The New “Era” of Antitrust Enforcement (Part I of III)
There is no question but we are in the “perfect storm” for antitrust enforcement. Antitrust enforcement is fast-becoming an area of rare “bipartisanship.” Republicans resent the growing power and influence of technology and social media companies. Democrats are concerned about the growth of the rich, large companies and political influence.
Jonathan Kanter, the confirmed Assistant Attorney General of the Antitrust Division, has already signaled that enforcement changes are coming. He received bipartisan support in his confirmation, reflecting the expectation of aggressive enforcement. At the same time, Congressional attempts to address antitrust issues in the marketplace are gaining steam.
Lina Kahn, the FTC Chairperson, has been a little bit more controversial, given her prior statements opposing Google and Facebook. Since her initial controversy, the FTC is settling down to business and continuing its enforcement action against Facebook in federal court.
Kanter gave a speech recently before the New York Bar Association at which he outlined his vision for enforcement and the need to update antitrust perspectives beyond the limited view of the past three decades. In recognition of the new era, the Justice Department and the FTC have initiated a review of both the Merger Guidelines and Vertical Conduct Guidelines. These revisions are expected to significantly alter DOJ’s and the FTC’s approach to merger and civil enforcement.
Kanter’s speech outlined a fresh approach to merger reviews. While noting that last year resulted in a record number of Hart-Scott-Rodino merger pre-notification filings, Kanter explained the need for a broader inquiry into the effect a proposed merger. With a broad analysis of potential anti-competitive effects, antitrust enforcement is expected to undergo changes in merger review to consider issues such as labor markets, consumer benefits, and anticipated reductions in competition among the remaining companies.
In another part of the speech, Kanter expressed reservations relating to prior antitrust settlements that permitted transactions to go forward with divestitures of overlapping operations and/or conduct-based prohibitions. Each of these approaches, in Kanter’s view, were questionable in effectiveness. Kanter may apply a simple view in future enforcement actions – if DOJ seeks to block a merger, the merger should not happen under any conditions. Again, this would be a significant departure from past approaches, although the last AAG Makan Delrahim, strongly advocated against merger settlements involving “conduct-based” settlements. Delrahim relied more often on structural changes to proposed mergers that incorporate divestitures. Kanter made clear he is not a big fan of divestitures since he questioned whether the divested assets were ever utilized to increase or restore a particular level of competition that existed in the market prior to the merger.
The Justice Department’s new approach to mergers and aggressive civil enforcement issues raise real risks to companies, particularly those operating in concentrated markets. The U.S. economy while growing has been rapidly shrinking in competition, particularly in various markets critical to the economy. Kanter’s fresh perspective on the value of “competition” as a driver of economic growth, consumer benefits, and innovation means more enforcement risks for companies in these concentrated markets, especially where a market leader has a dominant market share and influence.
Kanter, however, recognized that this new approach requires resources, and he highlighted the fact that the Antitrust Division has consistently shrunk in size over the last few years. DOJ is seeking a large budget increase to hire additional attorneys and staff. This takes time but will eventually occur since there is bipartisan support for the new era of antitrust enforcement.