DOJ Anticompetitive Mergers and Ineffective Regulations
Antitrust law enforcement promises to end anti-competitive mergers and ineffective regulations.
Various federal government leaders have made it clear that they are now applying greater scrutiny to mergers and acquisitions and that they are not thrilled with many years of anti-competitive business deals and regulations that provide inadequate protection for competition. .
Statements from the Justice Department’s Antitrust Division and the Federal Trade Commission’s antitrust authorities have said as much since President Biden took office. Before that, he was not alone in the pack of Democratic candidates who believed the government needed to be tougher to protect competition; it was a key talking point for other candidates, several of whom remain in the Senate today, namely Senators Amy Klobuchar, Bernie Sanders and Elizabeth Warren.
In case anyone in the back of the room couldn’t hear that message, Assistant Attorney General Jonathan Kanter recently delivered it with candor and clarity in a city known at least for its candor. The DOJ Antitrust Enforcement Officer told a meeting of the New York State Bar Association Antitrust Section:
“We have an obligation to enforce antitrust laws as written by Congress, and we will challenge any merger whose effect “may be to lessen competition substantially or tend to create a monopoly.” The second prong – or tends to create a monopoly – has often been given less importance. No more: we intend to stick to the plain language of the Clayton Act.
And if that still wasn’t clear, Kanter repeatedly yelled at Robert Jackson, who in January 1937 began his tenure in the same office Kanter holds today. Jackson – who would go on to serve on the Supreme Court and as a Nazi war crimes prosecutor at Nuremberg – took charge of the “widespread corporate concentration” of the time and “launched[ed] on an aggressive antitrust enforcement campaign to free markets from the grip of monopoly power,” Kanter said. He sees the bold Jackson as his inspiration.
Kanter acknowledged that today’s economy is very different from that of the 1930s, but said it was also different even from that of the 1990s and 2000s. He compared the dramatic changes that led to industries of today with those of the industrial revolution.
This modern development has been accompanied by “serious challenges of competing in too many markets”.
“Over the past two decades,” Kanter said, “concentration has increased in more than 75 percent of U.S. industries, including health care, financial services, agriculture, and others. Price-to-cost markups have tripled over the past 40 years Some labor markets are even more concentrated than product markets Employer monopsony power in labor markets tends to drive down wages, erode quality of life and make harder for workers to change jobs.He said when markets are dominated by giants, entrepreneurs and small businesses struggle to get started, noting that new business training is half of what they were half a century ago.
Kanter said he was “deeply concerned” about the impact of these trends on Americans. “Too little competition hurts real people, every day,” he said. “It’s not just a statistical or economic concept. It’s a half-empty grocery cart for Americans who can’t afford price hikes and padded markups. Or lower wages and poorer working conditions because of employers who face too little competition and workers who don’t have enough options. These are masses of personal and private data mined by mainstream platforms whose digital services have few or no realistic alternatives. And it’s the inability of Americans to buy a home and save for college.
Since antitrust law has not kept pace with our rapidly changing economy, Kanter said “the only way to reinvigorate antitrust enforcement is to adapt our approach…” He said that the Antitrust Division and its enforcement partners “commit to using all available tools to promote competition.”
Kanter discussed the need for an attitude adjustment and more resources:
The government’s approach must reflect the times in which we live. “Section 2 [of the Sherman Act] A doctrine that responds to market realities, not outdated models, is a necessary step in building a competitive economy.
Pre-merger notifications are coming at an unprecedented rate and more resources are needed. “This surge comes even as market-specific and retrospective studies of mergers indicate that consolidation has led to less competition and more market power. The surge also comes as the division is experiencing a historic shortage of resources.” Kanter is seeking increased funding for the app. “We have an obligation to enforce the antitrust laws as written by Congress, and we will challenge any merger the effect of which ‘may be to lessen competition substantially or tend to create a monopoly’.”
Transparency is necessary. “We are also committed to ensuring that we are transparent in our assessment of mergers and that our business models reflect market realities. Accordingly, in conjunction with the FTC, we sought public comment on existing horizontal and vertical merger guidelines. »
“We are law enforcement, not regulators.”
Kantor was particularly critical of the deals reached which he said allowed anti-competitive deals to go forward, saying:
Colony efficiency should be reviewed. “Like [Robert] Jackson,” said Kantor, once again invoking the name of his hard-nosed predecessor from the 1930s and 1940s, “I’m focused on how a cure will work. Once the ink has dried and the press cycle has faded, does a settlement actually restore competition? Does it preserve the competitive process? More importantly, does our comprehensive approach to remedies, applied to all cases and all sectors, protect competition as required by law? We are law enforcement, not regulators.
Sometimes blocking a transaction is the best solution. “I’m concerned that merger remedies that don’t block a deal are too often successful. Complex implementations, whether behavioral or structural, suffer from significant deficiencies. [W]When the division concludes that a merger is likely to lessen competition, in most situations we should seek a simple injunction to block the transaction. This is the surest way to maintain competition.
Settlements are sometimes only a temporary solution. “Merger deals that include partial divestments too often lead to what might be called ‘concentration drift’. This happens when transferred assets end up in the hands of someone who does not put them to effective use. Disposal buyers may lose interest in the assets after acquiring them or be less efficient than they expected.
Regulations do not make a useful law. “We need new notices issued by the courts that apply Modern Markets Law to provide clarity for businesses.”
All government hands on deck. Kantor welcomed the new cross-departmental initiative — the government-wide antitrust enforcement — launched under President Biden’s Executive Order on Competition. “[T]”The department looks forward to helping other federal departments and agencies win cases targeting anticompetitive behavior that violates industry-specific laws, including through direct litigation support and formalizing our cooperation” via memorandums of understanding,” Kantor concluded.
Edited by Tom Hagy for MoginRubin LLP.