Antitrust and Unfair Competition Law
A Deeper Dive: The First Six Months of the Biden Antitrust Agenda
By Lee Brand and Olivia Fong (summer associate)
In its first six months, the Biden administration has taken significant executive action to signal increased antitrust enforcement activity in general and in the tech industry in particular. These actions include: • the appointment of outspoken advocates for aggressive antitrust enforcement at the White House, Federal Trade Commission (“FTC”), and Department of Justice (“DOJ”); • revisions to FTC policy and procedure aimed at facilitating aggressive rulemaking and enforcement; and • a wide-ranging executive order, comprised of 72 initiatives and involving over a dozen federal agencies, to increase competition across the economy. This executive action, however, is likely to meet with at least some impediments in the courts. Congressional expansion of antitrust law could overcome such judicial impediments, but thus far the Biden administration has not prioritized such legislation and independent legislative activity remains preliminary.
A. Key Appointments
In March 2021, the Biden administration announced its appointment of Tim Wu to the National Economic Council as Special Assistant to the President for Technology and Competition Policy. Before joining the Biden administration, Wu taught antitrust law at Columbia Law School and worked in antitrust enforcement at the New York Attorney General’s Office and the FTC. Wu previously worked on the National Economic Council during the Obama administration. Wu is known for his criticism of the tech industry and is an advocate for stronger and broader antitrust enforcement policy that looks beyond a traditional consumer welfare standard focused on consumer pricing. For example, in his 2018 book, The Curse of Bigness: Antitrust in the New Gilded Age, Wu argued that “[e]xtreme economic concentration yields gross inequality and material suffering, feeding an appetite for nationalistic and extremist leadership.” Weeks later, the White House announced President Biden’s nomination of Lina Khan for commissioner of the FTC. After Khan’s Senate confirmation, President Biden elevated Khan to chair of the FTC. Before her appointment, Khan also taught antitrust law at Columbia Law School and served as counsel to the U.S. House Judiciary Committee’s Antitrust Subcommittee. Khan was the lead writer of the 2019 House report on competition in digital markets, which raised various abuses of monopoly power in the tech industry. As a law student, Khan also published an influential journal note, Amazon’s Antitrust Paradox, that has been cited over 800 times since its publication in 2017. In that note, Khan also argued that the consumer welfare standard is an inadequate framework for measuring antitrust impact in the modern economy. On July 20, President Biden announced the nomination of Jonathan Kanter as the chief of the DOJ Antitrust Division. Kanter began his career as a staff attorney at the FTC during the Clinton administration, but most of his experience has been in private practice. Kanter currently helms the Kanter Law Group, which specializes in federal and state antitrust enforcement and before founding his own firm co-chaired the antitrust practice at Paul Weiss Rifkind Wharton & Garrison LLP. Kanter is well known for representing tech clients alleging anticompetitive conduct by other players in the tech industry and has testified before the Senate’s Antirust Subcommittee that U.S. antitrust enforcers “should vigorously explore new questions in antitrust to ensure that U.S. antitrust law remains relevant to the realities of today’s economy and society.” There appears to be bipartisan support in the Senate for Mr. Kanter’s appointment.
B. Initial Revisions to FTC Policy and Procedure
In addition to these appointments and nominations, the executive branch has taken several other actions to signal a more aggressive antitrust stance. After being sworn in as Chair, Khan opened the FTC’s meetings to the public and, at her first meeting on July 1, voted with fellow Democratic Commissioners Rohit Chopra and Rebecca Kelly Slaughter to rescind a 2015 FTC policy statement. That policy had declared that the FTC would be guided by the consumer welfare standard in deciding whether to bring antitrust cases under Section 5 of the FTC Act (“Section 5”) and that it would not bring such cases “if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm.” Section 5 prohibits “unfair methods of competition,” and the FTC’s antitrust authority thereunder is viewed as separate from and broader than government enforcement authority under the Sherman and Clayton Acts. This recission of the 2015 statement signals the FTC’s willingness to use all tools at its disposal to challenge various forms of perceived anticompetitive harm. At the same July 1 meeting, Khan and her Democratic colleagues also voted to streamline FTC rulemaking procedures. Under Section 18 of the FTC Act, Congress gave the FTC rulemaking powers to regulate unfair or deceptive acts and practices. Previously, an in-house administrative law judge presided over the rulemaking process, but now the FTC Chair or another designated commissioner may act as the presiding officer. The FTC also revised the Section 18 rulemaking process to allow additional stakeholders to participate in informal hearings more easily and by eliminating rules not required by the FTC Act. The Commission represented that these rulemaking changes would set the stage for stronger deterrence of corporate misconduct. With Chair Khan and Commissioners Chopra and Slaughter now constituting a Democratic majority of the FTC’s five commissioners, the Commission appears likely to continue pursuing an aggressive antitrust agenda with or without bipartisan support.
C. Executive Order on Promoting Competition in the American Economy
On July 9, President Biden signed an executive order (the “Order”) to increase competition across the American economy. At the signing ceremony, President Biden’s remarks echoed the reframing of antitrust law championed by his appointees: “Forty years ago, we chose the wrong path, in my view, following the misguided philosophy of people like Robert Bork, and pulled back on enforcing laws to promote competition. We’re now 40 years into the experiment of letting giant corporations accumulate more and more power. . . . I believe the experiment failed.” Reflecting Tim Wu’s reported role as one of its key architects, the Order itself and its accompanying Fact Sheet represent a whole-of-government approach to preventing anticompetitive conduct, encouraging 72 specific initiatives across over a dozen federal agencies. With regard to the FTC and DOJ, the Order recognizes their ability to challenge past mergers that went unchallenged by prior administrations and calls for vigorous enforcement activity focused in particular on labor markets, agricultural markets, healthcare markets, and the tech sector. It also establishes a White House Competition Council to coordinate the Biden administration’s antitrust efforts across other federal agencies. With regard to the technology industry in particular, the Fact Sheet identifies three key areas for antitrust enforcement activity: (1) “killer” or nascent acquisitions wherein potential competitors are bought up before they become actual competitors; (2) business models that rely on the accumulation of sensitive personal information; and (3) unfair competition with small businesses, such as powerful marketplace platforms that use the data they accumulate running the marketplace to also sell competing products within the marketplace. In turn, the Order announces that the Biden administration will increase merger scrutiny, especially for dominant internet platforms, nascent acquisitions, serial mergers, data accumulation, competition by “free” products, and the effect on user privacy. The Order also encourages the FTC to establish surveillance and data accumulation rules and rules barring unfair methods of competition on internet marketplaces. On the same day the Order was signed, Chair Khan and Acting Assistant Attorney General Richard A. Powers, the current head of the DOJ’s Antitrust Division, released a statement announcing a joint review of the federal merger guidelines to ensure that they “reflect current economic realities and empirical learning and that they guide enforcers to review mergers with the skepticism the law demands.” Later that month at a July 21 meeting, the FTC voted along party lines to rescind a 1995 policy statement. Now, as prior to 1995, where the FTC has determined that a proposed merger is problematic, the FTC’s prior approval is required for any future transaction in the same product and geographic market for which a violation was alleged. On August 3, the FTC also announced a policy change in light of a surge in merger filings and its resulting inability to fully investigate many proposed transactions within the timeline set by the Hart Scott Rodino Act. Specifically, where the Commission’s investigation remains open, it has begun to send standard form letters alerting companies that if they proceed with a deal that has not been fully investigated, the FTC may subsequently determine that the deal is unlawful and seek to undo the transaction.
D. Judicial Roadblocks and Potential Legislation
While the foregoing executive branch activity no doubt portends increased antitrust enforcement, the courts remain a looming hurdle for the Biden administration’s agenda. For example, in June 2021, a federal district court dismissed the FTC’s lawsuit accusing Facebook of monopolization and seeking to unwind its prior acquisitions of Instagram and WhatsApp in 2012 and 2014, respectively. While originally filed during the Trump administration, this case represents precisely the type of re-review of past mergers and emphasis on nascent acquisitions that the Biden administration has made a priority. The case was dismissed with leave to amend based on a failure to sufficiently plead Facebook’s monopoly power in the market for personal social networking, and the FTC now has until August 19 to file an amended complaint—an early test for Biden and Khan’s antitrust agenda. Cooperation with the legislative branch represents a potential avenue to overcome such judicial challenges and to otherwise strengthen the executive branch’s antitrust toolkit. Thus far, however, new antitrust legislation has not appeared to be a priority for the Biden administration. But even without a strong push from the White House, there has been some notable preliminary legislative activity in the area. In late June, the House Judiciary Committee passed six antitrust-related bills that would: (1) update merger filing fees, (2) ensure that state attorneys general can bring antitrust cases in federal court without delays or higher costs, (3) increase interoperability and data portability between the largest online platforms, (4) prohibit the largest online platforms from acquiring competitors or potential competitors, (5) prevent dominant online platforms from using their market power to favor their own products, and (6) prevent dominant online platforms from owning another line of business that creates a conflict of interest. While the bills had bipartisan support in the House Judiciary Committee, three Democratic representatives from California voted against five of the six bills. The House Judiciary Committee has ordered these bills to be reported to the House, but no date has been set for a full House vote. Three significant antitrust bills have also been proposed in the Senate. Senate Bill 225, introduced on February 4 by Senator Amy Klobuchar (D-MN), would modify the Clayton Act’s standard for unlawful acquisition, shifting the burden to defendants to demonstrate that there is no material anticompetitive harm. It would also enhance the DOJ and FTC’s enforcement authority. Senate Bill 1074, introduced on April 12 by Senator Josh Hawley (R-MO), would amend the Clayton Act to prohibit extremely large companies from acquiring companies that may “lessen competition in any way.” This bill would also require the Sherman Act’s competitive harm analysis to consider the “protection of economic competition within the United States” and shift the burden of proof to the defendant. Senate Bill 2039, introduced by Senators Mike Lee (R-UT) and Chuck Grassley (R-IA) on June 14, would transfer the FTC’s competition resources to the DOJ and significantly increase the DOJ’s antitrust budget. The bill would also prohibit mergers resulting in a 66% market share unless the transaction is necessary to prevent serious harm to the national economy. All three Senate bills have been read twice and referred to the Senate Judiciary Committee, but no further action has been reported.
In sum, the appointments of Tim Wu and Lina Khan, the nomination of Jonathan Kanter, President Biden’s executive order, and FTC policy changes all signal a coming wave of aggressive antitrust enforcement. Further, a focus on big tech and a shift away from traditional notions of consumer welfare appear likely to be two of the major hallmarks of this enforcement activity. Nevertheless, this enforcement agenda may well run into considerable judicial headwinds, and it remains difficult to predict whether early signs of bipartisan support for significant new antirust legislation will prove enduring.
Lee Brand (with Pillsbury Winthrop Shaw Pittman LLP) is a commercial litigator with experience representing technology companies and financial institutions in antitrust and securities matters. Lee’s practice includes international cartel litigation, consumer and shareholder class actions, high-stakes contract disputes, and government and internal investigations. He has handled matters in federal courts across the country, California state courts, and various arbitral settings. His clients range from Fortune 100 companies to startups.