The question on everyone’s mind—that is, for those in antitrust law and economics, the question on everyone’s mind that’s about antitrust—is this: Where do we go from here?
As it happens, the International Center for Law & Economics (ICLE) recently hosted a panel discussion on precisely that question. ICLE’s Geoff Manne moderated an excellent discussion with panelists Maureen Ohlhausen, now the head of Wilson Sonsini’s competition practice and former commissioner and acting chair of the Federal Trade Commission (FTC); William Blumenthal, recently retired from Sidley and former FTC general counsel; and Andrew Finch, currently with Cravath and former principal deputy U.S. assistant attorney general and acting assistant attorney general for antitrust. For those who missed it, it’s must-see TV. Or, at least, must-see YouTube.
One editorial note: the panelists are former enforcers—they helped the agencies to bring, and win, antitrust cases, and their records give lie to neo-Brandeisian claims that Lina Khan and Jonathan Kanter sought to reverse decades of lax antitrust enforcement. Economically grounded, pro-consumer antitrust enforcement is just that, and it is no less vigorous than frolic-and-detour antitrust.
There’s been at least one significant change in the short time since the March 6 panel: Gail Slater has been confirmed as assistant U.S. attorney general for antitrust—that is, as the head of the U.S. Justice Department’s (DOJ) Antitrust Division. As I noted at year’s end, she:
was a colleague of mine at the FTC, where I found her to be smart, thoughtful, and collegial, but that’s not to say that I know her plans or those of the incoming administration. There will be some changes, to be sure, but [there have been] some signals of ongoing concerns about “big tech.”
Concern about “big tech” seems awfully generic if we’re to use antitrust as a scalpel and not a sledgehammer. One could review—and potentially reconsider—certain policies and cases without repudiating rigorous, case-by-case antitrust scrutiny.
For example, the DOJ recently filed its “revised proposed final judgment” in the Google Search case. My colleagues and I have written—and not a little—about the liability phase of the trial, but let’s leave the question of liability aside for now. The DOJ has a judgment from the U.S. District Court on liability, pending appeal. If it stands, there’s still a question of a remedy that’s appropriate to the conduct at-issue. And while DOJ’s revised proposal is slightly more temperate than their initial proposal, the initial proposal was ludicrous and key elements of the crazy remain.
I wrote about “The DOJ’s Not-so-Modest Proposal” in December and won’t recapitulate my account of the folly. But I would point to additional useful posts by my ICLE colleagues Brian Albrecht and Geoff Manne, as well as articles by Greg Werden and Bilal Sayyed in a collection on the case that I helped organize for Concurrences Review. For a quick take, back in 2023, Herb Hovenkamp considered potential remedies in an essay in ProMarket, and he had this to say about the possibility of structural relief:
How about a breakup? Even if it were technically feasible, a structural breakup of a natural monopoly search engine would be a disaster. It would impose two or more suboptimal products on consumers. This is not a stable situation, and it would immediately deteriorate the quality of search for both of the resulting products.
I really don’t know what the DOJ will do under AAG Slater, but Slater does know antitrust. She cannot have missed the problems with DOJ’s proposed remedies in the case. I hope that’s reflected in court going forward.
The More Things Change, the Harder It Is to Know What’s Going On
I don’t mean to make light of staffing uncertainties at the agencies. The staff really do have serious work to do under conditions of uncertainty. But recent news reports about one of the FTC’s numerous and sometimes . . . er . . . “creative” complaints about Amazon raise more questions than they answer.
As I covered here (scroll down to the section on “Prime, Pizza, and Dark Patterns”), one of those complaints had to do with “dark patterns” allegedly employed by Amazon to recruit and maintain Prime members (reportedly more than 200 million members worldwide, so either somebody likes the service or the patterns are very dark indeed). It’s a complaint under both Section 5 of the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA)—(it’s complicated, but I’ll get to that in another post, I promise).
Vidushi Dyall has an interesting (if baffling) thread (here and here) on the FTC’s recent maneuvering before the federal court in Washington, where—in the span of a day—FTC counsel complained that the commission lacked the staff and financial resources to meet the judge’s schedule and then, the same day, wrote oops, never mind, we’re ready to roll:
Following today’s telephonic status conference, I write to clarify comments I made today. I was wrong. The Commission does not have resource constraints and we are fully prepared to litigate. Please be assured that the FTC will meet whatever schedule and deadlines the court sets.
By “clarify,” I suppose one means “contradict.” Or, as Gilda Radner used to say: “never mind.”
I sympathize with agency counsel. Resources are constrained, and diminishing, and this is a complex case on a tight clock. I suspect that there were mixed signals from on high. Still, I have a question for the hive mind: who cleared the statement that “The Commission does not have resource constraints”?
Ready for a Drink?
The FTC’s complaint against Southern Glazer’s Wine and Spirits—filed Dec. 12 in federal district court in California—was subsequently met with a motion to dismiss from Southern Glazer’s and, on March 10, the FTC filed a motion in opposition to the motion to dismiss. In the abstract, this was to be expected: a defendant files a motion to dismiss—not surprising that they’d like to get it over with—and the plaintiff opposes the motion, because nothing much has changed as far as the case goes. Indeed, the agency shouldn’t have filed a complaint if they didn’t think they had a strong case.
And yet, one might have expected a change of heart (or mind) about this particular case. Some things have changed, if not relevant precedent, evidence, or the procedural posture of the case. Not incidentally, it’s a bad case—one that ought not to have been brought to begin with. Both FTC Chairman Andrew Ferguson and Commissioner Melissa Holyoak know that.
As I wrote in December (and also see Alden Abbott here), several things about Southern Glazer’s stand out. For one, it is the first Robinson Patman Act (RPA) case the commission has brought in more than 20 years. And there are several good reasons for the wait: not least is that there are challenges in bringing a viable standalone RPA case and, as a policy matter, there’s probably no such thing as a good (read, pro-competition and pro-consumer) RPA case that could not be brought under the Sherman Act. And this case couldn’t be brought under the Sherman Act—not successfully, at any rate. To repeat my prior take:
Prior (pre-Biden administration) agency policy . . . [is] entirely consistent with mainstream antitrust law and economics and, not incidentally, with the 2007 report of the bipartisan and congressionally mandated Antitrust Modernization Commission, which was unequivocal in its recommendation that:
“Congress finally repeal the Robinson-Patman Act (RPA). This law, enacted in 1936, appears antithetical to core antitrust principles. Its repeal or substantial overhaul has been recommended in three prior reports, in 1955, 1969, and 1977. That is because the RPA protects competitors over competition and punishes the very price discounting and innovation in distribution methods that the antitrust laws otherwise encourage. At the same time, it is not clear that the RPA actually effectively protects the small business constituents that it was meant to benefit. Continued existence of the RPA also makes it difficult for the United States to advocate against the adoption and use of similar laws against U.S. companies operating in other jurisdictions. Small business is adequately protected from truly anticompetitive behavior by application of the Sherman Act.”
The Antitrust Modernization Commission was correct in 2007, as was a 320-page report the DOJ issued in 1977; and the larger antitrust community largely agreed. Until (and apart from) the arrival of the neo-Brandeisians, one could say it very, very largely agreed.
That policy question (of no small import) aside, Commissioners Holyoak and Ferguson had opposed bringing the case to begin with and, indeed, had issued stinging dissents in the matter (Holyoak here and Ferguson here). Not incidentally, Ferguson is now chairman of the FTC, a position he’s held since the second day of the Trump administration.
Then again, as of today, there are only four sitting FTC commissioners. Mark Meador may soon take the fifth seat, filling that vacated by ex-Chair Lina Khan. But he’s not yet been confirmed so there’s something of a draw at the commission, the chairman’s agenda-setting authority notwithstanding.
To be clear, neither Holyoak nor Ferguson argued against RPA enforcement as a general matter—both suggested that RPA cases could, and should, be brought under different facts and circumstances. But both had serious qualms about this RPA case and the commission’s interpretation of the statutory language and prevailing precedent. My December post touted Holyoak’s excellent, scholarly, and 80-page-plus dissent, but both Holyoak and Ferguson were right about a key question: the likely competitive impact of the conduct at-issue. As now-Chairman Ferguson put it at the time, there was:
little evidence that the favored retailers possess substantial market power in any particular product or geographic market. This case therefore may protect the disfavored retailers who allegedly paid higher input prices than their competitors, but it may do so by raising prices for millions of hardworking Americans.
And for that reason, both Holyoak and Ferguson argued that it was imprudent for the FTC to devote its limited resources to this case, at the expense of “other enforcement actions that may protect consumers, competitors, and the vibrancy of our markets all at once.” That seems right.
Other matters might be reconsidered without anything resembling a wholesale reevaluation of the commission’s active enforcement matters (which would be imprudent even if it wouldn’t itself be an undue strain on the commission’s resources). Still, other cases come to mind, including, notably, another RPA case—that is, the Pepsi case filed just before the end of Lina Khan’s majority.
I would link to the FTC’s complaint, which was announced Jan. 17, but we’re in mid-March and they still haven’t posted it. But filing the complaint required a vote of the commission, which required the circulation of a complaint. And Ferguson and Holyoak were none too pleased with the circulation. Writing his dissent in his last days as a minority commissioner, Ferguson was clear that the presented case seemed nowhere near the enforcement margin:
The gaping holes in the evidence that Commission staff collected in its limited investigation make it impossible to determine whether the defendant, PepsiCo, Inc. (“Pepsi”), has broken the law. The Commission majority sues Pepsi nonetheless. The paucity of evidence is not a problem for the majority, because the law is beside the point.
Also dissenting (very dissenting), Holyoak called it “the worst case” she had seen as a member of the commission:
Today’s Complaint against Pepsi is wholly deficient, not only because the pleadings fail to state a claim, but because the Majority rushed the case out the door before it had evidence to support the allegations. I am astounded that the Majority has such little regard for our staff that it is willing to send them to court like a lamb to the slaughter.
There remains the question of when a fifth commissioner—very likely Mark Meador—will be confirmed by the full Senate. I do not recommend that the commission strain to reanimate its RPA-enforcement program, but my opinion is neither here nor there: I don’t get to vote. I don’t even walk the halls and kibbitz anymore. Still, however much a new majority might want to identify, and press, good RPA cases, it will not build the positive caselaw by litigating obvious losers. Save the ammo.
So that’s two. For a third, I’d look to another Amazon matter. The FTC’s monopolization complaint seems strained from end to end—from the gerrymandered domestic “online superstar” market definition to the challenge of demonstrating harm to competition and consumers as indicated by, e.g., higher prices or reduced output (or both), which looks to be tough sledding, uphill and into the wind at that. See Brian Albrecht and Geoff Manne, Geoff again, Herb Hovenkamp, and me, among others (including former FTC General Counsel Alden Abbott, who called the case “perhaps the greatest affront to consumer and producer welfare in antitrust history.”)
What About the Other Stuff?
Ferguson and Holyoak have been very clear (see here and here, among other places) that the commission should enforce the antitrust laws against anticompetitive noncompete agreements. At the same time, they have argued that the Khan-era competition rule was overly broad and that it exceeded the commission’s experience and jurisdiction.
They are right on all counts. And one hopes to see that reflected in FTC policy going forward. Rescind the rule, drop the appeals in the 5th and 11th U.S. Circuit Courts of Appeal, and bring good cases.
Easy, no?
I’m on a roll with the suggestions, so why not wedge in a couple more on little matters of agency guidance.
First, Ferguson (with apparent support from Holyoak) has stated that the 2023 merger guidelines will remain in effect and be used by the agencies going forward. I would rescind them (here’s Brian Albrecht in a recent post; here’s me in a tl;dr; and here’s ICLE on the draft merger guidelines).
Ferguson does, however, offer sensible countervailing considerations: serial repudiation of agency guidelines administration-by-administration does little in the service of stability, and stability is to be valued by businesses and enforcers alike. Stochastic guidance also does little for agency credibility before the courts—a matter of some interest (and sensitivity) nowadays. Issuing wholly new guidelines would demand process, which would demand time and precious agency resources. And, of course, it’s not as if there’s no useful (or grounded) material in the 2023 guidelines.
Moreover, the guidelines do not have the force of law, and the question how the agencies intend to use them may matter at least as much as the guidelines’ substance. These are all good reasons for caution, even as I don’t think that they should carry the day.
Note, at the same time, that Ferguson also said: “I think the clear lesson of history is that we should prize stability and disfavor wholesale rescission.”
Understood. But what about revisions? One could amend the guidelines without rescinding them. Or one could issue qualifying statements without the formalities (and commitments) of a new set of guidelines. I would change various things, but a couple stand out.
First, as many of us have noted, the 2023 guidelines double-down on outmoded structural presumptions in antitrust. On that, see the comments above; and see this, submitted by a half-dozen experienced antitrust economists, including, notably, Aviv Nevo (shortly before he joined the FTC as director of the Bureau of Economics).
As noted by DOJ and FTC staff and front office economists in late 2020, the 2010 HMG [horizontal merger guidelines] continue to accurately reflect the practices of the agencies and highlight practices and techniques of continued relevance to modern practice. We agree. Despite concerns voiced by some commentators and raised in some academic studies, our read of the evidence is that it does not support large deviations from the approach in the 2010 HMG or the 2020 VMG [vertical merger guidelines]. Some proponents favor strengthening structural presumptions and lowering presumption thresholds. … If the agencies were to substantially change the presumption thresholds, they would also need to persuade courts that the new thresholds were at the right level. Is the evidence there to do so? The existing body of research on this question is, today, thin, and mostly based on individual case studies in a handful of industries. Our reading of the literature is that it is not clear and persuasive enough, at this point in time, to support a substantially different threshold that will be applied across the board to all industries and market conditions.
Two revisions come to mind. First, revert to the thresholds specified in the 2010 horizontal-merger guidelines. Second, in doing so, strike the phrase imposing a presumption of illegality. As I noted here, there’s the question of the nature of the presumption.
There’s that phrase, “presumption of illegality,” which does not appear in the 2010 Horizontal Merger Guidelines (or the 1992 guidelines, or the 2020 Vertical Merger Guidelines, for that matter).
Identifying potential or even likely concerns about market power is one thing. Suggesting to the business community, courts, or agency staff that any merger, in any industry, leading to a Herfindahl-Hirschman Index (HHI) of 1,800 or greater is presumed unlawful—and perhaps implying that it makes out a prima facie case under Section 7 of the Clayton Act—is worse than unhelpful. It’s not the law and it’s not a sound method for bringing cases. It will not aid consumers or competition.
And it’s an easy fix. If one wishes to maintain the guideline on structural presumptions, prior editions of the guidelines provide better language about the role that structural presumptions might play in merger screening.
Also, the 2023 guidelines make a hash out of established distinctions between horizontal, vertical, and conglomerate mergers–less of a hash than the draft guidelines did, but still. And on vertical mergers, they don’t replace 15-year-old guidance, but 2020 vertical-merger guidelines that were rescinded without due consideration. Minor revisions could address the problem, and reinstating recognition of the 2020 guidelines wouldn’t hurt and would not impair bringing good cases where there are good cases.
I would add tweaks here and there to express less hostility about mergers generally, and less skepticism about potential merger efficiencies, in particular. Then again, I would redo the whole thing, and that’s not on the table. A few simple changes–even a published speech providing context by the chairman or, say, relevant bureau directors, would be helpful.
While we’re on the topic of agency guidelines, if I might make a humble suggestion, FOR CRYING OUT LOUD, PLEASE RESCIND THE 2022 “POLICY STATEMENT REGARDING THE SCOPE OF UNFAIR METHODS OF COMPETITION UNDER SECTION 5 OF THE FEDERAL TRADE COMMISSION ACT.”
I’d like to have something more moderate to say, but I don’t: the statement is rubbish as guidance and rubbish as a statement of the law. Everyone outside the cloisters of the neo-Brandeisian movement knows it.
I believe that both Ferguson and Holyoak care about law enforcement in the service of consumer welfare. The 2022 policy statement may be many things, but it is not that.
