Antitrust Enforcement: How Will the 2008 Election Impact You and Your Business?

Each presidential election provides the potential for changes in federal antitrust policy. The Obama administration will influence antitrust enforcement in a number of ways, primarily through staffing and enforcement decisions at the Antitrust Division of the Department of Justice ("DOJ") and appointments to the Federal Trade Commission ("FTC").

Although it is difficult to predict to what degree the Obama campaign rhetoric will translate into actual policy, it is widely expected that the Obama administration will adopt a more aggressive or "reinvigorated" enforcement of the U.S. antitrust laws.  Indeed, some analysts expect the shift in enforcement to be "dramatic" and "striking."  With a strong majority in Congress, the Democrats may also seek (down the road) to alter the antitrust legislative landscape by removing certain legislative exemptions to the antitrust laws. 

As an initial matter, however, it must be observed that the issues facing the Obama administration will be complex in light of the recent and severe crises in the financial markets and the unfolding U.S. economic recession.  Thus, antitrust policy likely will not be at the forefront of the Obama agenda when he assumes power.

Ability of President-Elect Obama to Set Antitrust Policy

The new President's ability to change antitrust policy is through his power to make appointments of senior enforcement officials at both the DOJ and FTC.  While the DOJ handles the criminal enforcement of the antitrust laws, both the FTC and DOJ share civil enforcement of the antitrust laws, including review and challenges of mergers.

FTC Commissioners are appointed by the President with the advice and consent of the Senate.  No more than three Commissioners may share the same political party affiliation.  The timing of vacancies on the current five-member Commission means that President Obama will be able to appoint two commissioners of his choosing and gain a majority position within the next year.  There currently is one vacancy on the Commission that will not be filled until after Obama takes office in January 2009.  The four current Commissioners include one Democrat, two Republicans, and one Independent. The next vacancy, scheduled to arise in September 2009, is the seat of the current Independent Commissioner.  In other words, the Democrats will have a majority of the FTC Commissioners by the fall of 2009.

President Obama, with the advice and consent of the Senate,  will appoint the new Assistant Attorney General in charge of the Antitrust Division at the DOJ-the key enforcer of the antitrust laws.  Although not necessarily political appointees, the deputy assistant attorneys general (who manage various segments of antitrust enforcement, e.g., international, criminal, regulatory, and civil) will take their direction from the newly appointed Division head.  Potential appointments that have been discussed within the antitrust bar are lawyers currently in private practice in Washington D.C.  For example, William Kolasky, a current advisor to Senator Obama on antitrust issues who has served in the Division, is viewed as a potential appointment to head the Antitrust Division.

Senator Obama's Campaign Positions

President-elect Obama has made the national economy the central issue of his "change" platform and he has promised to aggressively increase antitrust oversight.  Senator Obama has made the following comments on antitrust policy:
                       

"Regrettably, the current administration has what may be the weakest record of antitrust enforcement of any administration in the last half century."

"I will assure that we will have an Antitrust Division that is serious about pursuing cases.... We're going to have an Antitrust Division in the Justice Department that actually believes in antitrust law."

Senator Obama has promised to "reinvigorate" antitrust enforcement, stating that his administration would "step up review of merger activity and take effective action to stop or restructure those mergers that are likely to harm consumer welfare, while quickly clearing those that do not."

Senator Obama has generally pointed to the health insurance, drug, energy, and media sectors of the economy as possible areas of antitrust focus. Obama has specifically objected to the proposed alliance between freight carriers UPS and DHL.  Senator Obama has also promised to focus antitrust scrutiny on the insurance and pharmaceutical industries with the aim of reducing health care costs.  Senator Obama introduced a bill to repeal the antitrust exception for medical malpractice insurance and he has stated that "[a]n Obama administration will ensure that the law effectively prevents anticompetitive agreements that artificially retard the entry of generic pharmaceuticals onto the market." 

Senator Obama has also lamented the much reduced number of merger challenges and the lack of challenges to monopolies under the Bush administration versus the Clinton administration.  Thus, we expect that under the Obama administration there will be a heightened review of mergers (with more challenges and consent order remedies) and efforts to challenge dominant companies that are felt to be abusing their dominant market positions-all with an eye on consumer welfare.

Tempering this push for stronger enforcement of the antitrust laws will be concerns about the economy and the weakened state of particular industry sectors and companies. In addition, the federal judiciary, rendered more conservative under President Bush, will present a challenge to any dramatic "activist" changes urged by the Obama administration.  The Roberts' Supreme Court, for example, has been very active in reviewing antitrust cases in recent years and has consistently been ruling for defendants by imposing higher pleading requirements and changing the substantive common law to narrow liability.

It is worth noting that Obama's Vice President, Joe Biden, will likely be a factor in crafting antitrust policy in the Obama administration.  Senator Biden has served on the Senate's antitrust subcommittee, and has considerable background on competition issues.  Coupled with the stronger Democratic control of Congress, we would expect to see increased antitrust legislative activity under the Obama administration.  A potential target for such legislative activity would include the statutory antitrust exemptions enjoyed in insurance, agriculture and elsewhere.

The Impact of the Financial Crisis

It is impossible to predict the range of antitrust issues that may arise from the current global financial and economic crisis and the governmental responses to that crisis. It is safe to say, however, that the Obama administration will be faced with novel and significant antitrust issues in the financial services sector at least.  For example, emergency market consolidation in the financial services industry has lead to horizontal and vertical integration of some of the nation's largest financial institutions that would likely have raised antitrust issues but for the crises.  This consolidation may change how the FTC and DOJ define relevant markets relative to the banking and financial services industries, will impact future merger analyses for deals within these industries, and may involve increased scrutiny of single-firm conduct in the financial sector.

Conclusion

In sum, Obama's victory will lead to an FTC with a Democratic majority and a Department of Justice with a much more aggressive enforcement posture. The Obama administration clearly will be more aggressive with respect to merger review and antitrust enforcement activities.

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