After eight years of relatively inactive antitrust enforcement under President George W Bush, then Senator Barack Obama, the Democratic presidential candidate, promised that the federal agencies’ policing of the economy would change under his leadership. But four years into Obama’s presidency, the external signs of that progress were scant. There simply weren’t many cases, critics said, and that narrative of permissive antitrust oversight stuck.
David Gelfand objected. Having been a deputy in the US Department of Justice’s Antitrust Division for much of President Obama’s second term, he was certainly a partisan choice to defend the administration’s record in enforcing the country’s antitrust laws. In May 2017, in an editorial published in Global Competition Review – the magazine and news service behind this book – Gelfand wrote that in fact Obama had fulfilled that promise, and that his years saw a revolution of sorts at both the DOJ and the Federal Trade Commission, particularly when reviewing and challenging potentially harmful mergers.
“[T]here can be no question that President Obama’s vision was fully realised by the end of his second term, when the DOJ and FTC collectively had litigated 24 contested merger challenges,” Gelfand wrote. Even more impressive, he said, was the agencies’ track record in those merger challenges that went to trial. When companies and their counsel felt willing to go to court to fight for their deals, the agencies won at a rate without precedent in recent antitrust history.
Gelfand’s spirited defence of the administration he served in now appears justified. Nearly a year on from the administration’s final days, it is clear that federal antitrust enforcement under Obama did change. While it was perhaps not as robust or aggressive as some pundits believed it needed to be, the administration challenged deals at a higher clip than almost any other over the past half-century. The agencies also tried precedent-setting conduct cases, including the first-ever trial against a foreign company and executives for price fixing. The cases they prosecuted created important case law that will help to shape agency actions and private litigation for years.
The book includes chapters on every major antitrust trial federal agencies brought during the eight years of the Obama administration, including a chapter looking at enforcement efforts in the healthcare industry. It is a mix of original analysis from experienced reporters, external essays written by the lawyers who were there and contemporaneous news stories, all in an effort to cover the enforcement record and case law created by the US antitrust agencies over the past eight years.
The book is imperfect by its nature. The lawyers who won the cases wrote about their experiences: their tactics in court, their conversations behind the scenes and their views on the importance of the case law created by the courts’ decisions. Because the government experienced so much success in court during the Obama administration – particularly the second term – the primary voice in this book is that of the successful DOJ or FTC attorney. While the viewpoints are limited, we believe the collection of essays in the book captures details of a relevant and legally important part of the administration’s enforcement story: that it took difficult cases to trial and most often won.
That is, of course, not the only story of federal antitrust enforcement during the Obama era. Before Senator Obama mentioned the need for more vigorous federal antitrust enforcement in the US, it had been years since a candidate of either major political party suggested such a thing was needed. But even in 2008, as the global financial crisis unfolded before him, Obama recognised the importance of robust competition to a sound economy – and the potential trouble lax enforcement could create for businesses and consumers.
Now, with the Obama era behind us, it is appropriate to ask whether the antitrust agencies under his administration did boost enforcement as promised. Since the election of Donald Trump, Obama and his policies have attracted forceful critics on the political left in the US who see his economic policies as complicit in, if not partly responsible for, the growing wealth and wage gap in America. Antitrust enforcement is a part of that. Critics say that despite Obama’s brash talk of assertive enforcement, the antitrust agencies continued to allow US industry to consolidate and amass power.
But complaints that there was no effort on the part of the Obama antitrust agencies to increase enforcement appear disingenuous. The administration did not stray from the existing antitrust orthodoxy of the consumer welfare standard, under which enforcement typically only moves at the margins from one administration to another. Under Obama, those margins indeed moved, particularly in mergers, which resulted in most of the government-led antitrust trials detailed in the book.
According to its statistics, the Antitrust Division challenged no more than 16 mergers in any year of George W Bush’s second presidential term. The agency challenged at least 16 cases a year throughout the Obama administration, which included a recession when companies merged at a far slower pace than in the years immediately before or since. The DOJ took nine civil cases to trial during the Obama era, seven of which were merger cases. Companies abandoned four mergers after the DOJ sued to stop them. Meanwhile, the FTC under Obama took vastly more mergers to federal court than it did during the previous eight years, according to its statistics. From 2009 to 2016, the agency moved for 35 preliminary injunctions before the federal courts. In the eight years prior, it brought just 15 such motions.
One of the oddest traits of the antitrust agencies druing the Obama era was their reluctance to admit they were being more aggressive in challenging potentially harmful mergers and conduct, despite what the numbers and everyone’s anecdotal experience demonstrated. Deborah Feinstein, the head of the FTC’s Bureau of Competition during Obama’s second term, said repeatedly that her agency was no more likely to sue to block a deal than it had been in the past. The agency was in court more, she explained, simply because it had been presented with more potentially harmful mergers and conduct than it had in prior years. There is some truth to that – after all, enforcers can only address the cases before them. But both the FTC and DOJ took concrete steps to ensure they were prepared to challenge harmful mergers when they arrived, as the book explains. This seems an important distinction from prior administrations, and indicates a greater willingness to go to court to fight bad deals.
Again, over the past three-plus decades, antitrust enforcement has differed only on the margins regardless of which administration has been in power. But the decisions on those margins – whether to challenge a deal or conduct that is legally a close call – matter for both the legacy of those enforcers and the US economy. There can be little doubt that by the end of the Obama era, the battles fought on the margins of the law did matter, and did indeed shape the legacy that this book intends to capture. But no shift in enforcement, even a marginal one, could happen without changes within the government.
The changes happened through planning and forethought on the part of those first Obama administration antitrust officials. Indeed, the critics who chastised the antitrust enforcers midway through his two-term presidency appear shortsighted now; they had scoffed at paltry case numbers while disregarding the major structural transformation happening inside the agencies. Officials knew the government was saddled with bad case law, outdated guidance to judges and a staff that by-and-large had never experienced a successful government-led antitrust trial. The last time the DOJ went to court to block a merger had been 2004, and it suffered a brutal loss. That loss, coupled with a Republican administration’s distaste for enforcement on economic grounds, led the Antitrust Division to approve mergers that concentrated industries: United/Continental and Delta/Northwest in airlines; Maytag/Whirlpool in appliances; AT&T’s successful attempt to recreate its pre-breakup corporation by purchasing BellSouth and, with it, Cingular Wireless. A renewed focus on litigation, as well as the staff to carry out the agencies’ courtroom missions, marked the beginning of the Obama administration’s enforcement overhaul.
Then, as a matter of antitrust philosophy, officials within the agencies refused to readily accept arguments that a merger’s economic benefits would outweigh the harm it would cause consumers and competition without extensive and convincing evidence. Nearly every deal the agencies challenged promised major economic benefits, from the alleged $1 billion in savings from Sysco/US Foods, to the “substantial efficiencies of scale and geographic scope” that Halliburton and Baker Hughes jointly announced in a 2014 press release. In those deals, the agencies rejected evidence of those claims as insufficient to overcome the pain those mergers would inflict on consumers. While far from rejecting the consumer welfare standard outright, this did mark a shift in the amount of agency scepticism toward claims of economic benefit from mergers, more in line with the views of the federal courts.
By the end of the administration, the tone at the agencies had changed considerably from past antitrust regimes. In April 2016, Obama’s Council of Economic Advisors released a report citing highly concentrated industries as a driver of the country’s increasing wage and wealth inequality. A few months later, Renata Hesse, then the acting head of the DOJ’s Antitrust Division, gave a speech suggesting that antitrust could and should be used as a tool to help promote economic equality and fairness. The speech perhaps foreshadowed the Democratic Party’s 2017 “Better Deal” platform that promoted increased antitrust enforcement in hopes of lessening inequality and rebuilding economic diversity and entrepreneurship.
To be clear, this essay and indeed this book are not intended to defend the Obama-era antitrust agencies from criticism. Some critiques of the administration are likely justified, particularly those attacking the administration’s scant record against would-be or actual monopolists. Under Obama’s watch, the FTC was on the verge of suing Google for abusing its power in online search, only to back away. The DOJ allowed more airlines – United/Continental and US Airways/American – to merge after they promised conditions that some observers believe did little to stop price hikes, poor service and other consumer harm. And in the Apple e-books case, critics say the DOJ missed an opportunity to examine the pricing practices of Amazon, a company that has amassed considerable power in multiple industries over the past decade.
Antitrust enforcement over the past eight years was a reflection of Obama himself – assertive, but cautious and hesitant to stray too radically from the status quo. The men and women who led the antitrust agencies during his administration came from the intimate world of the antitrust bar and remained firmly within its modern bounds: the consumer welfare standard driven by economics and the philosophy that prices, output and market efficiencies trump all other considerations. But there has always been room for aggressive enforcement in those guideposts, and within that framework, the agencies challenged conduct where it deemed appropriate and found success before trial and appeals judges around the country. The story of those successes is captured in this book for the first time.