Antitrust policy has undergone more significant changes during the first year of President Biden’s administration than in the most recent five decades combined. This is in large part because the consensus around the consumer welfare standard maintained since the 1970s — the idea that what matters most is how business practices affect consumers — has broken down, returning us to a time of significant uncertainty for the business community.
Here's a look at the administration’s actions in three areas — antitrust enforcement, regulatory proposals, and legislative proposals. First year enforcement actions reflected an initial continuity with Trump administration litigation, but novel policy initiatives and legislative proposals suggest that antitrust enforcement and regulation may undergo a sea change in the next few years.
The Federal Trade Commission (FTC) and Department of Justice (DOJ)’s Antitrust Division have continued their antitrust enforcement efforts during the transition between the Trump and Biden administrations.
On the FTC side, three cases are significant. In FTC v. Facebook, Inc., the commission’s most recent complaints about the tech giant’s acquisitions of Instagram and WhatsApp were upheld, allowing the lawsuit to proceed. Next, the FTC has filed an enforcement action to block the proposed merger between Nvidia and Arm, two players in the chip technology sphere, citing harms to both innovation and competition. Finally, the FTC has moved forward with its 2020 enforcement action against the proposed Illumina-Grail merger, again citing harms to innovation and competition, as well as the ability to significantly raise prices for a cancer screening test. In the latter two cases, commentators have accused the FTC of misapplying vertical merger standards and of veering close to overenforcement in these high-tech markets.
On the DOJ side, its 2020 case against Google for allegedly limiting other search providers continues to move forward and is scheduled for trial in 2023. The proposed Visa-Plaid merger was called off in the face of a DOJ challenge, and two more mergers are currently facing DOJ scrutiny. One, the proposed Penguin Random House-Simon & Schuster merger, is based on DOJ claims that the combined publishing giant will underpay authors. The other, a proposed U.S. Sugar Corp.-Imperial Sugar Co. merger, is being fought on the basis that the combined company may be able to reduce output and raise prices in the refined sugar market.
In short, FTC and DOJ enforcement essentially was “business as usual” in the first year of the Biden administration, with new cases not reflecting a conceptual change in enforcement philosophy.
Administration Policy Initiatives
On July 9, 2021, President Biden signed an executive order outlining a whole-government approach to competition in the American economy. The order is slated to address a perceived lack of competition largely through government regulation. Key policy areas are as follows:
First, the FTC and DOJ are tasked with taking a tougher stance on mergers. Second, the FTC is tasked with enacting rules to limit or eliminate the unfair use of noncompete agreements. Third, numerous agencies are tasked with curtailing the power of large technology platforms. This includes how the companies use data, banning certain conduct, and closer scrutiny to eliminate “killer acquisitions.” Fourth, health care agencies, along with the FTC, are tasked with lowering the price of pharmaceuticals and reducing the concentration in hospital markets, looking specifically at hospital mergers in rural areas.
At the FTC, Lina M. Khan was confirmed as a commissioner and promptly appointed as chair, leaving in her wake a significant policy shakeup. Along with the “Statement of Regulatory Priorities,” which outlines a shift away from case-by-case adjudication and toward rulemaking, the commission has significantly shifted policy in three key areas:
First, the commission revoked its 1995 prior-notice and prior-approval policy statement, signaling that companies will need to obtain prior approval for nearly all mergers, regardless of whether they fall outside of the established Hart-Scott-Rodino thresholds.
Second, the commission revoked the “Statement of Enforcement Principles regarding ‘Unfair Methods of Competition’ (UMC) under Section 5 of the FTC Act,” signaling a shift away from rule-of-reason analysis and a shift toward increased standalone unfair methods of competition violation enforcement.
Finally, the commission unilaterally rescinded the 2020 “Vertical Merger Guidelines” (VMG), without a corresponding revocation from the DOJ, citing serious deficiencies. Without these guidelines, the business community will not have an encompassing understanding of how the government treats vertical mergers between companies engaged in different aspects of production on similar products. The presumption of efficiencies from such mergers will no longer be applicable.
At the DOJ, Jonathan Kanter was confirmed as Assistant Attorney General for the Antitrust Division, and while developments from the division have been relatively sparse, there are two policy changes in the works. DOJ released a draft policy statement dealing with standard essential patents (SEPs) and fair, reasonable, and nondiscriminatory (F/RAND) licensing commitments. This draft reverses the “New Madison Approach” championed by the previous AAG and tips the scales in favor of implementors of SEPs and against developers of patented, standardized technology. Second, the DOJ announced it will receive comments until February 15th on whether and how it should revise the 1995 Bank Merger Competitive Review Guidelines.
Perhaps most significantly, on January 18 the FTC and DOJ jointly announced plans for a wholescale revision of their merger guidelines, which may lead to a significant departure in their evaluation of proposed mergers. The tone of the announcement signaled that the new guidelines may be expected to be far more skeptical of merger proposals.
Taken together, these initiatives signal plans for a more aggressive antitrust policy and a departure from the standards that businesses have become accustomed to.
Numerous legislative proposals were made during 2021, following the “Investigation of Competition in Digital Markets” report from the House of Representatives in 2020. Of the five proposals that have been introduced in the House, only two have been mirrored in the Senate. The first, named the “American Innovation and Choice Online Act,” aims to prevent designated tech firms from self-preferencing their own products on their own platforms. The second, the “Platform Competition and Opportunity Act,” aims to prevent large platforms from engaging in merger and acquisition activities.
Both measures have similar thresholds for determining which companies are subject to the regulation: $550 billion or more in market capitalization, 50 million or more monthly active users, or 100,000 or more monthly active business users. In both bills, the definitions of the illegal actions are overly broad, and if passed, would characterize almost any action by a covered platform that would increase the size or scope of its operations as illegal.
2022 promises to be another eventful year for antitrust policy. New merger guidelines are likely to be far more aggressive, perhaps dissuading far more proposed firm consolidations (including efficiency-enhancing mergers) from being proposed than past policy would have. We can also expect the agencies to consider challenging a far broader array of non-merger transactions (including those involving intellectual property), generating additional business uncertainty.
The one real brake on imprudent new federal antitrust challenges is existing Supreme Court case law, which focuses on consumer welfare and is attentive to economic efficiency. It is unclear what if any new antitrust legislation will make it through Congress, but if new legislative restrictions on large company activities are adopted, American innovation and dynamism could suffer.