Antitrust in Obamaland
Antitrust enforcement was one area where most observers expected significant changes from the Bush years, particularly at the Antitrust Division of the Justice Department. For the past eight years, the Antitrust Division had vigorously prosecuted cartels, but had not been active in monopolization or merger enforcement. In addition to bringing relatively few cases in these areas, the Division had filed a number of amicus briefs in support of defendants, opposed a petition for certiorari sought by its sister agency the Federal Trade Commission, and issued a number of reports and policy recommendations that restricted the reach of the antitrust laws or imposed significant burdens on private plaintiffs. During this same period, the FTC proved to be more active in the competition area, particularly in the health care and intellectual property fields which suggests that the FTC will have a greater continuity in the competition area despite key changes at the Commissioner and staff levels.
The key officials in the Obama administration came into the antitrust agencies promising change. Christine Varney, the new head of the Antitrust Division, gave a speech in her early days promising more vigorous enforcement and hearkening back to the days of Thurman Arnold during the latter half of the New Deal. At the same time, she repudiated a highly restrictive report on monopoly power issued during the waning days of the prior administration issued by the Justice Department alone because a majority of the FTC had refused to endorse. In addition, the Division has reversed policy and filed an amicus brief in support of plaintiffs in a key Supreme Court case involving the pharmaceutical industry. Most recently, the Justice Department and the FTC jointly announced a new initiative to revisit the Merger Guidelines of the 1990s used by both agencies to decide which mergers and acquisitions to challenge on competition grounds.
These are all important changes, but at one level they are the easy ones in the sense that they all represent changes that can be made within the Division or the FTC without external review or endorsement by other parts of the executive branch, Congress, or the courts. The tough sledding is yet to come as the Division ponders what cases to bring and then has to litigate them before the lower courts bound by a series of highly restrictive rulings by the Supreme Court which have favored defendants in an unbroken string of victories dating back to the 1992. Cartels remain antitrust public enemy number one and little should change from the general tough stance in this area taken by the prior administration. But the Antitrust Division in particular vows to bring tough new cases in the monopolization and merger area where the law and the facts are on its side. These will take time to bring but signs already indicate significant changes. Many top practitioners report a new aggressiveness at the staff level and a skepticism to many of the types of arguments that would have been winners prior to January 20 2009.
We will probably see significant merger challenges before we see monopolization challenges. Monopolization cases require immense efforts and data collection and analysis before bringing a lengthy court challenge that will be hotly contested by the defendant. In contrast, parties have to report large deals and the antitrust agencies have statutory deadlines to complete their review once the parties have submitted all the documents. In these cases, delays typically favor the government and not the defendants, as the parties to the deal struggle to maintain their financing and keep the deal alive while litigating.
Many believe that the first big merger case brought the Division will be to challenge the Ticket Master-Live Nation merger which would increase concentration in several live entertainment markets. If the Antitrust Division does challenge this deal, look carefully at the theories set out in the complaint. If the complaint is limited to the so-called horizontal aspects, the markets where the parties are actual competitors, then this is a somewhat more active version of the kind of case even the prior Administration brought from time to time. If the complaint includes “vertical” theories focusing on the supply chain from the management of the musical talent, the venue for the concerts, the primary and secondary ticketing services, and the harmful effect that vertical integration may have on independent concert promoters, venues, talent companies, and ticketing services, then this is dramatic evidence that there is a new game in town.
Over at the Federal Trade Commission, there is more incremental change in the works for the short term. So far, the Chairmanship of the FTC has changed from a current Republican commissioner to a current Democrat, but the overall composition of the Commission has not. There is one Democratic commissioner, one independent who typically votes with her Democratic colleague, and two Republicans of differing perspectives. There is currently one vacancy and the term of the independent Commissioner has expired. The Administration thus has two seats to fill unless it chooses to renominate the hold over Commissioner. Thus, even though the Commission is a very Chair driven agency, any major changes appear to await the nomination and confirmation process which will bring the Commission back to full strength.
Even though it is still early, significant changes appear on the way when the agencies control the agenda through speeches, workshops, guidelines, consent decrees, and internal policies. The real challenges when the agencies venture into court and confront the legacy of the past decades which for better or worse have shrunk the scope of the antitrust laws to a fraction of their former self. In this regard, the real action may be in the area of judicial appointments, which may in the end play a larger role in shaping antitrust law than the appointments or policies at either the Justice Department or the FTC.