Judge Ginsburg and I are working on a project for an upcoming festschrift in honor of Bill Kovacic. The project involves the role of settlements in the pursuit of the goals of antitrust. In particular, we are looking for examples of antitrust settlements between competition agencies and private parties — in the U.S. or internationally — involving conditions either: (1) clearly antithetical to consumer welfare, or (2) that arguably disserve consumer welfare. In the former category, examples might include conditions requiring firms to make employment commitments. The second category might include conditions placing the agency in an ongoing regulatory role or restricting the firm’s ability to engage in consumer-welfare increasing price or non-price competition.
I turn to our learned TOTM readership for help. Please feel free to leave examples in the comments here — or email me. Cites and links appreciated.
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Josh,
In re General Motors Corp. 103 FTC 374 (1984) (restricting output of GM/Toyota joint venture to no more than 250K automobiles).
Bruce
Hi Josh,
I imagine you and Judge Ginsburg might disagree with me regarding settlements in some of the major monopolization cases that have come down the road, but that’s an argument for another day. What strikes me as a contribution of your project wasn’t so much whether the settlements were anticompetitive or reduced consumer welfare, but whether they were part of a bargain to get the parties to pay for largely unrelated policy initiatives that the relevant approving agency might like.
An immediate example would be the promises by AT&T that it would expand wireless broadband service to rural areas if the FCC approved its merger with T-Mobile. That particular example didn’t save the merger, right or wrong, but that it was on the table raises questions about what a settlement in an antitrust case should cover. The possibility also suggests that if the merging parties have the profits to pay for these extraneous regulatory goals, the merger may get approval only because it is anticompetitive.
I think the first time this idea crossed my mind was many years ago, when I was still at the Division, in a couple of areas. Some were opposed to breaking up the NCAA’s monopoly over college football TV rights because it would reduce scholarship money available for non-revenue sports. A related example was the defense of the Overlap cartel on the grounds that holding down scholarships on merit left more money available for need. I recall the members of the CEA (for whom I worked in 96-97) arguing in favor of the cartel until I asked them if they would favor universities conspiring to hold down faculty salaries in order to fund need-based scholarships. This gets close to the related question of whether promises to use monopoly profits to support programs a regulatory desires should serve as a defense in antitrust cases.
I don’t know how many of these you’re going to find in looking at DOJ or FTC cases, but they may not be hard to find in looking at approvals by sector-specific regulators, both federal and state. I don’t know the details, but I think Maryland extracted or attempted some conditions for approving Exelon’s acquisition of Constellation. See http://www.bizjournals.com/baltimore/news/2011/12/15/constellation-exelon-reach-accord.html, for example.
In any event, the hook to me isn’t necessarily that the extraneous conditions linked to the settlement reduce aggregate consumer welfare–especially if one isn’t opposed to redistribution in principle. However, they certainly raise policy process questions about whether antitrust settlements should be employed as a vehicle for serving other ends.
Good luck with the project,
Tim