INTERESTING RESOURCES

By Bert Foer

With the Obama Administration now at least partially in place, it is becoming possible to say some things – but not very specific because there have as yet been no cases – about how the new regime will affect antitrust. During the campaign, candidate Obama released a statement to the American Antitrust Institute (http://www.antitrustinstitute.org/Archives/obama2.ashx) which was highly critical of the Bush Administration's lack of activity outside of the cartel area. The statement gives the impression that President Obama is personally on top of the antitrust laws and of an interventionist persuasion. Whether this is true or a result of good staff work is yet to be established. Rarely in US history has a President involved himself in antitrust issues.

As a law professor at the generally conservative University of Chicago Law School, Obama was primarily concerned with civil rights law. He did not teach antitrust. How deeply he inhaled the Chicago School laissez faire oxygen is uncertain, but at least some must have entered his lungs. His close relationship with Professor Cass Sunstein may be an important sign of the future. Sunstein was one of the more liberal law faculty members at Chicago. His book, Nudge (co-authored with economist Richard Thaler), is considered must-reading because Sunstein has been appointed to a key position in the Administration with respect to all forms of regulatory intervention. Nudge applies behavioural economics to the policy arena and urges an approach that Sunstein and Thaler call "libertarian paternalism", which recommends using an "architecture of choice" that recognises how people actually (not theoretically) behave and leads them to voluntarily make the choices that best serve the public interest. Recognition of behavioural economics takes one quite a distance from the orthodox Chicago School, where the rational economic man prevails.

President Obama has now made three relevant appointments apart from Sunstein. First, the new Attorney General is Eric Holder. Holder has no known record on antitrust, yet history teaches that aggressive action by an Assistant Attorney General for Antitrust needs the support of the Attorney General.

If Holder is a question mark for antitrust, Obama's selection of Christine Varney for the key position of Assistant Attorney General for Antitrust, is not. She has already appointed one deputy, Carl Shapiro, a well-respected and relatively liberal economist from the University of California, to head the economics staff. Other newly appointed deputies are equally well qualified to promote a turn-around in the Department of Justice’s (DOJ) antitrust programme. Christine Varney herself is a former Commissioner of the Federal Trade Commission (FTC) and partner at the international law firm of Hogan & Hartson. She has been most active in representing high technology companies. Her presentation to an American Antitrust Institute conference in 2008 (http:/www.antitrustinstitute.org/Archives/Varney.ashx) suggests that she will be an activist antitrust chief, especially – compared to her Republican predecessors – in the areas of monopoly covered by Section 2 of the Sherman Act. Indeed, in her first speech, she formally and forcefully repudiated a controversial paper that her predecessor Tom Barnett had issued which was so restrictive of the government's anti-monopoly power that it was rejected by the FTC.

At the FTC, the President nominated a sitting Commissioner, Jon Leibowitz, to be Chairman. Leibowitz, like Varney, has a strongly political (Democratic, of course) background, having served on the staff of the current Chairman of the Senate Subcommittee on Courts and Competition and as antitrust counsel to the motion picture industry. His votes and speeches as Commissioner suggest he will be an activist Chairman, intent on stretching the scope of Section 5 of the FTC Act (unfair methods of competition). There is one open slot at the five-person FTC and another position will open in the fall. The President appears to be in no hurry to fill the open slot because Leibowitz has a likely majority now and the FTC – unlike the Antitrust Division – does not seem to require substantial reformation.

However, activist the new Administration will turn out to be, it will have to deal with one key fact-on-the-ground: the US courts, as a generality, are now quite conservative and hostile to antitrust enforcement, a legacy of the Bush years. They will not suddenly become more favourably disposed toward antitrust, although it is likely that the DOJ's advocacy positions before the courts will be more favourable.

Finally, there is the role of Congress to consider. With anger at corporate America running high and hopes for the courts reversing themselves running low, it is conceivable that this could be a period in which Congress takes positive action on at least a few antitrust issues, such as outlawing reverse payments in the pharmaceutical industry, eliminating an antitrust exemption for railroads, and re-imposing a per se test on resale price maintenance. These are not central issues. The key issues in today's economic environment are to assure that consumers do not suffer from the 3 C's of consumer catastrophe: consolidation, cartelisation, and constraints on trade.

A huge systemic issue is what to do about companies that are deemed "too big to fail". As Congress and the White House re-invent the relationship between the state and private enterprise, we must assure that competition policy concerns will be well-represented.

The writer is President, American Antitrust Institute.