In remarks delivered on January 18, 2022, and January 24, 2022, Jonathan Kanter, the Assistant Attorney General (AAG) for the US Department of Justice (DOJ) Antitrust Division, laid out the areas where he perceives shortcomings in antitrust enforcement. These speeches signaled that the Division, under Kanter’s direction, will take a more aggressive stance toward perceived anticompetitive conduct, echoing the changes in enforcement priorities at the Federal Trade Commission (FTC).
Overview of AAG Kanter’s Remarks
- Kanter intends to shape the regulatory landscape to better reflect dynamic markets. Both speeches featured a cohesive overarching message: Kanter believes that the regulatory and jurisprudential antitrust regime does not reflect and cannot address the market realities that exist today. Kanter believes that the Supreme Court of the United States’ 1992 opinion in Eastman Kodak v. Image Technology Services supports a change in approach because “[l]egal presumptions that rest on formalistic distinctions rather than actual market realities are generally disfavored in antitrust law.”[1] To address widespread increases in market concentration as well as “the economic and transformational technological changes” that define today’s economy, Kanter intends to revise the Division’s approach for analyzing mergers and conduct.[2]
- Kanter seeks to revive dormant areas of antitrust enforcement, in particular monopolization cases with a focus on tech “platform” companies. Kanter stated that the Division has failed to adequately address certain areas of antitrust enforcement. He noted that it has been almost 20 years since the Division’s last major monopolization case.[3] Dominant tech platforms have “extracted private data” and “have few, if any, realistic alternatives,” he said.[4] Shortly after Kanter’s comments about prioritizing monopolization cases, Richard Powers, the deputy for criminal enforcement, stated that the Division will now evaluate Section 2 conduct for criminal charges.[5] Powers’s comments signal a dramatic change in enforcement, reversing decades of policy in which Section 2 charges were only brought in the civil context. These statements from Division leadership mirror those of FTC Chair Lina Khan, who has repeatedly called for more robust antitrust enforcement, and indicate that Kanter intends to reshape the Division, both in terms of resource allocation and approach to anticompetitive conduct, from a civil and criminal perspective.
- Kanter laid out the Division’s overarching priorities clearly in his remarks. The Division intends to take a more aggressive stance on vertical merger enforcement, reformulate the Horizontal and Vertical Merger Guidelines to better reflect market realities (in the government’s view), enter into fewer consent decrees and instead litigate cases to generate judicial opinions and advance the relevant case law, and bring more civil and criminal conduct cases.
Vertical Merger Enforcement to Become a Focal Point for Regulators
- Kanter stated that agency enforcement of vertical mergers has been lacking. Kanter believes that the Division has placed too much value on the potential efficiencies of vertical mergers without identifying the relevant theories of harm presented by such transactions.
- The Division intends to follow the statutory text of the Clayton Act to the letter. Kanter indicated that the Division has historically addressed the first part of the Clayton Act’s prohibition on mergers addressing deals that “may substantially lessen competition” but has been derelict in bringing cases for deals that implicate the second part of that statutory text (i.e., deals that “tend to create a monopoly”).[6]
- Vertical mergers may not eliminate horizontal competitors, but Kanter argued that vertical integration and efficiencies of scale derived from these deals can just as effectively create monopolies.
The DOJ and FTC Intend to Craft Horizontal and Vertical Merger Guidelines that Better Encapsulate Existing Market Realities
- In their joint press conference on January 18, 2022, Kanter and Khan announced that the agencies would request comments from market participants to help shape the forthcoming revised Horizontal and Vertical Merger Guidelines. The Horizontal Merger Guidelines have not been revised since 2010, whereas the Vertical Merger Guidelines were last revised in 2020.[7]
- Kanter emphasized that the agencies are stuck “fighting the last generation’s war” and have failed to keep up with rapidly changing markets. This failure further “ossifies the law,” making it more difficult for the agencies to address alleged anticompetitive conduct in court.[8]
- The agencies’ request for information (RFI) indicates how they are seeking to evolve antitrust enforcement. In particular, the agencies are seeking comments from stakeholders on how current economic thinking related to anticompetitive effects and market definitions can be recalibrated to address present day markets. This RFI is indicative of the approach the agencies are now taking to antitrust enforcement and seeks to memorialize the theories of harm that the agencies are presently applying.
The Division Intends to Litigate Rather Than Seek Consent Decrees
- Kanter laid out the new agency approach to remedies: consent decrees should be “the exception, not the rule.”[9]
- Consent decrees have become disfavored because, in Kanter’s view, partial divestitures can still result in “concentration creep” in situations where the divested assets are acquired by a buyer that will not effectively deploy them, thus allowing the former owner to continue coalescing market power.[10]
- More frequent litigation serves to move the law forward by generating judicial opinions and minimizing the perceived disconnect between existing jurisprudence and existing economic headwinds. Kanter sees litigating as the most effective way to ensure that the law catches up to and reflects current market realities.
The DOJ Will Bring Conduct Cases More Frequently, Both Civilly and Criminally
- The Division intends to bring more cases related to firm conduct in light of perceived shortcomings in behavioral remedies that fail to anticipate “the complex incentives that drive corporate decision-making.” Kanter called on the Division to pursue structural remedies “whenever possible.”[11]
- On the criminal side, the Procurement Collusion Strike Force (PCSF) has already brought multiple conduct cases. The PCSF brought a case in June 2021 against the Belgian security firm G4S Secure Solutions NV, which pled guilty for its role in a criminal conspiracy involving bid rigging of US Department of Defense (DoD) contracts.[12] In September 2021, the PCSF brought a case against Minnesota concrete contractors for bid rigging of repair and construction contracts.[13] As recently as March 10, 2022, the PCSF filed a second charge against Kamida Inc. and its CEO for involvement in the same bid rigging conspiracy for concrete repair and construction contracts. The PCSF likely will remain highly active, since Kanter indicated that investigating improper conduct in government procurement is a top Division priority.
- On the civil side, there is widespread pressure across the executive branch to address anticompetitive conduct in response to President Biden’s July 2021 executive order intended to increase competition in the US economy. Various executive branch agencies have issued reports addressing competitive issues in a multitude of industries. The US Department of the Treasury released a report in February 2022 calling on the Alcohol and Tobacco Tax and Trade Bureau to work with the FTC and DOJ to address conduct in the beer, wine and spirits market. The report placed particular emphasis on conduct related to category management, tying and exclusive conduct. In March 2022, the Treasury released an additional report on the competitive status of labor markets. This report found that a lack of competition in labor markets has led to lower wages and less mobility for workers. The report specifically called out the use of non-compete and no-poach agreements and the sharing of wage information among market participants. The DoD also released a recent report stating that the defense industry has seen greater consolidation. The agency called for “heightened review” of future deals.[14]
There Are Still Ample Opportunities to Close Horizontal and Vertical Deals
- Despite this large shift in antitrust enforcement, a path remains to get deals done even when they involve a competitor or have a vertical nexus.
- Firms continue to exhibit an appetite for entering transactions, both vertical and horizontal. February 2022 saw 220 Hart-Scott-Rodino filings, up from 140 in February 2021.[15] Market participants are not shying away from increased regulatory scrutiny, and the number of deals being notified will force the agencies to be selective regarding which deals they scrutinize.
- It remains to be seen whether the agencies’ initiatives will find success judicially, as decades of well-entrenched antitrust jurisprudence have supported firms’ ability to transact with one another. While some deals will be abandoned, many firms likely will force the agencies’ hands, to see if they can prevail before a judge.
- Market participants should take careful consideration of these changes and engage with antitrust counsel as early in process as possible to ensure that the government is presented with the necessary competitive facts and strategic circumstances to understand why a particular deal will not result in the effects the agencies are seeking to quell.
[1] Eastman Kodak v. Image Technology Services, 504 U.S. 451, 466 (1992).
[2] Jonathan Kanter, Assistant Attorney General, Department of Justice, Antitrust Div., Remarks to the New York State Bar Association Antitrust Section (Jan. 24, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-antitrust-division-delivers-remarks-new-york [hereinafter “Kanter Jan. 24 Remarks”].
[3] Kanter Jan. 24 Remarks.
[4] Id.
[5] Michael Acton, U.S. DOJ Stands to Bring Criminal Charges in Section 2 Monopolization Cases, Powers says, MLex (Mar. 2, 2022), https://content.mlex.com/#/content/1363181?referrer=search_linkclick
[6] Kanter Jan. 18 Remarks; Kanter Jan. 24 Remarks.
[7] Jonathan Kanter, Assistant Attorney General, Department of Justice, Antitrust Division, Remarks on Modernizing Merger Guidelines (Jan. 18, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-remarks-modernizing-merger-guidelines [hereinafter “Kanter Jan. 18 Remarks”].
[8] Kanter Jan. 18 Remarks; Kanter Jan. 24 Remarks.
[9] Kanter Jan. 24 Remarks.
[10] Id.
[11] Id.
[12] Press Release, Department of Justice, Antitrust Division, Former Security Services Executives Plead Guilty to Rigging Bids for Department of Defense Security Contracts (Oct. 18, 2021), https://www.justice.gov/opa/pr/former-security-services-executives-plead-guilty-rigging-bids-department-defense-security
[13] Press Release, Department of Justice, Antitrust Division, Concrete Contractor Pleads Guilty to Rigging Bids for Public Contracts in Minnesota (Sept. 28, 2021), https://www.justice.gov/opa/pr/concrete-contractor-pleads-guilty-rigging-bids-public-contracts-minnesota
[14] DoD, Report: State of Competition within the Defense Industrial Base, 1 (Feb. 2022), https://media.defense.gov/2022/Feb/15/2002939087/-1/-1/1/STATE-OF-COMPETITION-WITHIN-THE-DEFENSE-INDUSTRIAL-BASE.PDF
[15] Federal Trade Commission, Premerger Notification Program: HSR Transactions by Month, https://www.ftc.gov/enforcement/premerger-notification-program.
