No incoming president in recent memory has fueled as much speculation and uncertainty regarding his administration’s antitrust enforcement agenda as President Trump. The conflicting signals sent by the candidate and then president-elect – the populist critic of the proposed AT&T/Time Warner, Inc. transaction and of Amazon’s putative market power versus the conservative critic of large government who hired Steve Bannon to run his campaign and who now serves as a close advisor to the president – have fueled the high level of speculation. The slow pace of sending nominees to the Senate for confirmation to fill the four open senior antitrust enforcement positions, including the Federal Trade Commission (FTC) chair, two commissioner seats, and the assistant attorney general (AAG) for Antitrust at the Department of Justice (DOJ), combined with rumors of potential nominees, have added more fuel to the speculation fires. The nomination of antitrust veteran and current White House Deputy Counsel Makan Delrahim, whose nomination hearing was held Wednesday, May 10, 2017, now provides meaningful insight into what we should expect from the antitrust agencies under the Trump administration.
Delrahim – whose confirmation is still pending (although it is widely expected) – comes to the AAG position with a background in both antitrust law and politics, having worked for the Senate Judiciary Committee under Senator Orrin Hatch before serving as a deputy AAG for Antitrust during President George W. Bush’s administration. Delrahim, who also spent over a decade in private practice where he worked as a lawyer and lobbyist, was an early supporter of Trump, and joined the transition team before accepting a position in the White House, where he helped shepherd Neil Gorsuch’s Supreme Court nomination through the Senate confirmation process before being nominated to lead the DOJ’s Antitrust Division.
Delrahim is viewed by the antitrust community as someone who falls squarely on the conservative side of the antitrust enforcement policy continuum, but who is also a pragmatist and not as ideological as other candidates who were rumored to be under consideration for the AAG position. His nomination can fairly be read as confirming the suspicions of those who viewed populist Trump’s rhetoric about antitrust issues as just that, and that antitrust enforcement – at least at the DOJ – is likely to reflect the type of restraint and faith in the free market that we have witnessed in prior Republican administrations.
Delrahim’s confirmation hearing was relatively brief, and the Senate Judiciary Committee failed to extract much from him about how he would operate the Antitrust Division. But his testimony, together with his background and reputation, provide some insight into his likely approach to antitrust enforcement, and his priorities in overseeing the Division.
The Obama administration heralded eight years of muscular antitrust enforcement reflected largely in the area of merger review. The Antitrust Division under the Obama appointees brought challenges to both horizontal and vertical mergers resulting in a variety of outcomes, from successful challenges (e.g., Anthem/Cigna) to abandonment (e.g., Comcast/Time Warner Cable and Halliburton/Baker Hughes) to consent decrees (e.g., Comcast/GE/NBC Universal). The Division also showed a willingness to revive conduct remedies for vertical mergers, as evidenced by its update to the Policy Guide to Merger Remedies in 2011, which added several paragraphs about conduct remedies to the 2004 guide.
Time will tell what mark Delrahim will make on the Division’s approach to merger clearance, and we cannot rule out the possibility that he will surprise conservatives and the business community and preserve some of the vigor that the Division exercised under Obama. The safe bet is that under his direction, the Division will revert to the more constrained use of its merger enforcement powers that we witnessed during prior Republican administrations. If so, we can reasonably expect to see the Division pivot from the path followed during the Obama administration with respect to:
- A willingness to rely on the ability of free markets to mitigate potential anticompetitive effects, particularly in dynamic markets with the likely prospect of new entrants or expansion by recent entrants (e.g., Whirlpool/Maytag, which the Division cleared during the George W. Bush administration despite the two companies relatively high market shares), to clear mergers in close cases that present a risk of at least a short term diminution of competition;
- The chances of satisfying the Division that the competitive effects of a proposed merger in close cases can be satisfactorily addressed by structural remedies (e.g., contrast the Division’s 1992 acceptance of a lease termination by Avjet/Butler Aviation to address competitive concerns with the Division’s rejection last year of proposed divestitures of certain assets by Halliburton/Baker Hughes);
- Vertical Mergers. The perceived vertical effects of a proposed merger, which provided the basis for prolonged investigations and challenges in a number of cases during the Obama administration (e.g., Google/ITA and Comcast/GE/NBC Universal) are generally less likely to gain traction with the Division under Delrahim’s leadership. Yet, this perhaps should not provide sufficient comfort for merging parties in industries in which inputs from various links in the production chain are especially important, such as the media industry. As noted, candidate Trump criticized the AT&T/Time Warner transaction on the ground that it would concentrate too much power in the hands of too few. And while Delrahim had commented before his nomination that the AT&T/Time Warner, Inc. transaction was a vertical merger and not a “major antitrust problem;” he will now have the opportunity to review the transaction with the benefit of an investigation record and staff analysis and the weight of responsibility on his shoulders; and
- Receptivity toward efficiency evidence proffered by parties in support of transactions (e.g., Delta Air Lines/Northwest Airlines), which have generally been viewed skeptically during the last eight years (e.g., Cigna/Anthem).
Finally, Delrahim was given the opportunity to address directly during the hearing a question on many people’s minds: how he would respond to an effort by the White House to influence how the Division handles a pending merger investigation. Antitrust practitioners generally believe that political influence has rarely impacted the course and outcome of merger investigations. Yet, some believe that law enforcement generally, and antitrust enforcement in particular, might be more vulnerable to political influence under the current administration than in prior administrations. Perhaps unfairly, Delrahim’s current position in the White House and his background as a lobbyist may be fueling the suspicion that antitrust enforcement by the current administration might be more susceptible to political influence than it has in the past. In response to a direct question about this issue, Delrahim was clear about his belief that the “independence of the decisions made in prosecuting and reviewing mergers, as well as other conduct, is a serious one that should be free from any political influence.” We may never know whether Delrahim’s resolve on this issue is tested and, if so, how he responded. But either way, as we have seen in the past, the Division leadership can find itself tightly constrained by the law if it tries to move a merger investigation in a direction that is dramatically different from where the facts and the law would otherwise lead it.
Criminal Antitrust Enforcement
Democratic and Republican administrations alike have historically made the criminal prosecution of “hard core” conduct such as price-fixing a very high priority. AAG Thomas O. Barnett under President George W. Bush dubbed cartels the “supreme evil of antitrust,” and cartel enforcement by the Division was robust under his leadership. Cartel enforcement under the Obama administration was also aggressive, from LCD price fixing cases in 2009 to real estate foreclosure auctions and financial benchmarking in 2016. Although Delrahim did not address criminal enforcement directly during his confirmation hearing, his belief that “[h]ard-nosed competition, free from inappropriate restraints, leads to lower prices, higher quality of goods and prices for the American consumer” is consistent with what we would otherwise expect, and is consistent with the widely-held assumption that the Division will continue to aggressively pursue suspected price-fixing and other hard-core conduct and will aggressively prosecute such conduct against both companies and culpable individuals when they find it.
Non-Merger Enforcement Including Intellectual Property
Historically, non-merger, civil antitrust enforcement has received little attention from Republican administrations, which tend to believe that potentially anticompetitive conduct that is not criminal is not likely to harm competition and consumers over the long term. Thus, for example, within a year of George W. Bush’s first inauguration, the Antitrust Division settled the Division’s case against Microsoft on terms that some viewed as generous given the Division’s hard-fought success in winning a judgment against Microsoft under President Clinton. In contrast, Obama-appointee Christine A. Varney withdrew the Division’s Sherman Act Section 2 report, which reflected the arguably limited view by the Division under George W. Bush of the types of unilateral conduct that would warrant enforcement under Section 2, reflecting her desire to investigate and, if appropriate, sue, companies using their market or monopoly power to engage in predatory conduct.
Delrahim has demonstrated an interest and a point of view with respect to one important area of civil antitrust enforcement: the application of the antitrust laws to intellectual property. During his first stint at the Division, Delrahim’s reputation for pragmatism seemed to have been reflected in his comment that in applying the antitrust laws to high-tech markets, it is important to “fully appreciate how certain business activities – certain marketing activities or other practices relating to high-technology – work in the real world.” He also expressed the dissenting view as a member of the Antitrust Modernization Committee that “antitrust law and policy must be careful not to constrain the legitimate exercise of intellectual property rights.” These views reflect what seems to be an ongoing interest by Delrahim in the application of antitrust law to high-tech markets and to intellectual property rights, and suggests that we might see a shift in focus by the Division on these issues with respect to the rights of patent holders (e.g., in contrast to the previous administration’s treatment in the IEEE’s business review letter, which arguably benefited implementers in the standards setting context).
Delrahim will have the ability to significantly influence the priorities of the Division and its approach to enforcement during his tenure at the DOJ. How he exercises that power is yet to be determined. Yet, Delrahim’s background, reputation and public statements give us some useful insight into what we will likely witness from the Division during his tenure.