There is currently a tug-of-war going on over the heart and soul of the antitrust laws. Well, perhaps that is a bit dramatic. But it is certainly fair to say that there is surging sentiment that the antitrust laws, and specifically antitrust enforcement, should be recalibrated to address concerns that are “populist” in nature. This was particularly evident last week by the introduction of two bills by Sen. Amy Klobuchar (D-Minn.) that seek to make it easier for the antitrust agencies to challenge “undue market concentration.”
The first bill would amend Section 7 of the Clayton Act, the law that governs the antitrust legality of mergers and acquisitions, to reduce what the antitrust agencies (FTC and DOJ) must prove to a court in order to stop a proposed merger or acquisition. Presently, the agencies must prove that the merger/acquisition would “substantially” lessen competition in the relevant market. The proposed bill would replace the word “substantially” with “materially,” which is intended to mean something “more than a de minimis amount of harm to competition.” While the change may seem semantic, the intent is to reduce significantly the standard under which mergers/acquisitions are blocked. The bill would also radically change how the largest mergers/acquisitions are analyzed. Presently, there is no different standard for large or small mergers – the agencies must prove that the transaction would substantially lessen competition in the relevant market. Under the proposed bill, however, the largest mergers/acquisitions – those greater than $5 billion in value or involving a party with assets greater than $10 billion – would be presumed unlawful and the burden would be upon the merging parties to prove that the transaction did not materially lessen competition. The second bill would reduce the filing fee most parties must pay for notifying the agencies of an impending transaction (from $45,000 to $30,000) but significantly increase the fee for transactions worth $5 billion or more (from $285,000 to $2.25 million).
These changes, as well as the others in the bills, implement part of the “Better Deal” economic platform that Democrats unveiled late July. Under the analytical framework that has governed antitrust for the past four-plus decades, market power and market concentration are important only insofar as it facilitates the ability to harm consumer welfare. Traditional antitrust analysis is consumer-oriented and focuses on whether the conduct at issue raises prices, reduces output, or reduces quality or innovation. Proponents of new antitrust objectives argue that antitrust’s current analytical framework isn’t sufficiently supple to address harms from dominant firms in modern markets. Sens. Bernie Sanders (D-Vt.) and Elizabeth Warren (D-Mass.), in particular, long years implored enforcement agencies to take these other concerns into account.
For example, proponents of a new antitrust paradigm argue that current antitrust doctrine underappreciates competitive harms from a dominant firm’s integration across distinct business lines. They argue that a dominant firm’s addition of another product line will have the cumulative effect of further cementing its position as a monopoly platform or logistics network. The technology sector has been a particularly fond target of these concerns. Many would also like to see the enforcement agencies show a concern for a merger’s impacts on jobs and wages, which are outside the scope of antitrust review as it exists today. Under this approach, antitrust analysis would expand the definition of the class of required merger beneficiaries to include workers, the general public and even potential competitors.
Despite the fact that antitrust policies premised on antipathy to large corporate size may be attractive in this “populist” political environment, – remember, then-candidate Trump railed against certain mergers and concentration of power – it is unlikely that these bills will ultimately become law, especially given that Republicans control Congress. Indeed, in two different speeches last week, the acting chairperson of the FTC and the acting assistant attorney general in charge of DOJ’s Antitrust Division reiterated that the traditional antitrust paradigm will govern enforcement policies and that market concentration and monopoly power are not inextricably linked.
In a speech earlier this month before the Concurrences Review and The George Washington University Law School, acting chairman of the Federal Trade Commission, Maureen Ohlhausen, defended the position that the antitrust laws should not be concerned with issues beyond its traditional concerns:
Antitrust is not a panacea… Antitrust is not well-suited to address many social and economic problems such as income or wealth inequality… Antitrust is a precision tool, designed to remedy specific harms to the process of competition, not to address macroeconomic issues.”
Chairperson Ohlhausen explained that, in her view, market share alone cannot guide enforcement decisions, especially given the fluidity of technological change and the rapidity with which markets change in this digital economy. Pursuing a more interventionist role, in her view, would force the FTC to pick and choose winners in a space whose economic futures they cannot possibly predict.
Andrew Finch, the acting assistant general in charge of the Antitrust Division of DOJ put the matter slightly differently. He warned that frequent changes to the antitrust regime are bad for business because the uncertainty may result in chilling behavior or investment that is otherwise desirable. He praised the consistency of the antitrust laws over the past several decades. Acknowledging that antitrust law must be dynamic and keep up with the changing economy, he stated:
Enforcers must always be on the watch for new or evolving threats to competition. As markets evolve and products develop over time, our analysis adapts. But as those changes occur, we pursue reliability and consistency in application in the antitrust laws as much as possible.
There is no question that the current political debate over the proper role of antitrust and antitrust enforcement harkens back to the structure-conduct-performance model and conglomerate merger theory that was abandoned after the 1960s and 70s in favor of the Chicago School that views antitrust issues through a price theory lens and rests on a faith in the efficiency of markets. The question, though, is whether such a change is necessary.
To implement a purported tougher antitrust regime would be costly. Antitrust scrutiny is already a comprehensive process, and expanding the necessary considerations would impose delay and additional costs on both the government and merging parties. Viewing cost savings—even in economic resources—as a negative under such entrenchment logic no doubt turns the faces of antitrust traditionalists red. Cost savings and other economic benefits are seen as socially desirable and increase efficient use of scarce resources. But, if those cost savings come at the expense of other social objectives, which standard will prevail?
These issues are only magnified as our large technology and platform companies grow and expand into new businesses. Consumers appear to benefit from these activities and so long as the process of competition remains free and fair, is there really a problem? Ultimately, this debate is less about economics and more about politics and the proper method of administering antitrust laws in our consumer-driven society. The open question is perhaps two-fold: whether existing antitrust doctrine is equipped to handle the distinct challenges created by the new economy, and whether expanding the analytical framework that currently governs antitrust and its enforcement is the proper vehicle for resolving these new challenges.
Whether and how this debate is resolved remains to be seen. The book has just started to be written. . . . Stay tuned…