawyers bringing winnable cases. The drop in morale has produced a big bump in departures of senior staff, depleting the FTC’s ability to bring and win cases pursuing edge-expanding theories.
Alfonso: Any questions?
Audience member: Do enforcement agencies have the right mix or portfolio of cases to achieve their ambitions?
Hesse: I believe so.
Alfonso: Thank you to the panel and the audience.
*See Robert Bork, The Antitrust Paradox: A Policy at War with Itself (1978).
**Channeling the lead character in Talladega Nights: The Ballad of Ricky Bobby (2006).