Another Way DOJ Might Pursue "Vigorous Antitrust Enforcement in This Challenging Era"

Thom Lambert —  24 August 2009

DOJ’s top antitrust enforcer Christine Varney had hardly gotten settled in her office before she repudiated the existing DOJ guidelines on policing single-firm conduct. In the spirit of Rahm Emanuel’s famous “never let a serious crisis go to waste” directive, Ms. Varney invoked the current economic crisis as grounds for her decision to throw out the product of more than a year’s worth of hearings (from all sides).

Ms. Varney began her speech announcing DOJ’s new stance (reactions from Josh and Geoff here and here) by noting how the absence of antitrust enforcement during the Great Depression injured American consumers. She then stated that a “lesson[] learned from this historical example” is that “vigorous antitrust enforcement must play a significant role in the Government’s response to economic crises to ensure that markets remain competitive.” She concluded by announcing that the Department would therefore throw out the Section 2 report and pursue unilateral firm conduct more aggressively.

It was a strange speech. The Depression-era anticompetitive harms to which Ms. Varney referred were not unilateral firm actions, the subject of the Section 2 report, but were instead collusive acts facilitated by protectionist legislation like the National Industrial Recovery Act. Thus, Ms. Varney’s Rahmesque syllogism — “competition suffered after the Depression; we’re experiencing Depression-like conditions now; therefore, we must throw out existing guidelines on single-firm conduct” — didn’t really work.

But let’s suppose DOJ really does want to avoid Depression-era anticompetitive harms. What should it do?

Well, it could start by flexing its advocacy muscle against this sort of madness. (The linked WSJ article discusses “a Depression-era federal program designed to keep prices from plummeting.” Under that program, a federally authorized panel of fruit processors has directed cherry farmers to leave up to 40% of their crop unharvested.) Or maybe DOJ could express support for this effort to raise the Depression-era import quotas that keep American sugar prices artificially high. Not only would raising import quotas increase competition to consumers’ benefit, it might also decrease Americans’ consumption of high fructose corn syrup, which tends to make us fatter than sugar does. (Health care savings, anyone?) Unfortunately, the Obama administration has thus far resisted any effort to enhance consumer-friendly competition among sugar sellers.

I’m not suggesting that these programs run afoul of the antitrust laws. I realize that various governmental immunities preclude antitrust liability. My point, though, is that these sorts of programs — not unilateral actions like loyalty rebates, bundled discounts, and tying — are the primary type of consumer-unfriendly action spawned in the wake of the Depression. If DOJ wanted to pursue competition policy in a manner that reflects what we’ve learned from the events Ms. Varney cited in her speech repudiating the Section 2 Report, it would push hard to reduce or eliminate these programs.

Thom Lambert

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I am a law professor at the University of Missouri Law School. I teach antitrust law, business organizations, and contracts. My scholarship focuses on regulatory theory, with a particular emphasis on antitrust.