Bill Baer, the Assistant Attorney General in charge of the DOJ Antitrust Division, spoke about the DOJ’s antitrust enforcement priorities last Friday, February 6, at a speech in Miami. AAG Baer emphasized three priorities: exercising patience with market flux due to new disruptive new industry sectors, giving meaningful guidance to the business community, and crafting structural remedies as part of their merger enforcement efforts.
First, the AAG noted the need to resist the temptation to overreact to fluctuations in markets. “[C]ompetition is not neat, organized, or pretty. There will be big winners and big losers in many markets – and big temptation to stifle these new competitive dynamics.” Antitrust enforcers must exercise some degree of perspective, for example, with new sectors such as generic competition in the pharmaceutical industry and the entry of e-books into the publishing business. In particular, enforcers must work with regulators to resist call from threatened industry players for new antitrust regulation against disruptive market entrants that would serve only to suppress competition and stifle motivation.
AAG Baer also discussed the Division’s commitment to “provid[ing] meaningful front-end guidance” to lawyers and businesses about the DOJ’s “enforcement priorities.” He pointed to the DOJ and FTC’s Horizontal Merger Guidelines, which are relied on not only by the business community but by courts and foreign jurisdictions as well. Also notable was the DOJ and FTC’s joint policy statement concerning cyber threats. The DOJ applied that guidance in April 2014 when it announced that it would not challenge an effort by CyberPoint International to create a data platform that would allow businesses to share cyber threat data.
Despite this role in providing guidance, AAG Baer stressed that the Division is a law enforcement agency, not a regulator: “I recoil at the suggestion that antitrust equates to regulation.” The AAG envisions a Division that is “trial-ready” and “prepared to be put to [its] proof” – even in cases that will likely never go to trial.
The AAG spoke in detail about the DOJ’s efforts to effect “meaningful structural relief” as part of its merger enforcement efforts. Such efforts, he noted, should foster competition and minimize the need for ongoing oversight. For example, when Anheuser-Busch InBev (ABI) sought to buy Grupo Modelo, the Mexican beermaker responsible for Corona, the proposed merger would have joined the largest and third-largest beer companies in the United States. As a concession to antitrust concerns, the brewers proposed divesting only Modelo’s U.S. beer distribution business, while retaining control of U.S. brewing and bottling. The DOJ sued, forcing a settlement in which Modelo divested its entire U.S. operations to a third party.
AAG Baer noted divestitures made in a settlement by US Airways and American Airlines before their merger. The airlines initially claimed no structural remedy was needed, but on the eve of trial they agreed to sell numerous properties, including 104 takeoff and landing slots at Reagan National Airport and 34 slots at LaGuardia. The DOJ also successfully negotiated a post-acquisition divestiture in BazaarVoice’s purchase of its only rival, PowerReviews. The companies are in the business of creating software for online ratings and reviews. After the DOJ persuaded a court that the acquisition violated Section 7 of the Sherman Act, the DOJ and BazaarVoice negotiated for all of the PowerReviews assets to be sold.
The DOJ views the remedies in each of these cases as fostering competition and benefiting consumers. The sale of Modelo’s U.S. operations led to increased beer production and the introduction of new brands by the acquiring company, AAG Baer said. Many of the slots divested by US Airways and American were bought by low-cost carriers, such as Southwest and Frontier, which have added new flights and larger-capacity planes. The AAG noted that now that PowerReviews has been severed from BazaarVoice, both the companies and customers are benefiting from increased choices in the market.
AAG Baer noted a few additional highlights from the Antitrust Division’s work in 2014:
- The Division introduced a streamlined procedure for parties seeking to modify or terminate pre-1980 antitrust settlements and judgments that have outlived their usefulness.
- The DOJ pursued cross-border collaboration in cartel enforcement and in merger investigations, such as the DOJ’s work with Brazilian, Canadian, and Mexican agencies in investigating Continental AG’s purchase of Veyance Technologies.
- The Division obtained a $3.8 million fine and a $1 million disgorgement in an action against Flakeboard and SierraPine, two particle board manufacturers, after they began prematurely consolidating their operations before a proposed merger was consummated.
- The Division has embraced technology assisted review, or predictive coding, as a tool to enable the subjects of investigations to respond more quickly and effectively to DOJ requests for information.
Baer’s address is available here.