Antitrust’s Implementation Blind Side: Challenges to Major Expansion of U.S. Competition Policy

A. The Crisis in Antitrust

At a high level, the modern critique of U.S. antitrust policy argues (with resemblances to criticism voiced in earlier eras ²² ) that antitrust shortcomings—including lax federal enforcement and judicial acceptance of permissive antitrust doctrine since the mid-1970s—have contributed significantly to large increases in concentration and the creation, and entrenchment, of market power in many sectors of the economy. ²³ These developments are said to have raised prices for consumers, diminished innovation and new business development, and increased business margins and profits. ²⁴ Some commentators and politicians go further and emphasize the adverse consequences of these changes on democracy ²⁵ and income or economic inequality, ²⁶ so laying at antitrust’s feet “a myriad of perceived socio-political problems.” ²⁷ In these critiques, weak antitrust enforcement is one key element of a larger failure of the government to promote competition to spur growth, to ensure that all citizens enjoy the fruits of prosperity, and to safeguard the sound functioning of the democratic process.

Modern critiques often compare the current antitrust system to enforcement policy between the late 1930s and the early 1970s. In this era, courts and enforcement agencies developed strict rules governing collusive agreements among competitors, vertical agreements between manufacturers and distributors, and dominant firm behavior. In addition, with the adoption of the Celler-Kefauver Act in 1950, ²⁸ Congress bolstered the Clayton Act’s merger control provision, ²⁹ which the DOJ and the FTC applied aggressively to challenge business combinations. With encouragement from the Supreme Court, the agencies imposed tough restrictions on horizontal and nonhorizontal mergers. ³⁰ Judicial decisions and enforcement policy embraced an egalitarian vision that emphasized the attainment of objectives (such as the preservation of SMEs and democracy) beyond the promotion of economic efficiency. ³¹ Public enforcement and jurisprudence formed what Jonathan Baker has called a political bargain that tolerated the development of large firms in return for the assurance, provided by robust antitrust policy, that such firms would not attain or abuse positions of dominance through improper exclusionary tactics, and that rivals would not use mergers or cartels to achieve and exploit market power. ³² Among other effects, the political bargain helped forestall the adoption of more intrusive forms of regulatory supervision, such as public utility control of pricing and entry. Largely unchallenged by significant foreign economic rivals, and perhaps facilitated by strong antitrust oversight, the U.S. economy enjoyed extraordinary growth from the end of World War II through the 1960s.

The rising concern articulated in the modern critique is that developments since the mid-1970s have depleted the force of antitrust law. As described below, commentators assign responsibility to various factors, including the Supreme Court’s misguided acceptance of the notion that Congress intended the Sherman Act to be an efficiency-oriented “consumer welfare prescription”; ³³ judicial decisions that narrowed antitrust law’s reach; and permissive antitrust enforcement.

B. The Proposed Cures

The critiques touched on in the section above are varied and result from different policy perspectives. Broadly, advocates for change can be group into three categories: (i) do substantially more with the existing antitrust system; (ii) do more with the existing system and enact additional regulatory mechanisms; and (iii) undertake a “root-and-branch” transformation of the U.S. competition policy system.

Although we survey the reform proposals from the broad perspective of each of these groups below, we recognize that this classification scheme is imperfect. For example, all three groups share some policy preferences—such as increasing scrutiny of dominant firm conduct and stiffening merger control. Further, although differences across the groups are detectable with respect to goals, and views differ about whether the consumer welfare standard has betrayed the antitrust laws, the first two groups would continue to emphasize consumer interests in designing policy. In contrast, the “root-and-branch” group would adopt a broader conception of citizen welfare that accounts for the well-being of individuals not only as purchasers of goods and services but also as workers and owners of smaller businesses. Views about the severity of measures needed to correct existing market pathologies also vary across the groups.

C. Implementing a More Ambitious Enforcement Agenda: The Steps So Far

Demands for stronger competition programs are already inspiring adjustments at the DOJ and the FTC. Over the past two years, the FTC has conducted an extensive set of public hearings to consider how it can meet changes in, and the new demands of the economy. ⁷¹ In addition, it has established a Technology Enforcement Division in its Bureau of Competition to lead its enforcement efforts in the high-tech sector. ⁷² Both federal agencies have initiated investigations of the Tech Giants, the agencies are in the process of preparing vertical merger guidelines (for the first time since 1984) ⁷³ and Digital Guidelines, and the DOJ is conducting a review of leading online platforms to identify practices that create or maintain structural impediments to greater competition. ⁷⁴ All of these activities have accompanied the stated commitment of the federal agencies to apply more resources and scrutiny to dominant firms and to mergers involving the acquisition by major incumbents of nascent competitors. ⁷⁵ The federal activity is taking place against the backdrop of visible, significant inquiries by state attorneys general, individually and collectively, into the conduct of digital platforms, including Google and other leading technology firms. It is easy to imagine that the collection of federal and state efforts will lead to the initiation of new cases in 2020. ⁷⁶

A. Judicial Resistance to Extensions of Existing Antitrust Doctrine

As noted in Section II.A, judicial decisions since the mid-1970s have reshaped antitrust law; created more permissive substantive standards governing dominant firm conduct, mergers, and vertical restraints; and raised the bar to antitrust claims in a number of ways. This remolding has been facilitated by the Court’s conclusion that the Sherman Act constitutes “a special kind of common law offense,” ⁸¹ so that Congress “expected the courts to give shape to the statute’s broad mandate by drawing on common-law tradition.” ⁸² This has allowed the statutory commands to be interpreted flexibly and the law to evolve with new circumstances and new wisdom; ⁸³ for example, where there is widespread agreement that the previous position is inappropriate or where the theoretical underpinnings of those decisions have been called into question. ⁸⁴

The proposed solutions will depend, in the short term at least, on the ability of enforcement agencies to navigate the described jurisprudence to find an antitrust infringement and, in some instances, a further rethinking, refinement, and/or development of doctrine, through softening, modification, or even a reversal of current case law. Although such an evolution could, in theory, result, as it did over the last forty years, from a steady stream of antitrust cases, judicial appointments since 2017 have arguably made such a change in direction unlikely. Rather, it seems more probable that successful prosecution of major antitrust, and especially Section 2 Sherman Act monopolization cases, will remain challenging and may even become more difficult. Cases will be litigated before judges who are ordinarily predisposed to accept the current framework, either by personal preference or by a felt compulsion to abide by forty years of jurisprudence that tells them to do so. ⁸⁵ A new president could gradually change the philosophy of the federal courts by appointing judges sympathetic to the aims of the proposed transformation. ⁸⁶ The reorientation of the courts through judicial appointments is, however, likely to take a long time. ⁸⁷

Until then, trial judges and the Court of Appeals will be compelled to abide by the existing jurisprudence and will only be at liberty to develop a more flexible approach in the “gaps” or spaces left by Supreme Court opinions—for example, in relation to mergers and rebates—and through creative interpretations of the law. Such cases are, however, likely to be hard fought. Indeed, Judge Lucy Koh’s finding in Federal Trade Commission v. Qualcomm, Inc. ⁸⁸ that Qualcomm’s licensing practices constituted unlawful monopolization of the market for certain telecommunications chips has provoked hostile attacks, not only from practitioners and academics but also from the DOJ, the U.S. Departments of Defense and Energy, and even one of the FTC’s own members. In a scathing op-ed in the Wall Street Journal, ⁸⁹ Commissioner Christine Wilson attacked Judge Koh’s “startling new creation” of legal obligations that may trigger a new wave of enforcement actions and undermine intellectual property rights. Commissioner Wilson condemned the judge’s “judicial innovations,” and “alchemy,” through reviving and expanding the Supreme Court’s 1985 opinion in Aspen Skiing Co v. Aspen Highlands Skiing Corp ⁹⁰ (which she stresses was described by the Supreme Court in Trinko ⁹¹ as “at or near the outer boundary” of U.S. antitrust law), turning contractual obligations into antitrust claims, and for departing from current federal agency practice, by imposing remedies requiring Qualcomm to negotiate or renegotiate contracts with customers and competitors worldwide. She has thus urged the Ninth Circuit (on appeal), and if necessary the Supreme Court, to assess the wisdom of these sweeping changes and to stay the ruling. ⁹²

It seems likely therefore that, at the same time as bringing cases seeking to develop procedural, evidential, and substantive antitrust standards under the existing regime, additional antidotes to the stringencies of existing jurisprudence will be required, including more extensive, and expansive, use of Section 5 FTC Act to plug the gaps created by the narrowing of the scope of Section 2 Sherman Act; and/or the adoption of legislation that directs courts to apply a wider goals framework.

B. Infirmities of Section 5 of the Federal Trade Commission Act

One possible solution to rigidities that have developed in Sherman Act jurisprudence is for the FTC to rely more heavily on the prosecution, through its own administrative process, of cases based on Section 5 of the FTC Act and its prohibition of “unfair methods of competition.” ⁹³ This section allows the FTC ⁹⁴ to tackle not only anticompetitive practices prohibited by the other antitrust statutes but also conduct constituting incipient violations of those statutes or behavior that exceeds their reach. The latter is possible where the conduct does not infringe the letter of the antitrust laws but contradicts their basic spirit or public policy. ⁹⁵

There is no doubt therefore that Section 5 was designed as an expansion joint in the U.S. antitrust system. It seems unlikely to us, nonetheless, that a majority of FTC’s current members will be minded to use it in this way. Further, even if they were to be, the reality is that such an application may encounter difficulties. Since its creation in 1914, the FTC has never prevailed before the Supreme Court in any case challenging dominant firm misconduct, whether premised on Section 2 of the Sherman Act or purely on Section 5 of the FTC Act. ⁹⁶ The last FTC success in federal court in a case predicated solely on Section 5 occurred in the late 1960s. ⁹⁷

The FTC’s record of limited success with Section 5 has not been for want of trying. In the 1970s, the FTC undertook an ambitious program to make the enforcement of claims predicated on the distinctive reach of Section 5, a foundation to develop “competition policy in its broadest sense.” ⁹⁸ The agency’s Section 5 agenda yielded some successes, ⁹⁹ but also a large number of litigation failures involving cases to address subtle forms of coordination in oligopolies, to impose new obligations on dominant firms, and to dissolve shared monopolies. ¹⁰⁰ The agency’s program elicited powerful legislative backlash from a Congress that once supported FTC’s trailblazing initiatives but turned against it as the Commission’s efforts to obtain dramatic structural remedies unfolded. ¹⁰¹

C. Designing Effective Remedies

Important issues arising for the new enforcement strategy proposed will be what remedies should be sought; how can an order, or decree, be fashioned to ensure that the violation is terminated, that competition on the market is restored, the opportunity for competition is re-established, and that future violations are not committed and deterred; and will a court be likely to impose any such remedy. ¹⁰²

The Sherman Act treats infringements of its key commands as crimes attracting severe sanctions, including fines (corporate and individual) and imprisonment. Although since 1980, the DOJ has used criminal prosecutions only to challenge hard-core horizontal cartels, ¹⁰³ some antitrust reform proponents are calling for the introduction of fines to sanction illegal monopolization, and some commentators have proposed that the DOJ reconsider its policy of not seeking criminal penalties beyond the Section 1 conspiracy context. ¹⁰⁴ For the time being, however, it would appear that existing civil sanctions will remain the tool of choice for DOJ in dealing with antitrust infringements and will be the only set of remedies available to the FTC, which has no mandate to bring criminal cases.

The civil remedial options, which can broadly be grouped into three categories, for the federal agencies, are nonetheless powerful in principle. The first and, perhaps, the most common form of remedy consists of controls on conduct. Conduct-related relief ordinarily takes the form of cease and desist orders that forbid certain behavior or, in a smaller number of cases, compel firms to engage in affirmative acts, such as providing a competitor access to an asset needed to compete.

The second major form of remedy is structural relief in the form of divestitures or the compulsory licensing of intellectual property that enables a firm to enter a previously monopolized market. The boundary between purely conduct-based and structural remedies is not always clear. A compulsory licensing decree has strong structural features (it directly facilitates new entry) and conduct elements (it may require the owner of the patent to provide the licensee know-how and updates of the patented technology).

The third remedy consists of civil monetary relief in the form of disgorgement of ill-gotten gains or the restitution of monopoly overcharges to victims. A number of Supreme Court decisions in monopolization cases in the late 1940s and early 1950s appeared to hold that these forms of recovery are encompassed in the mandate of courts to order equitable remedies to cure antitrust violations. The federal agencies have not used this power expansively, though it would appear to be available to recoup overcharges in Section 2 or other cases. ¹⁰⁵

The cures envisaged by many of the advocates of change call for the bold application of the full portfolio of civil remedies, including unwinding past mergers, divestment of assets, restructuring concentrated markets, limiting or reversing vertical integration or through the imposition of licensing obligations. Such advocates thus wish the DOJ and FTC to use the antitrust laws as an effective and simple mechanism for deconcentrating both monopolistic and oligopolistic markets, rapidly introducing new competition into a market; and reversing what they consider to be severe structural problems that have been allowed to develop on the market. ¹⁰⁶

Structural remedies, in particular, have always been a real and important part of the antitrust remedial arsenal, ¹⁰⁷ not only in merger cases where a violation of the antitrust rules may consist of an unlawful acquisition of shares or stock ¹⁰⁸ but also in Sherman Act cases. ¹⁰⁹ In the 1960s the FTC also sought, using its powers under Section 5 FTC Act to deconcentrate the petrol and breakfast cereal markets ¹¹⁰ and in 1969 the Neal Report, ¹¹¹ commissioned by President Lyndon Johnson, proposed the adoption of laws which would allow oligopolistic industries to be deconcentrated and the condemnation of mergers on markets that were already concentrated. ¹¹²

Modern antitrust has, however, had less appetite for the use of antitrust to break up companies. Although the District Court in United States v Microsoft Corp ¹¹³ ordered, at the request of the DOJ, that Microsoft be broken into two parts, the Court of Appeals, despite affirming the violation of section 2, reversed and remanded the finding that Microsoft should be split into two. Setting out a high bar for structural relief, the Court stressed that the lower court had not (1) held a remedies-specific hearing ¹¹⁴ or (2) provided adequate reasons for the decreed remedies. ¹¹⁵

A number of factors seem responsible for the trend away from structural remedies. First, the change in antitrust thinking that has evolved since the early 1970s, from a belief that antitrust intervention and structural remedies can improve performance ¹¹⁶ to the current more laissez-faire one. ¹¹⁷ Second, concerns about the effectiveness of previous attempts to deconcentrate industries, ¹¹⁸ especially given the length of time that antitrust proceedings take. ¹¹⁹ Third, the difficulty involved in constructing and overseeing a structural remedy effectively. Although in cases involving a merger or acquisition it may be relatively easy to structure such a remedy through disentangling assets that were once owned separately, ¹²⁰ outside of this situation, the question of how and what to divest might be much more speculative, seem much more risky and may in fact be complex and difficult to administer (involving significant restructuring, separation of physical facilities, and allocation of staff from integrated teams). ¹²¹ These types of concern make it a challenge to persuade a court that a structural remedy is warranted and will be successful in achieving its objective. ¹²²

In the discussion above, we have been addressing the types of remedies that are imposed at the conclusion of a lawsuit. A problem in highly dynamic markets, however, is that the lag between the initiation of a case and a final order on relief may be so great that market circumstances have changed dramatically or the victim of allegedly improper exclusion may have left the market or otherwise lost its opportunity to expand and contest the position of the incumbent dominant firm. In this context, the antitrust cure arrives far too late to protect competition. The relatively slow pace of antitrust investigations and litigation (with appeals that follow an initial decision) has led some observers to doubt the efficacy of antitrust cases as effective policy-making tools in dynamic commercial sectors.

There are at least five possible responses to concerns about the speed of antitrust litigation, particularly matters involving dominant firms. First, agencies could experiment with ways to accelerate investigations, and courts could adopt innovative techniques to shorten the length of trials. In the United States, we perceive that greater integration of effort among the public agencies would permit the more rapid completion of investigations (e.g., by pooling knowledge and focusing more resources on the collection and evaluation of evidence). Courts could use methods tested with success in the DOJ prosecution of Microsoft in the late 1990s to truncate the presentation of evidence. These types of measures have some promise to bring matters to a close more quickly.

Second, the initiation of a lawsuit could be recognized as being, in some important ways, its own remedy; the prosecution of a case by itself causes the firm to change its behavior in ways that give rivals more breathing room to grow. Moreover, the visible presence of the enforcement authority, manifest by its investigations and lawsuits, causes other firms to reconsider tactics that arguably violate the law. Seen in this light, the entry of a final order that specifies remedies may not be necessary for all instances to have the desired chastening effect.

A third response is to experiment more broadly with interim relief that seeks to suspend certain types of exclusionary conduct pending the completion of the full trial. ¹²³ Effective interim measures would require the enforcement agency to develop a base of knowledge about the sector that enables it to accurately identify the practices to be enjoined on an interim basis and to give judges a confident basis for intervening in this manner.

A fourth approach would be that the remedies achieved in protracted antitrust litigation may not be so imperfect or untimely as they might appear to be. There have been a number of instances in which the remedy achieved in a monopolization case was rebuked as desperately insufficient when ordered but turned out to have positive competitive consequences. ¹²⁴ This is a humbling and difficult aspect of policy making. It may not be easy for an agency to persuade its political overseers—or other external audiences—that the chief benefits of its intervention will emerge in, say, two or three decades. Yet the positive results may take a long time to become apparent.

A fifth technique would be to rely more heavily on ex-ante regulation in the form of trade regulation rules that forbid certain practices. A competition authority—most likely the FTC—would use its rulemaking powers to proscribe specific types of conduct (e.g., self-preferencing by dominant information services platforms).

In this article, we do not purport to solve the problems of the remedial design set out above. There is, however, a fairly clear conclusion about how enforcement agencies should go about thinking of remedies. As we note below, there is considerable room for public agencies to design remedies more effectively by systematically examining past experience and collaborating with external researchers to identify superior techniques. In this regard, the FTC’s collection of policy tools would appear to make it the ideal focal point for the development of more effective approaches to remedial design.

D. Political Backlash

As we have already indicated, the government’s prosecution of high stakes antitrust cases often inspires defendants to lobby elected officials to rein in the enforcement agency. Targets of cases that seek to impose powerful remedies have several possible paths to encourage politicians to blunt enforcement measures. One path is to seek intervention from the President. The Assistant Attorney General of the Antitrust Division serves at the will of the President, making DOJ policy dependent on the President’s continuing support. The White House ordinarily does not guide the Antitrust Division’s selection of cases, but there have been instances in which the President pressured the Division to alter course on behalf of a defendant, and did so successfully. ¹²⁵

The second path is to lobby the Congress. The FTC is called an “independent” regulatory agency, but Congress interprets independence in an idiosyncratic way. ¹²⁶ Legislators believe independence means insulation from the executive branch, not from the legislature. The FTC is dependent on a good relationship with Congress, which controls its budget and can react with hostility, and forcefully, when it disapproves of FTC litigation—particularly where it adversely affects the interests of members’ constituents. Controversial and contested cases may consequently be derailed or muted if political support for them wanes and politicians become more sympathetic to commercial interests. The FTC’s sometimes tempestuous relationship with Congress demonstrates that political coalitions favoring bold enforcement can be volatile, unpredictable, and evanescent. ¹²⁷ If the FTC does not manage its relationship with Congress carefully, its litigation opponents may mobilize legislative intervention that causes ambitious enforcement measures to the founder.

Imagine, for a moment, that the DOJ and the FTC launch monopolization cases against each of the GAFA giants. Among other grounds, these cases might be premised on the theory that the firms used mergers to accumulate and protect positions of dominance. The GAFA firms have received unfavorable scrutiny from legislators from both political parties over the past few years, but the current wave of political opprobrium is unlikely to discourage the firms from bringing their formidable lobbying resources to bear upon the Congress. It would be hazardous for the enforcement agencies to assume that a sustained, well-financed lobbying campaign will be ineffective. At a minimum, the agencies would need to consider how many battles they can fight at one time, and how to foster a countervailing coalition of business interests to oppose the defendants.

E. Opposition to Legislative Reform

Although statutory reform might at first sight appear to be a direct, effective solution to some of the impediments (such as entrenched judicial resistance to intervention), there are good reasons to expect that powerful business interests will also stoutly oppose any proposals for legislation to expand the reach of the antitrust laws or to create a new digital regulator. ¹²⁸ One can envisage the formidable financial and political resources of the affected firms will amass to stymie far-reaching legislative reforms. Legislative steps that threaten the structure, operations, and profitability of the Tech Giants and other leading firms are fraught with political risk. These risks are surmountable, but only by means of a clever strategy that anticipates and blunts political pressure. One element of such a strategy is to mobilize countervailing support from consumer and business interests to sustain an enabling political environment to enact ambitious new laws.

Even if successful, “[l]egislative relief from existing jurisprudential structures might take years to accomplish”; ¹²⁹ acts taken under new legislation—even with the establishment of presumptions that improve the litigation position of government plaintiffs—may still be relatively complex and difficult to prosecute. Rulemaking is an alternative to litigation, but it is no easy way out of the problem. On the contrary, promulgation and defense, in litigation, of a major trade regulation rule is liable to take as long as the prosecution of a Section 2 case. It can also be anticipated that a judiciary populated with many regulation skeptics will subject new rules or related measures to demanding scrutiny.

A. Finding a Path

In Section III, we described the obstacles that are likely to stand in the way of accomplishing a significant reconstruction of U.S. antitrust doctrine and enforcement policy. To some degree, the severity of the obstacles depends on how ambitious the chosen reform program turns out to be. The aims and means of the “do more with what you have” group are challenging enough, but they pale in comparison to the difficulties presented by the proposals of the root-and-branch transformation advocates. The latter group would place greater demands on the implementing institutions through, for example, initiating a larger number of major cases and seeking more powerful structural remedies, and by insisting that the entire program be undertaken quickly and decisively rather than at a more moderate tempo.

Although successful accomplishment and delivery of reforms, more moderate and more ambitious, alike, will require awareness and a realistic assessment of likely implementation obstacles and a conscious effort to develop a strategy to surmount them (it has been seen that history provides sobering examples of failures where similar, significant implementation barriers have not been considered or have been discounted ¹³⁰ ), such barriers are not a formula for timidity or a reason not to undertake change. Rather, understanding them helps guide the design of a successful program. To return to our U.S. space program analogy, ¹³¹ an indispensable foundation for the ultimate success of the Apollo program was the commitment of National Aeronautics and Space Administration and its contractors to understand the full magnitude of the task before them and to anticipate all hazards that would confront human spaceflight to and from the Moon’s surface. ¹³² The probing analysis of risks inspired successful efforts to find solutions. Operating in an unforgiving environment where even small errors could be catastrophic, humans landed on the Moon and returned safely to Earth.

This section consequently discusses approaches for navigating the reform implementation challenges. Our most important caution is that the reforms—more dramatic and less sweeping—will require substantial upgrades in the capabilities and performance of the institutions responsible for implementation. The more ambitious the reform, the more urgent is the need to enhance capabilities. Further, the prospects of success for the public agencies (federal and state) are likely to improve if they can formulate a common strategy to overcome identified obstacles. Doing so will demand planned, joined-up, and consensual enforcement by the public enforcement agencies and a forthright self-assessment of existing operations and capabilities—to repair institutional flaws, to temper interagency disagreements, and to acquire the human capital needed to run a new, large collection of difficult antitrust suits.

B. Augmenting the Human Capital of the Enforcement Agencies

Measures to expand federal antitrust intervention dramatically—through the prosecution of lawsuits or the promulgation of trade regulation rules—will face arduous opposition from the affected businesses. Assuming that litigation will provide the main method in the coming few years to attack positions of single-firm or collective dominance, the targets of big antitrust cases will marshal the best talent that private law firms, economic consultancies, and academic bodies can offer to oppose the government in court. The defense will benefit from doctrinal principles that generally are sympathetic to dominant firms (again, we assume that legislation to change the doctrinal status quo will not be immediately forthcoming). Beyond a certain point, the addition of new, high stakes cases to the litigation portfolio of public antitrust agencies will create a serious gap between the teams assembled for the prosecution and defense, respectively. Although therefore the public agencies can match the private sector punch for the punch when prosecuting several major de-monopolization cases, when the volume of such cases rises from several to many, the government agencies may have to rely on personnel with considerably less experience to develop and prosecute difficult antitrust cases, seeking powerful remedies upon global giants.

An enhanced litigation program will therefore go only as far as the talent of the agencies will carry it. We propose three steps to build and retain the human capital—attorneys, economists, technologists, and administrative managers ¹³³ —to undertake a more ambitious litigation program. The first is to use antitrust as a prototype for a program to raise civil service salaries. The second two steps consist of cautions about the dangers of (a) denigrating the skills and accomplishments of existing agency personnel and (b) attempting to shut the revolving door through which professionals move between the public and private sectors. We discuss all three of these steps below.

C. Common Public Enforcement Strategy

The U.S. antitrust system is famous for its decentralization of the power to prosecute, giving many entities—public agencies (at both the federal and state levels), consumers, and businesses—competence to enforce the federal antitrust laws. The federal enforcement regime also coexists with state antitrust laws and with sectoral regulation, at the national and state levels, that includes a competition policy mandate.

The extraordinary decentralization and multiplicity of enforcement mechanisms supply valuable possibilities for experimentation and provide safeguards in case any single enforcement agent is disabled (e.g., due to capture, resource austerity, or corruption). ¹⁴⁶ Among public agencies, there is also the possibility that federal and state government institutions, while preserving the benefits of experimentation and redundancy, could improve performance through cooperation that allows them to perform tasks collectively that each could accomplish with great difficulty, or not at all, if they act in isolation. For models of successful interagency cooperation, one might study the successful policy integration that has taken place through the work of the United Kingdom Competition Network and the European Competition Network. In both examples, one can see the mix of organizational structures and personal leadership that enabled agencies collectively to accomplish policy results that would have been unattainable through the work of single agencies operating in isolation.

We doubt the ambitious litigation agenda demanded in the modern reform proposals is attainable if the public agencies adhere to traditional practices that overlook the expansion of outcome and increase in quality that superior interagency cooperation could generate. A suggested program of fuller integration would have the following elements.

D. Enabling the FTC to Perform Its Intended Function

A number of the proposals for expansive reform would give the FTC a broader and fuller role in formulating competition policy. Several features of its original design make the Commission an attractive vehicle for carrying out a program of basic reforms. It has been seen that the FTC Act gives the Commission a broad, scalable mandate (Section 5’s prohibition on “unfair methods of competition”) to prohibit behavior not reached by existing interpretations of the Sherman and Clayton Acts. The agency also has expansive authority to collect information from firms through compulsory processes and to publish reports. ¹⁵² The statute also intended that the Commission serve as a special resource to the DOJ and to the courts in formulating remedies in antitrust cases. ¹⁵³

Under the program of greater interagency cooperation we have proposed above, the FTC would use Section 5 of the FTC to seek to extend the boundaries of existing doctrine and to use its information gathering and reporting powers to set the empirical basis for proposed extensions. The starting point for this effort would be to examine the agency’s past (and rare) Section 5 litigation successes for lessons about how to gain judicial acceptance for an extension of antitrust doctrine. ¹⁵⁴ The Commission also would serve, in effect, as the main public agency resource on remedies. The agency would use its analytical resources and experience in evaluating the effectiveness of antitrust remedies to guide the formulation of remedies in the Sherman Act and Clayton Act cases, in addition to Section 5 cases. The agency would employ the large body of experience that the U.S. system and other systems have collected in the use of structural and behavioral remedies to suggest solutions in specific cases.

We suggest three legislative changes to enable the Commission to fulfill the role we have described above. The first is to relax restrictions that the Government in the Sunshine Act ¹⁵⁵ imposes on the ability of commissioners to deliberate together privately to discuss strategy and tactics. Among other consequences, the Sunshine Act severely limits the ability of a quorum of commissioners to discuss and debate matters of agency policy except in meetings open to the public. ¹⁵⁶ The policy planning functions that we see as essential to an expanded role cannot be performed at a high level without this reform. ¹⁵⁷

A second essential step is to eliminate statutory exemptions that deny the FTC jurisdiction over common carriers, not for profit institutions, and banks. A third reform would confer powers on the FTC to conduct market studies, and obtain information necessary to allow it to carry out its functions, and market investigations in the same way as the UK’s Competition and Markets Authority (CMA). ¹⁵⁸ For example, Part 4 of the Enterprise Act 2002 ¹⁵⁹ enables the CMA to investigate markets where it appears that the structure of the market or the conduct of suppliers or customers in the market is harming competition and, where problems are identified, to propose steps to mitigate, remedy, prevent, or overcome them. This would enable to FTC to study sectoral or economy-wide phenomena and to impose remedies regardless of whether the conditions or practices in question violate the antitrust laws.