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January 27, 2022

Back to the Future: The Antitrust Division Looks to the Past to Chart Aggressive New Course

Advisory

On January 24, 2022, Jonathan Kanter, the recently confirmed Assistant Attorney General (AAG) of the US Department of Justice’s Antitrust Division (Division), laid out his enforcement plans and priorities to a meeting of the New York State Bar Association’s Antitrust Section.1 Consistent with the Biden Administration’s stance on competition issues,2 AAG Kanter set forth an aggressive approach that draws inspiration from the past—specifically, from former AAG and Supreme Court Justice Robert Jackson.

Citing the “dozens of cases” Justice Jackson brought during his first year leading the Division, AAG Kanter said he was ready “to embark on an aggressive campaign of antitrust enforcement” to, in his words, “free markets from the grip of monopoly power.” AAG Kanter observed that the economy has changed significantly in the last several decades, and expressed his view that “[a]ntitrust law enforcement has not succeeded in keeping pace with these massive changes.” Accordingly, AAG Kanter announced plans to reinvigorate antitrust enforcement in the following ways:

Section 2 Enforcement

AAG Kanter said he intends to place greater priority on filing cases under Section 2 of the Sherman Act. Section 2 makes it unlawful for any person to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations . . . .”3 Highlighting the 20-year gap between the filing of “major DOJ monopolization cases” (United States v. Microsoft in 1998 and United States v. Google in 2020), AAG Kanter’s remarks indicate that he plans to litigate more Section 2 cases to address the “dearth of Section 2 case law addressing modern markets.”

AAG Kanter believes there is a “growing divide” between Section 2 antitrust doctrine and current markets, and said he will apply Section 2 in a way that is “responsive to market realities,” not “outdated models.” Further foreshadowing a new approach to evaluating competition in “modern markets,” AAG Kanter observed that “there are an increasing number of markets where competition is not reflected merely, or primarily, in consumer prices or output.” For example, AAG Kanter noted concerns about the accumulation of large quantities of personal, private data by “dominant platforms whose digital services have few, if any, realistic alternatives.”

Continuing the Division’s focus on competition in labor markets,4 AAG Kanter also expressed concerns about “monopsony power of employers in labor markets.” AAG Kanter’s remarks suggested that the Division may consider less traditional measures of monopsony harm, such as reduced quality of life, as potential measures of harm in labor markets.

Merger Enforcement

Quoting Section 7 of the Clayton Act, AAG Kanter stated that he intends to challenge any merger that may substantially lessen competition or tend to create a monopoly.5 In line with his emphasis on Section 2, AAG Kanter specifically highlighted the “tend to create a monopoly” prong of Section 7, suggesting that the Division may increasingly challenge mergers by dominant firms that pose a risk to incipient competition.

AAG Kanter emphasized two other efforts to bolster the Division’s merger-enforcement efforts. First, he noted the Division’s work with Congress to increase the Division’s funding. AAG Kanter described a “historic resource shortage” at the Division in the face of an “unprecedented explosion” of premerger notifications and retrospective studies suggesting that consolidation over the past decades has led to less competition. Second, he cited the recent joint DOJ-FTC public inquiry6 seeking comments on ways to modernize the 2010 Horizontal Merger Guidelines7 to reflect developments in the modern economy and make sure “our economic models reflect market realities.”

Remedies

Finally, AAG Kanter indicated a preference toward pursuing litigation, rather than negotiated settlements, to prevent the loss of competition from anticompetitive mergers. He expressed concern that “merger remedies short of blocking a transaction too often miss the mark” and skepticism in the Division’s ability to determine appropriate divestitures “for evolving business models and innovative markets.” In his view, “a simple injunction to block the transaction. . . is the surest way to preserve competition.”

AAG Kanter noted, however, that divestitures may still be an option where “business units are sufficiently discrete and complete” such that “disentangling them from the parent company in a non-dynamic market is a straightforward exercise.” But, in his view, these circumstances are “the exception, not the rule.” Like his predecessor, AAG Makan Delrahim,8 AAG Kanter expressed a preference for structural remedies over behavioral remedies to resolve antitrust concerns.

Takeaways

The Antitrust Division will be more inclined to sue to block transactions than to negotiate settlements with targeted divestitures. AAG Kanter’s remarks suggest that the Division likely will seek to enjoin transactions that the Division believes are anticompetitive unless it has a high level of confidence that a structural remedy will fully preserve competition. Whether this approach will be feasible (because parties can “litigate the fix,” and given the Division’s “historic resource shortage” it may not have the resources to litigate every merger where it might otherwise accept a divestiture) remains to be seen. Nevertheless, parties should approach deal planning and merger reviews understanding that the Division may now be more likely to take an “all or nothing” approach to merger remedies.

The Antitrust Division will place greater emphasis on real-world evidence of competitive harm than economic models. In his introduction, AAG Kanter asserted that economics “are merely tools to understand facts relevant to particular case” and “where there are natural experiments and direct evidence of competitive harm, economic theory must give way to market realities.” This statement suggests that the Division will place greater weight on actual competitive effects—even if anecdotal—over economic predictions. Parties should be prepared to provide examples of past procompetitive deals and other real-world evidence to defend their transactions, whether to the Division or to the courts.

The Antitrust Division is more likely to bring cases testing the limits of the antitrust statutes and precedent. AAG Kanter repeatedly emphasized that current enforcement must reflect today’s market realities, and that new litigation is needed to “bring clarity to the law” and “reconsider the application of old precedents” to “modern markets.” AAG Kanter’s statements indicate that the Division may be willing to bring cases that test the boundaries of the Sherman and Clayton Acts and existing caselaw, in order to obtain “new published opinions from courts that apply the law in modern markets.” Parties should be prepared to address competitive-harm theories that are not based on traditional measures of harm such as price and output effects.

The Antitrust Division is staffing up for more trials. On the day of AAG Kanter’s speech, the Division posted “many vacancies” for Senior Trial Counsel positions. According to its job posting,9 the Division is “seeking experienced first-chair and second-chair trial lawyers to take leadership roles on high-profile antitrust and competition cases involving challenges to anticompetitive mergers and business conduct, including monopolization cases.” This job posting follows recent Division hires of experienced litigators from other DOJ components.

In AAG Kanter’s first two months at the Division, it has already filed one merger challenge.10 Kanter’s speech and the Division’s recent hiring and budgetary efforts send a clear message that the Division intends to file and litigate more cases. Only time will tell whether the Division’s enforcement activity will live up to the rhetoric and whether its litigation bent will have success in the courts, but parties should approach the Division with a clear understanding that it is spoiling for a fight.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1. Jonathan Kanter, Asst. Att’y Gen., U.S. Dep’t of Justice, Antitrust Div., Remarks to the New York State Bar Association Antitrust Section (Jan. 24, 2022).

  2. See, e.g.Executive Order on Promoting Competition in the American Economy (July 9, 2021).

  3. 15 U.S.C. § 2.

  4. See Makan Delrahim, Asst. Att’y Gen., U.S. Dep’t of Justice, Antitrust Div., Remarks at the Public Workshop on Competition in Labor Markets (Sept. 23, 2019).

  5. 15 U.S.C. § 18.

  6. See Press Release, U.S. Dep’t of Justice, Justice Department and Federal Trade Commission Seek to Strengthen Enforcement Against Illegal Mergers (Jan. 18, 2022).

  7. U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines (Aug. 19, 2010).

  8. See Makan Delrahim, Ass’t Atty. Gen., U.S. Dep’t of Justice, Antitrust Div., Keynote Address at American Bar Association’s Antitrust Fall Forum (Nov. 16, 2017).

  9. USAJobs, U.S. Dep’t of Justice, Trial Attorney.

  10. Press Release, U.S. Dep’t of Justice, Justice Department Sues to Block U.S. Sugar’s Proposed Acquisition of Imperial Sugar (Nov. 23, 2021).

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