“Together we discovered that a free market only thrives when there are rules to ensure competition and fair play.”  -- President Barack Obama, January 21, 2013

While much was made of then-candidate Barack Obama’s pledges during the 2008 presidential campaign to “reinvigorate antitrust enforcement” and “step up review of merger activity,” it seems that little ink (independent or otherwise) was spent noting the bare reference to “competition and fair play” in his second inaugural address.  Regardless of whether one views the first four years of the Obama administration’s enforcement of the antitrust laws as living up to the pre-opening hype, there is significant foreshadowing of a potentially eventful second act.

The First Four Years:  Stage-Setting at the DOJ

Although recent cost-cutting moves involved the shuttering of four of the DOJ Antitrust Division’s seven field offices (Atlanta, Cleveland, Dallas and Philadelphia), with only about one-quarter of those enforcers being relocated within the Division, prominent hirings during President Obama’s first term were generally perceived as building a DOJ antitrust team that was litigation-ready – or at least one that had the appearance of being so.  In one of her first acts as Assistant Attorney General for Antitrust, Christine Varney withdrew the Division’s report, issued in the last days of the Bush administration that circumscribed very limited circumstances in which unilateral conduct by dominant companies would be challenged under Section 2 of the Sherman Act.  Two years later, and for the first time since the Clinton administration, the Division brought a Section 2 case – challenging contracting practices engaged in by a Texas monopolist in the health care market.

By the Obama Administration’s third year (and following on the heels of its 2010 revision of the Horizontal Merger Guidelines), the Division had prevailed in a litigated merger challenge in October 2011  involving tax preparation software – its first such success in eight years.  Much more widely publicized was the Division’s August 2011 filing of a lawsuit that never went to trial: its complaint seeking to block AT&T’s proposed acquisition of T-Mobile, a deal the parties abandoned four months afterwards.  Also in 2011, a planned hostile takeover bid that would have combined the two leading competitors for U.S. stock listings was dropped in the face of a planned DOJ lawsuit.  The Division did allow high-profile mergers to proceed in the concert ticketing/promotions and entertainment markets, but only after extracting conditions on the transactions. 

It certainly would be reasonable to think that the Division’s first-term civil activity – challenging certain specific combinations that might be readily understood by the public as potentially anticompetitive, as well as acquiring enhanced courtroom credibility, and even opening the door a crack on single-firm conduct scrutiny – might be the prelude to a busy four years to come.  And enforcement on the criminal side (which was not stagnant during the Bush administration) certainly lost no momentum.  Fines from criminal antitrust offenses reached a record high of $1.35 billion in fiscal year 2012, during which the Division also prevailed in four jury trials and first defended the alternative fine calculation based on twice the gross gain or loss.

In particular, it is worth noting the following DOJ business begun but not finished in President Obama’s first term:

>      The Division is in the midst of the largest price-fixing investigation it has ever undertaken – an expanding look into the auto parts industry that may test the Division’s resources, given the field office closures and loss of approximately 30 lawyers.

>      The Division currently has seven civil cases in active litigation, the largest docket in its history – and a varied one.  Among these cases are high-profile challenges to e-book agency pricing arrangements; the use of most favored nation (MFN) clauses by insurers with market power in connection with hospital pricing; an alleged conspiracy to inflate charge card swipe fees; and “do not hire” agreements among employers in the technology sector.

And the seventh of those civil cases was one filed only 10 days after the curtain went up on the second term:  the Division’s challenge to a proposed combination of two of the three largest sellers of beer in the U.S.

The First Four Years:  Character Development at the Agencies

After a succession of three acting Assistant Attorney Generals following Christine Varney’s departure in August 2011 and a stalled first nomination attempt in 2012, William J. (“Bill”) Baer was confirmed to head the Division in December 2012.  Baer is a highly experienced Washington, D.C. antitrust mainstay who previously served as Director of the FTC’s Bureau of Competition.  During that tenure, he was instrumental in challenging not only high-profile mergers such as the proposed combination of Staples and Office Depot, but also exclusionary conduct such as alleged pressure on manufacturers by a leading toy retailer to refrain from selling popular toys to warehouse clubs.  Baer can be expected to be a significant protagonist in the president’s second act.

Meanwhile, the cast of Commissioners at the FTC (including Chairman Jon Leibowitz, who is in the process of exiting the FTC stage) now consists entirely of President Obama appointments.  While some of the Commissioners arguably bring a body of work marked by consumer protection, privacy and technology issues more so than by antitrust (or, in the case of Commissioners Edith Ramirez and Joshua Wright, no past regulatory roles), there is no reason yet to think – the closing of the Google “search bias” investigation notwithstanding – that this FTC will be any less aggressive in antitrust enforcement.

The Second Act  

Although the coming twists and turns of the story lines cannot be known, some likely settings for potentially vigorous antitrust enforcement in the next four years of the Obama administration are clear.  Broadly speaking, the backdrops include the health care, technology and financial services industries (and, of course, cartel activity wherever it is found).  More specifically, they include  the analysis of healthcare sector mergers (already the subject of substantial FTC interest); scrutiny of competition in the financial services industry (the LIBOR investigation being one such example); the FTC’s opposition to “reverse payment” settlements in drug patent disputes (an issue now before the U.S. Supreme Court); alleged misuse of market power by holders of “standard-essential” patents; us of MFNs and MFN-plus (better price) agreements by buyers with market power (the subject of a joint FTC-DOJ workshop in 2012); and internet distribution issues, among others. 

Hold on to your chair for an interesting four years.  Barring repeal of the Twenty-Second Amendment, there will be no third act for antitrust enforcement by the Obama administration.