1. Opening Remarks by Bill Baer
Mr. Baer stated that both Chair Khan and AAG Kanter have been critical of an alleged underenforcement of antitrust laws and judicial interpretation of the Sherman and Clayton Acts. In particular, he pointed to statements they have made about antitrust enforcement over the last 40 years leaving consumer injury unaddressed or under addressed, resulting in harm to consumers and workers. He stated Chair Khan and AAG Kanter were appointed to be “game changers.”
2. Historical underenforcement of antitrust laws
Khan discussed what she views as a troubling trend towards concentration and associated harms over the last 40 years owing to underenforcement of antitrust laws.
Too much M&A: In her first remarks, Chair Khan stated that—as set forth in President Biden’s Executive Order on Promoting Competition in the American Economy in 2021—there is a serious need for reassessing and reinvigorating antitrust policy. She stated that over the last 40 years, there has been too much M&A activity, and the resulting consolidation in the market has harmed American people through higher prices, lower wages, and less innovation. She remarked that the FTC is returning to the text of the statutes and faithfully fulfilling their original intent.
Broad Policy Tools: To address the underenforcement of antitrust laws, Chair Khan stated that she is seeking to “fire on all cylinders.” She noted that the FTC has not only law enforcement but also policy tools, including, “critically Section 5 of the FTC Act,” and FTC rulemaking, such as the proposed rule banning non-competes in employer-employee contracts. She discussed the importance of being faithful to congressional intent regarding “unfair methods of competition.”
3. Beyond Consumer Welfare
Chair Khan and AAG Kanter both framed their antitrust enforcement priorities as maintaining the quality of life for everyday Americans by considering harm to Americans in their role as workers and entrepreneurs, rather than only in their role as consumers. AAG Kanter stated that he is returning to first principles: Congress made a value judgment that competition matters because a democratic society depends on opportunities and access to opportunities, the ability to start a business, be upwardly mobile, and benefit from innovations and lower prices. Notably, he mentioned access to opportunities and upward mobility before he mentioned innovation and lower prices.
Statutory text not limited to consumer harms: An audience member attending the event asked what the statutory basis was for treating labor market power as an antitrust violation on par with producer market power. AAG Kanter pointed out that antitrust laws do not specify that anticompetitive harm must be to consumers. AAG Kanter described combatting harm in the labor market as “foundational to the work we are doing in the merger and non-merger context” and cited a recent Seventh Circuit opinion that vacated a district court’s dismissal of a complaint brought by McDonald’s workers who were prevented from accepting higher paying positions at other McDonalds’s franchises because of no-poach agreements. Chair Khan echoed AAG Kanter’s view that the antitrust laws do not specify harms to consumers, and noted that considering harms to workers, businesses, and entrepreneurs are appropriate antitrust goals.
No-poach agreements: Mr. Baer asked AAG Kanter whether the DOJ should continue to regard no-poach agreements as criminal violations under Section 1 given that juries so far have not gone along with it. AAG Kanter responded that protecting workers from unlawful behavior that harms their upward mobility is a major issue and foundational for the DOJ. He said the agencies have an obligation to bring these cases as criminal matters regardless of the odds of winning.
Non-competes: Mr. Baer asked Chair Khan about non-compete agreements. Chair Khan stated that non-competes have drastically expanded beyond the boardroom and lamented the broad swathe of workers bound by non-competes. She stated that evidence shows that non-competes are not just bad for the workers they bind, but also for other workers as they lead to fewer opportunities and lower wages for all. Chair Khan also stated that non-competes restrict the supply of labor, thereby preventing firms from entering the market even if they have the capital to start a new business. Based on these findings, the FTC in January 2023 proposed a rule that would eliminate non-competes in employment contracts. Chair Khan mentioned that the proposed rule followed a “successful enforcement action” (under Section 5 of the FTC Act) challenging non-competes limiting the mobility of low-wage security guards. Although Chair Khan characterized this as an enforcement action, the resolution proceeded from a consent agreement not a successful litigation challenge. Chair Khan also singled out the healthcare industry as one in which non-competes are particularly undesirable because they impact the quality of healthcare.
4. Assessment of success
Both Chair Khan and AAG Kanter appraised their work highly in response to Mr. Baer’s invitation to grade their progress. They both viewed the following effects of their vigorous enforcement as evidence of their success: preventing mergers from being filed or having the parties abandon mergers. They noted that their enforcement efforts have extended beyond mergers to Section 2 civil and criminal cases and Section 8 Clayton Act cases (prohibiting interlocking boards of directors).
Chair Khan gives FTC high marks: Chair Khan remarked that the “small but mighty” FTC has been successful under her tenure. As support, Chair Khan mentioned two monopolization lawsuits brought by the FTC in the last month: (1) Amazon, in which the FTC alleged Amazon violates the law by engaging in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging; and (2) Welsh Carson & Stowe, in which the FTC alleged that a private equity firm undertook a multi-year scheme to dominate Texas anesthesiology practices through serial acquisitions leading to monopoly-level shares. Chair Khan also described the draft merger guidelines and the legislative reform underway, including the rulemaking seeking to ban non-compete clauses that was introduced earlier this year, as FTC successes. When Mr. Baer asked whether the public perception that the agencies are on a losing streak is accurate, Chair Khan also mentioned a challenge to a notable vertical merger early in her tenure that resulted in deal abandonment. She also counts among her achievements the “judicial ratification” of the potential competition doctrine.
AAG Kanter grades DOJ highly: Like Chair Khan, AAG Kanter characterized the DOJ under his tenure as successful. As evidence, he cited the Penguin Random House case, which was the first judicial victory for the government on a theory of monopsony—that an unfair buying market would harm workers (in that case, authors of books). He also mentioned the first successful airline challenge at trial in over 40 years, the DOJ’s decisions to bring criminal monopolization cases under Section 2 rather than under Section 1, and 20 director resignations resulting from reinvigorated enforcement of Section 8 of the Clayton Act (barring interlocking boards of directors).
Deterrence is success: Mr. Baer commented that the public’s perception is that the agencies have drastically increased the number of transactions they are investigating and litigating and asked Chair Khan and AAG Kanter whether that view is accurate. Chair Khan acknowledged that earlier in her tenure, the Commission was issuing more second requests compared to previous administrations, but she stated that is no longer true because fewer initial filings are being received. Chair Khan noted that many deals are not being done due to antitrust concerns and that this “deterrence is a mark of the FTC’s success,” which allows the FTC to “deploy resources more effectively” and focus on conduct investigations and other areas where she thinks there needs to be more enforcement efforts. AAG Kanter also emphasized that deterrence is a sign of success by pointing out that at least 10 mergers have been abandoned during his tenure due to more aggressive enforcement efforts.
5. Draft Merger Guidelines
Chair Khan and AAG Kanter explained that the draft merger guidelines reflect modern market realities, are easy for judges to apply, and are faithful to precedent. Both expressed their view that the opposite was true for the most recent guidelines. For example, AAG Kanter criticized how the recent guidelines allegedly fail to capture commercial realities by trying to shoehorn everything into unilateral and coordinated effects when competition presents itself in various ways. Likewise, Chair Khan mentioned that the focus on economic tools in the 2010 Horizontal Merger Guidelines has become divorced from the core anchor of the text of the Clayton Act itself and congressional intent.
Focus on Modern Realities: AAG Kanter opined that competition has changed since the inception of the guidelines; he cited as examples the rise of platform markets and the privacy dimension of harm to consumers. He also stated that much economic research has shifted from theoretical to applied research during that time. He referred to the emergence of behavioral economics and cognitive science as further evidence of how the world has changed. Considering these changes, he reiterated that if the goal of antitrust enforcement is to protect competition, then agency inquiries should focus not on formulaic distinctions like whether a merger is horizontal or vertical but instead on how competition presents itself in a particular market, and then analyze whether a merger threatens that competition. By being less technocratic, AAG Kanter stated that the agencies would better align antitrust discussions with how business executives think. According to AAG Kanter, the draft guidelines aim to organize around the realities of the market.
Reassessment of private equity role: When an audience member asked what the agencies are doing about private equity’s role in concentration, AAG Kanter responded that the role of private equity is unrecognizable compared to when the guidelines were originally drafted. He stated that his goal is to understand those realities and enforce the law based on changed circumstances to reflect the facts of the market.
Guidelines help judges: The enforcers were asked whether the menu of thirteen analytical tools in the proposed guidelines would make judges less willing to use the guidelines for fear of subjectivity. Chair Khan argued that the prevailing focus on econometric analysis has not in fact been objective because it masks subjective decisions. She then noted that the draft guidelines do not profess to be objective but are easier for judges to use as opposed to choosing between dueling economic experts, as is often the case today.
Menu of Analytical Tools: Chair Khan stated that different tools in the draft guidelines may be salient in various cases—while some tools look at econometric evidence, others look at direct evidence. The thirteen frameworks in the guidelines are only intended to give options for the agencies to make a prima facie case, which would be subject to rebuttals. Chair Khan assured Mr. Baer that the agencies will use the right tool depending on the market and that the guidelines reflect this. She also insisted that the new draft merger guidelines are already paying dividends because they provide a shorthand for enforcers and merging parties to talk about potential problems with deals through a list of thirteen specific scenarios rooted in precedent.
Guidelines cite old cases: In response to a question by Mr. Baer about why the guidelines cite case law (particularly older cases), Chair Khan responded that the core of what the agencies are looking to do is to maintain “fidelity to the law.” That includes not just text but precedent. When reviewing precedent, Chair Khan argued that the FTC staff found a bit of a gap between what the most recent guidelines said and what the precedent said. According to Chair Khan, the draft guidelines further the rule of law because they are in line with what courts have done. AAG Kanter remarked that though there have been no new Supreme Court cases on mergers in 20 to 30 years, the key principles of avoiding concentration, entrenchment of monopoly power, and transactions that may result in input foreclosure to suppliers are timeless.
Structural presumption: When Mr. Baer asked whether increases in concentration are sufficient to initiate investigations under the new guidelines, Chair Khan affirmed the structural presumption, calling it longstanding. AAG Kanter pointed out that United States v. Philadelphia National Bank, 374 U.S. 321 (1963), came right after Congress amended the Clayton Act in the 1950s, indicating that it followed congressional intent.
Punt on Timing: Mr. Baer asked when the guidelines would be final. Neither AAG Kanter nor Chair Khan answered the question, instead discussing how many public comments had been received by the agencies.
6. Proposed Hart-Scott-Rodino (HSR) Merger Notification Requirements
Mr. Baer asked what Chair Khan was trying to achieve with the rewrite of the HSR form and how enforcers would balance the increased burden on the transactions that do not pose any competitive risk.
Chair Khan first stated that on the front end, the agencies are not getting what they need to do sound analysis right now. She stated that a revision is necessary for the FTC to scrutinize deal rationales, serial acquirers, and impacts on labor markets. She also argued that the proposed revision mitigates these blind spots on the front end and that other jurisdictions already require the data the FTC seeks. Even if more burdensome, Chair Khan justified the request for more data because the agency now sees the same number of mergers in a month as it did over an entire year when the form was initially released. However, she did not explain why the volume of mergers would affect the amount of data required to scrutinize each merger. Finally, Chair Khan stated that merger review could be more efficient and quicker for both enforcers and merging parties because the information requested upfront could prevent a costly second request.
7. Agencies are paying attention to public opinion
Chair Khan credited the 26,000 comments from healthcare workers that the FTC received on its proposed rule banning non-competes as informing her view that the classic rationales for non-competes are inapplicable to healthcare workers who apply and invest in their own training, making it unnecessary for employers to protect their investment in healthcare workers. Further, she said that she gleaned from these comments the plight of nurses constrained by non-competes during the COVID-19 pandemic. There were other cues that the enforcers are listening closely to public comments. For example, in discussing the draft merger guidelines, AAG Kanter seemed to suggest that what matters more than any criticism is that the ordinary (non-antitrust specialist) public overwhelmingly supports the guidelines. AAG Kanter stated that the draft guidelines encourage further public engagement because they deviate from using antitrust jargon only specialists can understand.
