New inflection point? US antitrust agencies see opportunity to change direction of antitrust law

May 25, 2023
Posted in News
May 25, 2023 admin

May 25, 2023

Erin Glavich

Introduction

Despite recent court losses, US agencies tasked with antitrust enforcement recently gathered to reiterate their strong commitment to disrupting the status quo in antitrust by using broad constructions of their own power, new theories of harm, and dormant or near-dormant competition laws. In a moderated discussion, Department of Justice (DOJ) Assistant Attorney General (AAG) Jonathan Kanter and Federal Trade Commission (FTC) Chair Lina Khan illuminated the significant policy and enforcement changes driving both agencies. Underscoring the importance of this revolution, the conversation occurred at a conference which featured similar messaging from heads of other governmental agencies and the former White House advisor on competition matters.

In short, both AAG Kanter and Chair Khan believe that US antitrust is at an inflection point caused by the current administration’s approach to the issue. This administration believes that the policy choices that have dominated antitrust since the 1980s have allowed unchecked consolidation, harmful chokepoints, and injury to competition and consumers. The agencies’ shift in attitude represents a change in both underlying economic and political policy and in how the agencies approach enforcement.

“Whole government” change in policy and all tools in toolbox

The discussion was part of a one-day Anti-Monopoly Summit hosted by the American Economic Liberties Project, a progressive organisation concerned with harms created by concentrated economic power. The general theme of the conference – and one embraced by AAG Kanter and Chair Khan – was anti-consolidation. Indeed, there was strong participation by the Biden administration, including a taped message from President Biden, reflecting a broad, government-wide policy leaning towards this opinion.

Since the 1980s, US antitrust law has been dominated by the Chicago school of law and economics, a price-focused consumer welfare standard, and what they perceive as pro-big business policies. Deliberate policy choices of past administrations are believed to have allowed unchecked consolidation by market participants, while changes in technology have fundamentally changed market realities. Both consolidation and new market realities have, according to the summit attendees, led to “an economy of intermediaries and platforms” – so-called “gatekeepers” and “chokepoints” that stifle competition (particularly for those with weaker and decentralised economic power, such as workers and smaller operations). Examples of such intermediaries, gatekeepers and chokepoints include meat packers and pharmacy benefits managers.

These chokepoints are a high priority for the agencies and reflect the policy shift in how they view economics, antitrust and healthy competition. The motivating belief is that consolidation has put economic power in the hands a few large entities, allowing them to maximise profits and power at the expense of consumers, competitors and other economic players (including labour and those weaker players up and downstream).

This change in underlying view manifests itself in how and when the agencies are enforcing antitrust law. There is a clear distrust of claimed efficiencies and other economic benefits of consolidation and, while a price-based consumer welfare standard is still a factor, it is no longer the primary arbiter of competitive harm. For example, AAG Kanter indicated that acquisitions can be challenged due to their impact on labour alone.

Additionally, AAG Kanter and Chair Khan repeatedly emphasised that they would both use “all tools in the toolbox” – that is, any authority at the agencies’ disposal remains on the table. These include dormant theories, broad readings of statutory text, FTC rulemaking, and rescinding and/or revising policy statements and guidelines.

Recognising the shift from prior practice, Chair Khan anchored this authority in the broad statutory text of the FTC Act, the FTC’s mandate under the rule of law, and her explanation that past practice was simply a reflection of then-accepted public policy. This sentiment was echoed by AAG Kanter, as well as other administration officials, including Consumer Financial Protection Bureau Director Rohit Chopra (a former FTC commissioner), General Counsel of the National Labor Relations Board Jennifer Abruzzo and Department of Transportation Secretary Pete Buttigieg. All took the same position to justify new or rarely used exercises of authority: because there is now a shift in underlying policy against the dominant practice of allowing consolidation, the usual practices that are viewed as having allowed that unchecked consolidation must also change.

Comment

Both agencies have already taken steps in this anti-consolidation direction: the FTC has introduced a new section 5 policy reinterpreting its authority to combat “unfair practices”, and has proposed a non-compete rule; and the DOJ has pursued labour and section 2 criminal prosecutions (for further details please see “Full year of FTC/DOJ progressive antitrust enforcement”).

However, the conference was notable for being the clearest and most direct articulation of the new policy driving the DOJ and FTC.

Clearly, these efforts will continue in new spaces and in ways that may not be apparent. Both AAG Kanter and Chair Khan stated the agencies are prioritising “high impact/programmatically significant” cases. The revised merger guidelines are expected to be released imminently and Chair Khan indicated the revisions will reflect these policy shifts. Despite high profile losses, AAG Kanter cited as accomplishments the DOJ’s reinvigoration of dormant theories, such as section 8 interlocking directorate and criminal section 2 monopolisation prosecutions. Kanter also noted an increased deterrent effect in merger enforcement, citing DOJ data showing a record number of abandoned mergers, many of which were not public.

Chair Lina Khan noted that the FTC is looking at section 3 of the Clayton Act (exclusive dealing and tying) and the Robinson-Patman Act, a now little used 1936 law originally designed to protect smaller “mom and pop” retailers by forbidding suppliers’ preferential pricing treatment of competing bigger chain stores except in limited circumstances. In fact, the Robinson-Patman Act received several callouts by agency and other participants as a potential rich vein of enforcement (for further information please see “More democrats, more action? FTC increases scrutiny of pharmaceutical rebate walls and fees”).

The agencies are not unaware that their goals are ambitious and will struggle to find traction with a now well-established body of law and a more conservative judiciary that is rooted in the very policy they want to change. Both the DOJ and the FTC have lost major cases pushing some of these newer theories. However, both anticipate continuing to push to expand the laws’ reach and convince the courts of the soundness of their approach.

Entities that act as platforms or intermediaries can expect additional scrutiny of any acquisitions, and everyone should expect all merger investigations to incorporate broader probes into other potential impacts that might not have received as much attention in the past. It is critical to note that the agencies are not shy about revisiting past acquisitions or practices, particularly where the government perceives that the transaction or conduct has resulted in new chokepoints or gatekeeping.

This content was originally published on May 25, 2023, via the International Law Office (ILO) newsletter. It can be found here: New inflection point? US antitrust agencies see opportunity to change direction of antitrust law

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