The Clinton DOJ attacked international cartels. The Obama DOJ prioritized merger enforcement. The Biden DOJ needs to focus on America’s monopoly problem.
Antitrust is like a three-legged stool, made up of criminal offenses such as price fixing, merger control, and monopolization.
Looking back at the DOJ Antitrust Division during the Clinton and Obama years, one can see that the Division’s priorities have changed. These changes were driven by what DOJ leadership saw as the most pressing antitrust issues of the day: the Antitrust Division vastly increased its international criminal enforcement during the Clinton years and made merger enforcement a priority during the Obama years.
The most pressing antitrust problem today is not merger control or criminal enforcement, although there is room for improvement on both fronts. The problem the Biden administration needs to confront is the third leg of the antitrust stool: monopolization. We have a monopoly problem in the US. Data compiled by the Open Markets Institute across a range of industries graphically show how fewer and fewer firms control more and more industries. This is true from airlines to washers and dryers, from diapers to coffins.
“The problem the Biden administration needs to confront is the third leg of the antitrust stool: monopolization.”
Although there are those who continue to argue that industry concentration does not matter, the evidence suggests otherwise. In an empirical analysis, John Kwoka found that the number of significant competitors turns out to be a reliable indicator of competitive effects. Joseph Stiglitz has written that the increase in market power across the economy “helps explain simultaneously the slowdown in productivity growth, the sluggishness of the economy, and the growth of inequality—in short, the poor performance of the American economy in so many dimensions.”
This is a problem that the Council of Economic Advisers identified at the very end of the Obama administration and that the Biden administration urgently needs to address. The new administration’s selection of who will lead the Antitrust Division will have a lot to do with how well the monopolization problem is addressed—or indeed, whether it is effectively addressed at all.
The Clinton DOJ: International Cartels
The Clinton years’ most significant challenge—and the most significant success—was in international cartel enforcement. In 1993, the Antitrust Division announced a new Corporate Leniency Policy under which a corporation could avoid criminal prosecution for antitrust violations by confessing its role in the illegal activities, fully cooperating with the Division, and meeting other specified conditions.
In a 1995 speech, AAG Anne Bingaman stressed the priority of the Division’s criminal program: “Criminal enforcement against the most serious antitrust offenses is our core mission. People who rig bids, allocate markets or fix prices are taking money out of the pockets of American consumers and out of the registers of American businesses just as surely as if they broke in under cover of darkness.” Later in the same speech, she identified “one of the greatest challenges facing the Division in carrying out its criminal enforcement mission in today’s global economy—effectively prosecuting international cartels and price-fixing conspiracies.”
The Division’s Corporate Leniency Policy proved phenomenally successful in the detection and prosecution of international cartels. The result was an almost complete change in criminal antitrust enforcement, coupled with much closer cooperation with foreign antitrust agencies.
In a 1999 speech, Joel Klein noted that of the nearly $500 million in fines secured in 1997 and 1998, well over 90 percent were in connection with the prosecution of international cartel activity. “To put those numbers in perspective, the fines in those two years were roughly equivalent to the total fines imposed in all of the Antitrust Division’s criminal prosecutions, domestic and international, over the previous 20 years.”
In the speech, Klein mentioned the recent success of the Lycine, Citric Acid, Vitamins, and Graphite Electrodes prosecutions in particular. And in a speech at the very end of the Clinton years, Acting AAG Doug Melamed pointed to the nearly $2 billion in criminal fines secured during the prior four years and noted that “globalization has radically changed the focus of our work, from almost purely domestic less than 10 years ago to a heavy international component today.” The Microsoft case notwithstanding, international criminal enforcement was the major achievement of the Clinton years.
The Obama DOJ: Merger Enforcement
In the Obama years, one can see a reinvigoration of merger enforcement at DOJ relative to the George W. Bush years. Mergers became a priority.
The Horizontal Merger Guidelines were revised in 2010 to become more in tune both with what Congress intended (an incipiency standard for merger enforcement) and also more in line with current economic thinking about competitive effects.
Not only were more merger cases brought during the Obama years than the Bush administration, but the government won a significant percentage of the cases it brought. Part of this was likely due to better case selection and development, but that in turn was made possible by the fact that all of the heads of the Antitrust Division who served during the Obama years had years of public sector and private sector merger experience —from Christine Varney at the beginning to Renata Hesse at the end. Having sat on both sides of the table, they knew a good merger case when they saw one.
The results were, relatively speaking, impressive. In a 2015 speech, former DOJ Antitrust Division head Bill Baer took a victory lap when summarizing the state of merger enforcement at DOJ. He said that “the Antitrust Division has embraced its role as the cop on the merger beat. The numbers bear that out. In the seven-plus years of the Obama Administration, we successfully challenged or secured the abandonment of 39 mergers—a dramatic increase from the 16 successful challenges or abandonments during the eight years of the previous administration.” Although 39 mergers does not sound like a lot, it was more than twice the number stopped or abandoned during the Bush years. Particularly noteworthy were the abandonment of the high profile AT&T/T-Mobile and Comcast/Time Warner Cable deals.
The Challenge for the Biden Administration: Monopolization
Notwithstanding Bill Baer’s victory lap, things were not so rosy. Near the end of the Obama administration, the Council of Economic Advisors put out an issue brief detailing a decline in competition in numerous sectors within the American economy. Around the same time, the White House issued a statement with a sobering message:
“Across our economy, too many consumers are dealing with inferior or overpriced products, too many workers aren’t getting the wage increases they deserve, too many entrepreneurs and small businesses are getting squeezed out unfairly by their bigger competitors, and overall we are not seeing the level of innovative growth we would like to see. And a big piece of why that happens is anti-competitive behavior—companies stacking the deck against their competitors and their workers. We’ve got to fix that, by doing everything we can to make sure that consumers, middle-class and working families, and entrepreneurs are getting a fair deal.”
Lest we forget, large tech companies took advantage of lawless space during the Obama years. This was the time when the FTC resolved its Google investigation with only “voluntary commitments” and when Facebook bought Instagram and WhatsApp without a peep from the antitrust agencies.
The Council of Economic Advisors in the Trump administration hotly disputed the claim that there is a major competition problem in the US economy. Nevertheless, during the last administration, both antitrust agencies began to look at the impact of mergers on workers, not only consumers. And both agencies developed and brought significant monopolization cases. So even if the administration rejected the notion of systemic economic problems, there was some not insignificant forward motion. Meanwhile, the evidence has continued to mount that the US economy is not where it ought to be, and there is a lot more work to be done.
All of this suggests that the principal focus of the new administration’s antitrust enforcement should be on monopolization. This is not to say that criminal antitrust should be ignored, or that merger enforcement is unimportant. Indeed, the bill that Senator Klobuchar and others recently introduced goes a long way toward fixing what appears to be a broken merger system. It does this through burden-shifting, restoring coordinated effects to the center of merger enforcement, and institutionalizing merger retrospectives. But merger enforcement is largely forward-looking, and is not the right tool to undo the cumulative effects of years of mergers that have already taken place.
A lesson from the past two Democratic administrations is that leadership can make a real difference in priorities and outcomes at DOJ. This is particularly true when DOJ goes up against some of the most powerful companies on the planet, but it is also true in less newsworthy segments of the economy. We’ve got a monopoly problem, and the time to fix it is now.
