Well this is fortunate timing: one day after we had a post exploring the antitrust challenges around Microsoft’s proposed acquisition of Activision Blizzard, the Justice Department’s top antitrust official gave a speech warning that his division will be more likely to block proposed mergers and less likely to accept settlements that simply restrict post-merger practices.
The speech came from Jonathan Kanter, chief of the Antitrust Division, who made his remarks while speaking to the New York Bar Association on Monday afternoon. This was a major statement about antitrust policy, and anyone who has antitrust matters in your purview should give it a close read.
Kanter argued that antitrust policy in the United States has not kept up with economic reality, which is that market consolidation has happened across a host of industries. That consolidation, in turn, has led to fewer choices and higher prices for consumers, plus stagnant wages for workers.
“Antitrust law enforcement has not succeeded in keeping pace with these massive changes in our economy,” Kanter said. “In my view, the only way to reinvigorate antitrust enforcement is to adapt our approach to reflect the obvious economic and transformational technological changes that now define our economy. That is why we and our law enforcement partners are committed to using every tool available to promote competition. ”
Kanter faulted courts for applying outdated standards for antitrust review to proposed mergers. Too often, he said, courts only move against proposed mergers if those deals would result in higher prices for consumers. But in the modern world…
[T]here are an increasing number of markets where competition is not reflected merely, or primarily, in consumer prices or output. Antitrust doctrine must, therefore, account for the many ways that the process of competition is important. Competition brings benefits that include: improved quality; greater choice of products and services; incentives to innovate; the empowerment of workers to negotiate better working conditions or to switch jobs; and the flow of information and news, which is vital to the health of a functioning democracy… [Antitrust] doctrine that is responsive to market realities, not outdated models, is a necessary step to build a competitive economy.
That is quite the call for change. It also provides a nifty intellectual setup for Kanter’s other point: what the appropriate remedy should be for mergers that might stifle competition. Because if the benefits of a competitive market are so many and so important, then we shouldn’t be afraid to use powerful remedies to preserve that many-splendored market, right?
Or, as Kanter said (emphasis mine):
I am concerned that merger remedies short of blocking a transaction too often miss the mark. Complex settlements, whether behavioral or structural, suffer from significant deficiencies. Therefore, in my view, when the division concludes that a merger is likely to lessen competition, in most situations we should seek a simple injunction to block the transaction. It is the surest way to preserve competition… We must give full weight to the benefits of preserving competition that already exists in a market, rather than predicting whether a divestiture will actually serve to keep a market competitive. That will often mean that we cannot accept anything less than an injunction blocking the merger — full stop.
Finally, almost as an afterthought, Kanter gave the obligatory “we are working with our partner agencies” pep talk about supporting more competition generally. The Biden Administration announced a big push in favor of more market competition last year, which includes everything from cracking down on non-competition clauses in employment agreements, to more data sharing among federal agencies for better enforcement.
Honestly, this policy shift is more relevant for corporate legal departments and senior executives plotting growth strategies than it is for ethics and compliance professionals. Still, it’s a shift profound enough that even compliance officers should be aware of it, simply so you understand the regulatory pressures buffeting your enterprise.
From a purely self-interested point of view, compliance officers might even welcome a shift like this. Fewer mergers approved means less chance that you’re caught up in a consolidation where your job gets eliminated. (More than a few compliance officers have recounted that unfortunate turn of events to me over the years.)
Fewer mergers would also mean that companies looking for growth would need to come up with innovative ideas that actually, ya know, work. Some of those innovative ideas might lead to lucrative career opportunities for you.
I still believe this Microsoft-Activision merger stands a reasonable chance of success, because Microsoft has extensive experience with antitrust matters and was willing to promise a lot of cash to Activision if this idea fails.
Then again, I also still stand by what I said in my previous post: The simplest way for regulators to address all their antitrust concerns here is not to allow the merger to proceed at all.
Now tell me Kanter’s speech doesn’t have you wondering the same thing.