December 16, 2021
W. Todd Miller, Donald I. Baker
With the recent confirmation of Jonathan Kanter as assistant attorney general in charge of the antitrust division of the Department of Justice (DOJ), the Biden administration finally has leadership at the world’s largest antitrust enforcer. Kanter was nominated during the widely reported desire by the administration to prosecute Big Tech, while broadly invigorating antitrust enforcement and shifting the paradigms under which prosecutions are selected in the larger economy. In the meantime, over at the Federal Trade Commission (FTC), uncertainty remains over whether the vacant seat in the equally divided FTC will be filled by an ideological ally of Chairperson Lina Khan or by someone with a more centrist antitrust record. Also, Khan has taken the unusual step to create what appears to be her own cabinet – additional advisers on technology, economics and privacy – rather than relying on the expertise that already exists within the FTC, or recruiting additional experts for the agency’s existing bureaus.
Kanter had garnered bipartisan support for his nomination based on the disdain for Big Tech from members of both US political parties. While Kanter is known to be generally critical of Big Tech, relatively little is known about his specific ideas to approach the area. Even less is known about Kanter’s views and likely approaches to the many issues that he will necessarily confront outside of this narrow area. Kanter has not written much for publication and, therefore, his broader antitrust approach to criminal enforcement and non-platform issues is somewhat hard to predict. Nonetheless, several predications about his likely approach seem possible:
- Kanter is part of a larger push within the administration to enhance antitrust enforcement. The true catalyst is Timothy Wu, the president’s special assistant for technology and competition (and apparently the principal author of the recent presidential order that broadly mandated the expanded use of competition as a policy tool throughout the government). Professor Wu (of Columbia Law School) is well-known for his progressive views, and writing a book entitled The Curse of Bigness. His basic belief is that the economy is too concentrated and that this concentration needs to be reformed. He also is a strong believer in internet neutrality (indeed, he is largely credited with coining the phrase). Because the DOJ is a part of the Executive Branch, Kanter must be mindful of the broader views of the White House, even if the current White House would not try to directly interfere in any particular antitrust investigation or criminal case.
- Kanter gained his position based on strong support from the progressive element of the Democratic Party. He is not likely to betray that support absent some issue(s) on which he has strong (but perhaps unknown) personal views. Consistent with his testimony during his confirmation hearings, it can be expected to see less reliance on a pure “consumer welfare” test for conduct, the application of which he described as having been “inconsistent, vague, and insufficient to keep pace with market realities” during his confirmation hearing. Rather, potential adverse effects on suppliers, workers and communities more broadly should be expected to be factors in the Kanter DOJ’s antitrust analysis of mergers as well as agreements and dominant enterprises.
- These broader considerations are likely to result in a significant revision to the government’s merger guidelines. This joint DOJ-FTC effort would be a major undertaking and would likely take some time as the agencies negotiate over both the broader policy approach and the details. Meanwhile, before any new guidelines appear, the public can expect to see more of what it has seen already – that which should be perceived as tougher merger policy.
- A more immediate reflection of Kanter’s likely changes in policies and priorities may well be seen in his appointments to the top positions within the DOJ. He has yet to name his deputies, but it is highly likely that they will have some strong commonality with him in terms of basic antitrust enforcement philosophy.
- It will be important to see if Kanter makes significant reallocations of how the DOJ’s enforcement resources are being deployed. At the FTC, Khan apparently has been shifting more staff resources into merger enforcement. This may be out of pure necessity as the number of mandatory filings under the US premerger notification regime (the Hart-Scott-Rodino Act) has substantially increased (for further details please see “FTC changes to merger review process: lifeboat or policy shift?“). Kanter may be compelled to follow a similar course, which may impact his agenda on platforms, employer restraints or some other priority, as well as criminal investigations of cartel activities. At the same time, in the past few weeks, both the FTC and the DOJ have announced major merger challenges which will also tax resources, including a challenge to:
- Nvidia Corp’s $40 billion vertical acquisition of U.K. chip designer Arm Ltd. Semiconductor;
- US Sugar’s acquisition of Imperial Sugar; and
- Penguin Random House’s acquisition of Simon & Shuster (filed shortly before Kanter’s confirmation).
Current litigation at each agency also tasks resources. For example, the FTC continues its litigation challenging the Illumina/Grail transaction (for further details please see “Expect more of the same: FTC’s novel challenge to Illumina’s acquisition of Grail“). There are other transactions garnering attention and absorbing resources as reflected in recent agreed resolutions to several transactions. During this, the FTC was undoubtedly relieved to have the parties to the Great Outdoors/Sportsman’s Warehouse transaction abandon their transaction rather than fight through litigation.
- Questions about access to and control of personal data will likely take centre stage at the DOJ under Kanter. Such data is the major source of the dominant platforms’ economic importance and extraordinary profitability. It is an issue about which he stated during his confirmation hearings:
Effective antitrust enforcement should address the full range of competitive harm in markets involving the extraction and use of data. These include, among other things, harms related to privacy, innovation, resiliency of technology infrastructure.
He noted further that “[d]ata and privacy are directly related to the core business models of many tech companies. As a result, harm to user privacy may be an actionable competitive harm”.
- Similarly to Khan at the FTC, Kanter will face allegations from the larger technology companies about conflicts of interest; having represented complainants against the large platforms, Kanter will face criticism that, under his supervision, the DOJ cannot make unbiased enforcement decisions. At this point, such criticism seems premature and unlikely to impact the enforcement landscape. In addition, Kanter’s situation is not quite comparable to Khan’s at the FTC, where a commissioner may end up having an awkward dual role (if administrative litigation is pursued) of:
- initially being a prosecutor deciding whether to bring a complaint stage; and
- ultimately being a finder of liability based on the trial record developed before an administrative law judge (for further details please see “FTC under attack as parties challenge its structure and participation of chairperson“).
Moreover, unlike Khan, Kanter has acted as counsel for anti-platform clients, rather than writing articles recommending antitrust remedies against particular dominant platforms. It is uncommon to see an experienced antitrust professional who has not taken sides on important issues for or against the government or some potential antitrust defendants.
- One can also expect that Kanter will parallel the FTC and embrace a broader enforcement agenda to pursue:
- more mergers between market leaders and their nascent competitors;
- employment restraints; and
- monopsony issues.
This will be part of the broader effort to be more aggressive in pursuing acquisitions and conduct that may have adverse competitive effects on buyers and smaller competitors (for further details please see “FTC attempts to correct “failed experiment”“).
- Kanter will necessarily have to coordinate with the FTC to ensure a reasonably consistent approach. While a few Republican senators had complained about the potentially inconsistent approaches of the DOJ and the FTC, this appears to have been a short-term problem reflecting the extraordinary amount of time that passed between Biden’s selection of an aggressive populist as FTC leader and his delayed selection and announcement of a leader of the DOJ. Now that Kanter is in place, one of his first acts was to announce greater coordination with the FTC during a joint workshop on labour market competition. In addition, regardless of Kanter’s philosophic leanings, there should be regular consultations with the FTC on operational matters such as merger and other case clearances (ie, which agency will take which matter), as well as on guidelines and other policy announcements.
The situation at the FTC remains uncertain because there is not yet a confirmed fifth commissioner. With the recent departure of Commissioner Rohit Chopra (appointed to head the Consumer Financial Protection Bureau), there are only four commissioners, which leaves the FTC in a two-for-two deadlock between Republicans and Democrats. For the fifth position, the Biden administration has nominated an academic expert on privacy issues, Alvaro Bedoya of Georgetown Law School. Bedoya is meeting unexpected resistance and the Senate Commerce Committee recently refused to endorse his nomination on an equally divided party line vote. The full Senate could still approve Bedoya if all Democrats support it. This tug of war undoubtedly stems from the facts that Bedoya would likely be the third vote that Khan needs to pursue her activist antitrust agenda and that his antitrust views are unknown. Otherwise, the Biden administration may be forced to nominate someone who has a known (and perhaps more centrist) antitrust record.
Until a known fifth commissioner is place, the FTC will probably have serious difficulty in coordinating with the DOJ on new merger guidelines or on any major progressive antitrust policy proposals.
Meanwhile, Khan seems to be appointing a few interesting academics to create a cabinet her own advisors. Of particular note is Professor John Kwoka, a professor of economics at Northeastern University. Kwoka has served at both the FTC and the DOJ (as well as the Federal Communications Commission) and is known to be in favour of stronger enforcement, particularly in the merger area, where he has argued that the government should have challenged more transactions and/or obtained stronger divestiture settlements. Kwoka will directly advise Khan, which also presents an interesting precedent since Khan gets to choose an economist to head the Bureau of Economics who will also report to her. Khan’s other appointed advisors include published critics of Big Tech.
Kanter’s confirmation clearly moves US antitrust enforcement a step forward; on 29 November 2021, he and Chair Khan participated in a summit with the agency leaders of six other major jurisdictions to talk about the dominant digital platforms and other issues.
But the rest of the world is not likely to wait for the United States to develop new rules, policies or cases as regards the Big Tech giants. Many foreign agencies are already using their broader “abuse of dominance” antitrust authority against Big Tech. Moreover, legislative activity is underway in the European Parliament, the United Kingdom and several EU member states to further expand agency powers.
On the enforcement front, the European General Court recently affirmed the European Commission’s €1.49 billion ($2.8 billion) fine against Google for preferencing itself in its search results. The UK Competition & Markets Authority (CMA) has just ordered Meta (formerly known as Facebook) to divest itself of Giphy, a GIF-sharing platform, which according to the CMA was a competitor in the display ad market and has GIFs that are used by many consumers. The CMA has been described as having “drawn a line in the sand for any future acquisition the company may make, at least within the social media space”. These efforts raise the interesting question of how the FTC and the DOJ will coordinate with each other over responding to the increasing antitrust activism in Brussels, London and beyond.
There will be many other questions about how the antitrust enforcement landscape will change. For example, how far the US agencies are able and willing to go with their enforcement efforts in “the social media space” is the question likely to attract headlines and stories in newspapers and other media; however, much more still remains uncertain, even with Kanter’s confirmation at the DOJ, since the FTC’s pending case against Facebook (now known as Meta) and DOJ’s case against Google remain to be tried, the states are pursuing Google on separate grounds and the District of Columbia is pursuing Amazon.
What will happen to other matters that seem consistent with the progressive agenda (even if not initiated by them)? It appears that Kanter will expand the DOJ’s effort, which began a year ago under the Trump administration, to bring criminal indictments against employers who agree with competitors to restrict their competition for employees or regarding compensation arrangements. The recent ruling rejecting efforts by the defendants in the first criminal wage-fixing case to have those charges dismissed as being beyond the scope of the criminal antitrust laws will embolden such efforts (for further details please see “Antitrust indictments for employer restraints against employees“). The DOJ announced in December 2021 a new case involving a conspiracy among competing engineering outsourcing companies to not hire aerospace engineers from each other.
Will Kanter, Khan and their senior advisers focus more of their public efforts on supporting some of the pending legislative proposals which could generate bigger antitrust changes faster than the slow and uncertain process of litigation or rulemaking?
The list could go on, but for now, Kanter’s and Khan’s pronouncements and actions will be closely followed in an era when so much political and media attention is focused on antitrust enforcement.
This content was originally published on December 16, 2021, via the International Law Office (ILO) newsletter. It can be found here: Biden Administration’s Antitrust Blitz – Progress and Ongoing Uncertainty
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