Tag: chapter-32

Author’s Note*

Introduction

The United States follows an institutional design for the enforcement of its competition laws that is unique in the world. There are two federal agencies with largely overlapping and concurrent jurisdiction (the Federal Trade Commission and the Justice Department’s Antitrust Division), more than fifty state and territorial attorneys general with enforcement power over state and federal law, and a virtually unlimited number of “private attorneys general” whose enforcement activities far outstrip public enforcement.[1] Private enforcement is encouraged by an automatic entitlement to treble damages, one-way shifting of attorney’s fees and costs in favor of prevailing plaintiffs, liberal discovery rules, and the availability of class actions. Often, legal norms created in private adjudication are applied in public cases as well, with the effect that perceived over-reaches of private enforcement have negative feedback effects on the strength of public enforcement.

Many aspects of this design are unintended, which is to say that the Congresses that created the institutional arrangements did not anticipate that the arrangements would work in the ways that they ended up working. Private enforcement was meant to be secondary to public enforcement, not the predominant enforcement mechanism. The FTC was meant to be a legislative and judicial body that worked in concert with the executive functions of the Antitrust Division, not a separate and independent executive agency. State Attorneys General were meant to vindicate the interests of their citizens, not to compete with the Justice Department to set national antitrust policy.

But although the institutions of American antitrust do not necessarily work and interact in the ways they were designed to, that does not mean that they work poorly or that the goal of reform should be to conform them to Congress’ original design. The question is whether they work well enough, or whether significant reforms should be undertaken to enhance their performance. Further, given that many of the past efforts to design the institutions of antitrust have resulted in very different arrangements than anticipated, the question is not merely whether antitrust institutions should be reformed, but how things would actually turn out if proposed reforms were adopted. This chapter analyzes the performance of the federal agencies, including their interaction with private and state enforcement, and considers various potential reforms.

I. The FTC and DOJ: Design and Function

A.  The DOJ: Professionalization and Politicization

Since the enactment of the Sherman Act in 1890, the Justice Department’s role in enforcing the antitrust laws has changed considerably along the dimensions of professionalism, expertise, and political control. In the early days, antitrust enforcement was handled by the main Justice Department. A dedicated Antitrust Division was not created until 1933, and it was not until 1936 that the Division hired its first economist. Over time, as antitrust grew increasingly technical and economic, the Antitrust Division grew into a technocratic body of antitrust experts working discretely on antitrust matters. In 1964, the historian Richard Hofstadter described antitrust as administered by “a small group of influential and deeply concerned specialists” in “differentiated, specialized, and bureaucratized” administrative institutions.[2] By the 1980s, the Division’s specialized economic function became reflected in the appointment of an economist as Deputy Assistant Attorney General in charge of the Division’s growing team of economists.

As the Antitrust Division has become professionalized and antitrust has become increasingly technical, a norm has developed that antitrust enforcement decisions should be kept separate from ordinary politics. Although to many this norm seems inevitable today, for much of the twentieth century it was not remotely scandalous for the President to be directly involved in antitrust decision-making. President Theodore Roosevelt took a hands-on approach to the management of antitrust cases by the Justice Department, going so far as to make a May 4, 1906 Special Address to Congress about the Standard Oil case that was about to be filed.[3] In 1937, President Franklin Roosevelt gave a press conference about the Attorney General’s findings concerning collusion in the steel industry.[4] As late as 1974, President Ford would admit to being mildly involved in the decision to bring the AT&T case.[5]

The propriety of White House involvement in bringing antitrust cases came into question during the Watergate scandal, when it became known that the White House had effectively traded an easy settlement in an antitrust case against ITT for a major campaign contribution to the 1972 Republican National Convention.[6] Following Watergate, it became the norm that decisions on the bringing and management of particular antitrust cases should be a technocratic or law enforcement decision at the Antitrust Division over which the White House and senior political officials should have no say. Thus, in 2000, President Clinton publicly insisted that he had no role whatsoever in the Justice Department’s decision to bring its landmark monopolization case against Microsoft.[7]

The question of undue political control by the White House over antitrust enforcement is currently in focus once again. Critics assert that President Trump’s personal political antipathy to the CNN network was behind the Antitrust Division’s unsuccessful litigation against the AT&T/Time Warner merger. Since that case, accusations of political intermeddling have become even more severe. In June of 2020, a career staff lawyer at the Antitrust Division wrote a whistleblower letter to the U.S. House Committee on the Judiciary asserting that the Attorney General had inappropriately directed the Antitrust Division to investigate cannabis industry mergers that involved no serious competition issues because of his personal opposition to marijuana.[8] He further alleged that, under political pressure from the White House, the Antitrust Division had initiated an investigation into an automobile emissions agreement that four automobile manufacturers had completed with the State of California, even though the agreement was clearly protected by Noerr-Pennington immunity. Critics assert that the Trump Administration has used the Antitrust Division to further the political aims of the President and top administration officials, charges that the Assistant Attorney General for Antitrust has sharply denied.[9]

Today, the Justice Department’s Antitrust Division is a professional organization staffed primarily by lawyers expert in antitrust and microeconomists. Most of its business is technocratic, specialized, and non-political. But there remains an important question about the extent to which the agency is—and should be—independent from the political control of the White House and senior politicians. On the one hand, antitrust must be kept free of corrupting influences and partisanship. On the other hand, antitrust decision-making involves weighty policy decisions for which the President is ultimately responsible. Whatever else the relevant norm is, it cannot be a flat prohibition on the White House being involved in formulating antitrust policy, including in giving guidance on the kinds of cases that should be brought and the remedies that should be sought.

B.  The FTC: From Quasi-Legislative and Quasi-Judicial to Mostly Executive

In 1914, Congress created the FTC as an independent administrative agency to solve some of the perceived institutional infirmities of antitrust enforcement by the executive branch. In the words of the Supreme Court in its landmark decision in Humphrey’s Executor,[10] the FTC could constitutionally function free from White House control because it had a “quasi-legislative,” and “quasi-judicial” character rather than executive one.[11] As Congress had in 1914, the Supreme Court apparently considered the FTC as a body that would be primarily involved in studying markets, proposing new legislation to Congress, framing trade regulation rules, bolstering the Antitrust Division by recommending remedies or sitting as a special master in equity, and hearing equitable cases as an administrative tribunal.

In fact, the FTC has turned out to be a very different institution than Congress and the Supreme Court imagined in the early twentieth century. In its antitrust capacity, it has functioned much more as an executive enforcement agency than as a legislative or judicial body.[12] Over the course of its over one hundred years of existence, the FTC has framed almost no antitrust rules. While it does occasionally sit as an adjudicative body, it has increasingly chosen the option of suing in federal district court as a party-litigant, that is to say, doing exactly what the Justice Department does when it litigates antitrust cases. The FTC almost completely ignored the statutory powers to sit as a special master in equity or to monitor compliance with antitrust remedies imposed in Justice Department cases.

Instead of functioning as a legislative and adjudicatory body, the FTC has become an alternative to the Justice Department for antitrust enforcement. Putting aside criminal enforcement and cases involving common carriers, which the FTC cannot prosecute, the two agencies have concurrent jurisdiction to launch investigations and enforce the antitrust laws. Whether the subject is mergers, monopolization, or agreements in restraint of trade, most of the two agencies do exactly the same thing—determine if the law has been violated and, if so, either resolve the issue through negotiation with the parties or bring a lawsuit to address the issue. The agencies do not divide enforcement territory based on any of their relative institutional features—for example, by assigning cases to the FTC which might be better heard administratively or assigning cases to the DOJ because of political sensitivities requiring coordination with other executive agencies. Rather, they divide territory based on their experience with particular industries. Thus, cases involving computer software (i.e., Microsoft) typically land at DOJ, whereas cases involved computer hardware (i.e., Intel) typically land at FTC. This is division of executive labor between two executive agencies that have accidentally arrived at the same portfolio of enforcement responsibilities, not something that any reasonable person would intentionally construct as a matter of institutional design.

Two more ostensible advantages of having an independent commission warrant brief mention. Compared to the Justice Department, Congress ostensibly meant for the FTC to be highly expert and politically neutral. As to expertise, for much of its history the FTC has not been particularly expert in economics or competition policy. Today, the Commission does have a considerable amount of expertise, but no more than DOJ. As to political independence, it is true that the FTC is not subservient to the President in the way that, for better or worse, the Justice Department is. However, the FTC may have traded subservience to the President for subservience to Congress. Studies have shown that the Commission tends to follow the will of the Congresspersons with oversight authority over the Commission. These political pressures may be less direct and acute than the hierarchical power of the President over the Justice Department, and the separation of antitrust enforcement into an agency controlled by the President and one controlled by Congress may disperse power, lower the potential for abuse, and minimize the threat of dramatic swings in enforcement from administration to administration. Nonetheless, it is not accurate that the FTC is a politically detached body. It simply tends to serve a different master than the Justice Department.

II. Interactions Between Enforcement Institutions

A.  FTC & DOJ: Collaborators and Antagonists

As already noted, Congress designed the FTC to collaborate with the Justice Department in studying and enforcing the antitrust laws rather than to serve as an alternative law enforcement agency, as it largely has done historically and does today. Still, the two agencies do collaborate productively in various important ways.

Given that the two agencies have largely overlapping jurisdiction over mergers, investigations, and enforcement, one very important way the agencies collaborate is in the process of determining which agency will take jurisdiction over which matters. This is particularly important in the time-sensitive matter of pre-merger notification under the Hart-Scott-Rodino Act, where a 30-day clock (or even 15 in some cases) to close the merger begins to run as soon as the merging parties submit their HSR filing. The DOJ and FTC are usually able to resolve which agency will take a matter relatively quickly and efficiently, but on occasion turf wars can occur.

Another, and equally important, kind of collaboration concerns joint hearings and the promulgation of enforcement guidelines. The Horizontal Merger Guidelines[13] are the most important example, but there are others covering such topics as vertical mergers,[14] competitor collaborations,[15] and the licensing of intellectual property.[16] In the antitrust community, the agencies’ joint guidelines are generally viewed as helpful guidance documents for understanding the agencies’ position on antitrust policy and enforcement and providing advice to clients who must navigate the uncertainties of antitrust law. With a few exceptions, the various guidelines have been viewed as technocratic rather than political or ideological documents, as evidenced by the fact that they have not been discarded with inter-party shifts in administration.

But if the agencies are usually good collaborators, they can also be antagonists on occasion. In recent years, agency antagonism has largely been the product of the Justice Department taking a more conservative position than the FTC on matters of antitrust policy. The agency bad blood is episodic, and sometimes seems retaliatory.

For instance, in the early 2000s the FTC brought an enforcement action against Schering-Plough over several of Schering’s patent litigation settlements involving “reverse payments” (payments from the branded drug maker to the generic drug maker not to enter the market).^[17] The FTC suffered a stinging defeat in the United States Court of Appeals for the Eleventh Circuit and sought a writ of certiorari in the Supreme Court.^[18] The Solicitor General and the Antitrust Division then filed their own brief (at the invitation of the Supreme Court), recommending that the Court deny certiorari,^[19] which the Court did.^[20] The FTC was highly displeased at the time (it eventually won on the reverse payments issue in the Supreme Court in 2013).[21]

Several years later, the FTC shot back. In 2007, in a private lawsuit, the United States Court of Appeals for the Ninth Circuit ruled that an Internet service provider (ISP) could maintain a “price-squeeze” claim against the local telephone company for charging the ISP too high a price at wholesale in relation to the telephone company’s retail prices for DSL service.^[22] Displeased with this result, the Solicitor General and the Antitrust Division filed an amicus curiae brief supporting the phone company’s certiorari petition in the Supreme Court.^[23] The FTC then issued a lengthy press release explaining that it strongly disagreed with the Justice Department and refused to join the brief.^[24] In this case, the Justice Department’s position ultimately prevailed in the Supreme Court.[25]

The bickering was about to get worse. For several years, the agencies had been collaborating on a report on unilateral exclusionary conduct. They held numerous joint hearings, organized and staffed by members of both agencies. Since unilateral exclusionary conduct was a hot issue in the antitrust community, the joint report was much anticipated. But when the report was released in September 2008, it was unilateral in two senses: it discussed unilateral conduct, and the FTC refused to join.^[26] Instead, the FTC issued a harshly worded dissent, complaining that the report “would be a blueprint for radically weakened enforcement of Section 2 of the Sherman Act,” asserting that “the testimony gathered during the hearings was not representative of the views of all Section 2 stakeholders,”^[27] and threatening that the FTC “stands ready to fill any Sherman Act enforcement void that might be created if the Department actually implements the policy decisions expressed in its Report.”^[28] In 2009, when President Obama’s appointees took over the Antitrust Division, one of Assistant Attorney General Christine Varney’s first official acts was to withdraw the Justice Department’s Section 2 Report as excessively conservative and limiting of anti-monopolization enforcement.[29] As with much of the inter-agency squabbling, this may have been more bark than bite: over the course of its 8 years, the Obama Justice Department brought only one monopolization case—and an insignificant one at that.

Recently, the agencies have again publicly clashed in ideological terms. In 2017, the Federal Trade Commission voted 2–1 to bring a monopolization case against Qualcomm concerning the licensing of its chipsets. It brought the case in a federal district court in California over the dissent of Commissioner Maureen Ohlhausen, who asserted that the case would “undermine U.S. intellectual property rights in Asia and worldwide.”[30] Before the district court ruled, the Trump Justice Department filed a “Statement of Interest.”[31] It foresaw a possible victory for the FTC and a possible order to Qualcomm to license its technology on FRAND terms, and it urged the court to hold further hearings before fashioning a remedy in the event it found liability.[32] The district court did not heed the DOJ’s statement. In 2019, in a factually intensive 233-page decision, it found that “Qualcomm’s licensing practices have strangled competition,”[33] and it issued an injunction requiring Qualcomm to discontinue its practice of refusing to sell chips to phone makers unless they also licensed its patents.[34]

By the time of the district court decision, a new set of FTC commissioners was in place, and the Commission’s ideological divide was on full display. Commissioner Christine Wilson penned an op-ed in the Wall Street Journal condemning the court’s decision as a “dangerous antitrust overreach” that will “create new legal obligations, undermine intellectual-property rights, and expand the application of our antitrust laws beyond U.S. borders.”[35] At the same time, her colleagues Commissioners Rohit Chopra and Rebecca Slaughter issued statements praising the decision as “a thorough accounting,” “meticulous,” and a huge victory “for every American who believes in competitive markets.”[36]

Qualcomm appealed the decision to the U.S. Court of Appeals for the Ninth Circuit.[37] The DOJ went beyond its previous cautionary Statement of Interest and filed a brief declaring the FTC’s case ill-founded and the district court’s opinion wrong. The DOJ invoked statements by the Departments of Defense and Energy fearing that antitrust remedies will significantly reduce Qualcomm’s technological competitiveness vis-à-vis China and could seriously harm U.S. national security. The Ninth Circuit ultimately reversed in part and vacated in part the district court’s opinion, holding that Qualcomm did not engage in anticompetitive conduct by refusing to license to rival chip manufacturers.

What should we make of this recurrent inter-agency squabbling? On the one hand, it could be a sign of democratic health that different governmental agencies express differing points of view on complex regulatory matters. On the other hand, it arguably diminishes the overall influence of federal antitrust enforcement to have the two federal agencies directly feuding with each other in court. Courts might expect that two agencies with different mandates—for example the Department of Transportation and the Environmental Protection Agency—would clash over policy matters, but antagonism between two federal agencies with the same mandate suggests that the house of antitrust is not in order.

B.  DOJ and State AGs: Hierarchy or Equality?

The United States has a federal antitrust system, meaning that the States also play a role in promulgating and enforcing antitrust law. State Attorneys General enforce their own states antitrust laws, but the Hart-Scott-Rodino Act of 1976 also gave them parens patriae authority to bring federal antitrust suits on behalf of the citizens of their respective states. Often working through groups organized under the auspices of the National Association of Attorneys General (or “NAAG,” which is not a felicitous acronym for a group that sometimes has to remind the federal government to do its job), the states sometimes join the Justice Department in bringing federal antitrust lawsuits, as they did with respect to the ultimately unsuccessful case involving American Express’s “anti-steering” provisions with merchants.[38] The states also sometimes sue when the Justice Department has decided not to bring a case, as with respect to their failed lawsuit attempting to block the merger between Sprint and T-Mobile.[39] Whether the states sue in tandem with the Justice Department or instead of it, problems can arise. States cannot enforce the FTC Act, so these issues do not arise in quite the same way with respect to the FTC.

The best-known example of problems arising from the states suing in tandem with the Justice Department is the Justice Department’s 1999 suit against Microsoft.^[40] Nineteen states brought suit also, and the cases were consolidated before Judge Thomas Penfield Jackson in the D.C. District Court. Among the more unusual twists and turns in the case, Judge Posner was appointed mediator. In early 2000, after Judge Jackson issued his findings of fact but before he issued his conclusions of law, Judge Posner mediated the case. The parties were unable to reach a settlement. Judge Jackson issued his conclusion of law and subsequently ordered Microsoft broken into two separate companies: an operating systems company and a browser company. The U.S. Court of Appeals for the D.C. Circuit affirmed the decision in part but reversed some key findings, including the remedy, and ordered the case remanded to a different district judge. Then, in November of 2002, the Bush administration reached a settlement with Microsoft. Of the nineteen state plaintiffs, one (South Carolina) dropped its suit, sixteen agreed to the federal settlement, and two states—Massachusetts and West Virginia—objected to the settlement.^[41] Judge Kollar-Kottelly eventually issued a final decree close to the one proposed by the Bush administration.^[42]

The antitrust federalism questions mostly center on differing accounts of what occurred during the failed 2000 mediation. In press accounts, Judge Posner blamed the state attorneys general for obstructing a mediated resolution.^[43] Subsequently, Judge Posner has argued that states should be “stripped of their authority to bring antitrust suits, federal or state, except under circumstances in which a private firm would be able to sue.”^[44] Alternatively, he has proposed giving federal authorities a “right of first refusal” to bring antitrust cases and strip states and private parties from suing over the same matter.^[45] Without mentioning Microsoft specifically, he has developed a theory that state attorneys general follow a “strategy consist[ing] of bringing high-profile lawsuits that attract publicity to the attorney general and promote the interests of politically influential state residents . . . at the expense of nonresidents.”^[46] Judge Posner’s arguments are widely understood as a rebuke of the state attorneys general who participated in Microsoft.[47]

It has hard to know what to make of the states’ participation in Microsoft. One possibility is that the states’ insistence on remedies more stringent than those that the Clinton Justice Department was willing to accept may have resulted in a weaker eventual decree than would otherwise have been possible. The failure of the mediation in 2000 meant that the case was litigated to the D.C. Circuit, which issued an opinion that affirmed some aspects of Judge Jackson’s liability findings but reversed others and, particularly, cast doubt on the viability of a break-up remedy.^[48] The failure of the mediation meant that the Bush Administration rather than the Clinton Administration had the opportunity to settle the case post-appeal and did so on terms more sympathetic to Microsoft. If, as many believe, the eventual Microsoft consent decree was a failure,^[49] then one could claim that the states’ refusal to follow the federal lead in 2000 resulted in the ultimate failure of the government’s enforcement action.

Microsoft provides a cautionary tale about federal and state enforcers potentially getting in each other’s way while trying to jointly manage an antitrust case. In the Sprint/T-Mobile case, there was no coordination problem because the Justice Department approved the deal and opposed the States’ injunctive lawsuit to block it. After Federal District Judge Marrero ruled against the deal, allowing the deal to close, Makan Delrahim, Assistant Attorney General for the Antitrust Division, asserted that the states’ failed challenge could impair the states’ ability to intervene in future merger cases. “Had that gone the other way, you would have had 53 antitrust agencies,” he argued, asserting that the states should not take “whacks of the pinata” after the federal government has approved a merger.[50]

Unlike with respect to squabbling between the DOJ and FTC, it is not obvious that differences of opinion between federal and state officials diminish the prestige or influence of antitrust enforcement. The states should be expected to have different objectives, perspectives, ideological commitments, and political priorities than the federal government. The problem is more logistical in nature. Case prosecution is a core executive function (alas for the FTC, which isn’t supposed to be an executive agency!), and it is not ideal to have too many executives in charge of any function. Effective executive management requires flexibility, decisiveness, consistency, and the ability to bargain credibly with the defendant. All of these virtues are in short supply when too many law enforcers have a say in case management and resolution.

C.  Public and Private Enforcement: Substitutes or Complements?

This chapter is focused on public enforcement of the antitrust laws rather than private enforcement. As noted at the outset, in the United States there are many more private cases than public ones, and there are many structural issues with private enforcement—from standing rules to class certification—in dire need of addressing. Private enforcement can also have significant effects on public enforcement, sometimes weakening the government’s ability to bring antitrust cases.

Here is how that happens. Putting aside the FTC’s enforcement of Section 5 of the FTC Act (discussed below), public and private enforcers sue under the same statutes. Courts interpret and apply the same statutory texts whether the plaintiff is the Justice Department or a private litigant. Since the courts see many more private cases than public ones, many of the legal standards are formulated in private cases. Rightly or wrongly, in recent decades judges have come to look at private antitrust cases with some degree of suspicion. They have expressed concerns about such things as the chilling effect of the treble damages remedy, opportunistic plaintiffs motivated by anticompetitive interests, and the inability of lay juries to tackle complex economic matters. Drawing on these concerns, the courts have increasingly formulated antitrust law to protect defendants from antitrust theories perceived to be weak or subject to abuse. Since the same legal principles should apply to a government case, the government often finds itself hamstrung when bringing a case on the same legal theory, even though these concerns about private litigation abuse have less evident relevance to actions by the government.

Consider predatory pricing law, for example. During the 1980s and ’90s, in a series of private cases, the federal courts sharply constricted the right of action for predatory pricing.^[51] The courts justified restrictive predation liability rules by claiming that opportunistic private plaintiffs could chill rivals’ aggressive pricing by bringing predatory pricing lawsuits for treble damages.^[52] During the years that the courts were developing these restrictive liability norms, neither the FTC nor the Department of Justice brought any predatory pricing lawsuits. The liability rules were created with the institutional limitations of private litigation in mind. Then, in 1999, the Justice Department brought its first predatory pricing lawsuit in decades, against American Airlines.^[53] The government lost the case on summary judgment in the district court and then again in Tenth Circuit, largely because the courts applied off-the-rack predatory pricing liability rules designed to avoid abusive private litigation.^[54] If the law of predatory pricing had developed with the institutional parameters of public enforcement in mind, it is doubtful that the resulting liability rules would have been so deferential to pricing decisions by dominant firms. In any event, neither the FTC nor Justice Department has brought a predatory pricing case since American Airlines.

Whether or not the government should be bringing more predatory pricing cases, it does not make much sense for it to be bound by legal doctrines that were created in private lawsuits subject to very different institutional constraints. Almost nowhere else in the world does this occur, because public enforcement predominates and private enforcement, if it exists, usually follows public enforcement. The American system of heavy reliance on private antitrust enforcement to vindicate the public interest in competition may have its benefits, but it does have a deleterious effect on public enforcement.

III. Proposals for Reform

A.  Ending or Curtailing Dual Federal Enforcement

It is difficult to imagine that any country designing an antitrust system from scratch would choose to follow the U.S. model and create an executive division accountable to the President and an independent agency accountable to Congress with functionally identical mandates to enforce the antitrust laws. The system we have is not the one Congress thought it was designing, nor one that anyone would design. That said, it is not obvious that trying to change the system to comply with the Congressional design or re-designing it altogether would be desirable. There could be significant losses of institutional capacity, political checks and balances, and enforcement efficiency if one or both agencies were significantly overhauled or eliminated.

In 2007, the bipartisan, congressionally appointed Antitrust Modernization Commission released an evaluative report on the entire gambit of modern antitrust law.[55] Among other things, the twelve members of the Commission considered whether dual federal enforcement should continue. Three of the twelve—including two former heads of the Antitrust Division—voted to recommend abolishing the FTC’s antitrust enforcement authority and vesting responsibility for all antitrust enforcement with the Justice Department.^[56] But the majority recommended retaining the dual-enforcement structure. With the benefit of nearly one hundred years of dual-agency history, the commissioners were realistic in their assessment of the agencies’ performance. They admitted that the two agencies did not provide counter-cyclical checks on each other—no, the two agencies “typically have worked together to develop similar, if not identical, approaches to substantive antitrust policy.”^[57] The commissioners made clear the real justification for continuing with dual enforcement: “Although concentrating enforcement authority in a single agency generally would be a superior institutional structure, the significant costs and disruption of moving to a single-agency system at this point in time would likely exceed the benefits.”^[58] The commissioners noted further practical difficulties with such a switch: “there is no consensus as to which agency would preferably retain antitrust enforcement authority,” and any such move “would likely be politically very difficult.”^[59]

But, more recently, there have been renewed calls to overhaul the agencies, some with the goal of expanding the number of agencies with antitrust authority and others with the goal of reducing or streamlining them. On the expansive side, Professor Fiona Scott Morton has proposed creating a new Digital Authority to enforce privacy laws, protect digital identities and consumer data from being monopolized by private firms with market power, and create baseline conditions conducive to competition in digital marketplaces.[60] Professor Scott Morton argues that creating a new agency is necessary because the existing agencies lack the statutory rule-making powers to regulate digital businesses and because they lack the necessary expertise. But even crediting her assumptions, it is not clear why such powers should be given to a brand-new agency rather than added to the portfolio of an existing agency. The history of the Antitrust Division and FTC stepping on each other’s toes does not encourage the thought of adding yet a third federal antitrust agency.[61]

By contrast, on the streamlining side, Senator Josh Hawley has unveiled a plan to roll the FTC into the DOJ.[62] Under his plan, the FTC would be headed by a single Director (like the FBI), instead of a multi-member commission. The Director would report to the Associate Attorney General. The FTC would gain new market analysis authority to direct its enforcement, assist the Antitrust Division, and inform Congress. It would lose all authority to review mergers and acquisitions to the Antitrust Division.[63]

Senator Hawley’s plan would align the FTC more closely with the Congress’ original design by making it more a research, analysis, and market study agency supporting the Justice Department than a stand-alone law enforcer, but it is not obvious what advantage this would bring over simply eliminating the FTC’s antitrust authority and rolling all antitrust authority in the Justice Department, as endorsed by three of the twelve members of the AMC in 2007. In my view, that remains the most sensible proposal, although it would be challenging politically. To be clear, transferring all antitrust jurisdiction to the Justice Department would not eliminate the FTC as an agency. The FTC already spends more of its budget on consumer protection matters than on antitrust matters, and its consumer protection work would continue, perhaps fortified. There is a good case to be made that eliminating the FTC’s original mandate—antitrust—and asking it to focus single-mindedly on the consumer protection role that Congress added in 1938 would strengthen consumer protection and also strengthen antitrust enforcement by consolidating it under a single roof.

B.  Aligning the Capacities and Constraints of the Federal Agencies

If the FTC and DOJ are to continue in their current course of doing effectively the same job, the question arises as to whether the two agencies should operate with the same tools at their disposal and subject to the same constraints. While the two agencies already share many of the same tools and constraints, there are some important differences that merit reconsideration.

One important set of differences concerns the FTC’s ability to sit as an adjudicatory body. As noted earlier, in antitrust cases the FTC has increasingly chosen to proceed as a litigant in court rather than trying cases administratively. Part of the reason for this is that the Commission’s adjudicatory system is poorly designed. When the Commission staff choose to seek an administrative complaint, the first step is to obtain approval by a vote of the Commission. This puts the Commission itself in the prosecutorial position of deciding whether or not a complaint has merit and should be pursued. Once the Commission votes out a complaint, it is heard before an administrative law judge (“ALJ”), with the Commission staff acting as prosecutors. The ALJ decision is then reviewed by the Commission itself, which now sits as an appellate adjudicatory body on the very complaint on which it previously acted as a prosecutor. Not surprising, the Commission rarely overrides its own staff on the complaints it previously authorized. A study by Doug Melamed found that, between 1983 and 2008, the staff won all sixteen antitrust cases adjudicated before an administrative law judge on review by the Commission.[64]

If this system seems unfairly to mingle prosecutorial and adjudicatory functions, that does not necessarily translate into a large litigation advantage to the Commission. There is appellate review from Commission decisions, and here defendants have some odd advantages of their own. The FTC Act’s appellate review provision allows a defendant to lodge an appeal from an adverse FTC decision “within any circuit where the method of competition or the act or practice in question was used or where such person, partnership, or corporation resides or carries on business.”[65] Unlike the appellate provision applicable to almost any other federal agency, this provision effectively allows most defendants to pick any of the twelve federal circuits for their appeal and thereby to forum shop for the circuit whose precedents or ideological composition are most favorable to the defendant. In order to avoid facing a potentially hostile circuit chosen by the defendant, the FTC has sometimes decided to sue in federal district court rather than try a case administratively, thus frustrating Congress’s design for agency adjudication. The FTC still wins the majority of its cases in the appellate courts—about 72% of them—but that is considerably lower than the 93% of cases it wins on appeal when squarely acting as a prosecutor in actions originated in federal district court.[66] The advantages that the Commission obtains in-house through the questionable commingling of prosecutorial and adjudicatory functions dissipate on appeal with the equally questionable power of defendants to engage in appellate forum shopping.

What’s to be done about this? One possibility is to structurally separate the Commission’s prosecutorial and adjudicatory functions. For example, Terry Calvani and Angela Diveley have suggested vesting the prosecutorial function in an FTC Director of Enforcement appointed by, and serving at the pleasure of, the President,[67] with the five-member Commission retaining its adjudicatory functions. Such a reform might be paired with a reform to the procedures for selecting the appellate circuit, for example by amending the statute to provide either for an exclusive appellate forum for all FTC cases (for example, the D.C. Circuit, which generally hears appeals from FCC decisions) or designating a particular circuit dependent on the defendant’s status (for example, that of the defendant’s principal place of business).

A related issue concerns the standard for obtaining a preliminary injunction standard for blocking mergers for the two agencies. There has been “some ambiguity” in the case law as to how the preliminary injunction standard in FTC Part III (administrative) cases should be applied,[68] and some suggestion that the FTC can prevail in obtaining a preliminary injunction with a lesser degree of proof of likely anticompetitive effects than the DOJ would have to show if it were the plaintiff.[69] Given the time sensitivity of most mergers, the grant of a preliminary injunction is often the merger’s death knell. As a practical matter, this means that merging parties face an agency with a stronger or weaker hand in blocking a merger based on the happenstance of which agency takes the case. This is an arbitrary way to run the system. The preliminary injunction standards for the two agencies should be aligned, as was proposed in the Standard Merger and Acquisition Reviews through Equal Rules Act of 2017.[70]

A second difference between the FTC and Justice Department concerns the substantive standards applicable to the two agencies. In non-merger cases, the Justice Department enforces the Sherman Act, whereas the FTC enforces Section 5 of the FTC Act, which prohibits “unfair methods of competition.” The Supreme Court has long recognized that Section 5 includes all conduct that is unlawful under the Sherman Act.^[71] But it has also held that the FTC may go further than the Sherman Act and “stop in their incipiency acts and practices which, when full blown, would violate those Acts.”^[72] Thus, “the standard of unfairness under the FTC Act . . . encompass[es] not only practices that violate the Sherman Act and the other antitrust laws . . . but also practices that the Commission determines are against public policy for other reasons.”^[73]

Although this seems to give the FTC a considerable substantive advantage over the Justice Department, for most of the FTC’s history, things have not worked out that way. During the 1970s and 80s, the Commission attempted to bring stand-alone Section 5 cases on theories that might not have been cognizable under the Sherman Act, but the courts rejected these attempts. As former Chairman Bill Kovacic has remarked, it is difficult to find even ten successfully litigated Section 5 antitrust cases over the Commission’s nearly hundred-year history.^[74] In consequence, in recent decades the FTC has largely fallen back on Sherman Act theories, and Section 5 has become functionally identical to Sections 1 and 2 of the Sherman Act.

Within the last decade, there has been a revival of interest in the FTC asserting stand-alone unfair methods of competition cases, and the Commission has taken modest steps in that direction on a few occasions. In 2013, the Commission issued a Statement of Principles Regarding Enforcement of the FTC Act as a Competition Statute, which essentially committed the Commission to employing rule of reason treatment and applying the consumer welfare standard in Section 5 cases.[75] Still, the question remains as to why the FTC should enjoy a substantive advantage over the Justice Department at all. As discussed in the final section below, it makes sense for public enforcers to have wider substantive powers than private litigants, but there is no good reason for one federal agency to have wider substantive powers than the other, particularly given that they divide enforcement turf by industry rather than on any basis in their respective institutional structures.

C.  Making Federal Enforcement Supreme

The question of state attorney general involvement in national antitrust cases where the Justice Department is also involved raises complex questions of federalism and political economy. On the one hand, the states may bring valuable resources and perspectives to federal enforcement activities. They may also provide a needed nudge when the Justice Department has become too reticent to sue for political or ideological reasons. And it is democratically healthy for the states to listen to their own citizens and bring their unique perspectives to competition issues. On the other hand, too many cooks spoil the broth. Although proponents of stronger antitrust enforcement sometimes assume that empowering more antitrust enforcers means stronger enforcement, that does not necessarily follow. Multiple enforcers can get in any other’s way, send mixed messages to the courts and the parties, and prevent effective resolution of matters.

Judge Posner’s previously discussed suggestion of giving the Justice Department a right of first refusal to bring an antitrust case—or to permit participation by the states if it does—seems sensible. If the Justice Department does not believe that a case is merited, the states would still be free to file one anyway. In cases that the Justice Department does pursue, the right of first refusal would give the Justice Department the power to steer the prosecutorial ship, including negotiating a settlement, without interference from alternative prosecutors.

D.  Private Enforcement

As previously noted, there are many necessary fixes to the private antitrust litigation system, particularly with respect to standing, class actions, and damages, but those are beyond the scope of this paper. From the perspective of public enforcement, the question is how to structure private enforcement so as to minimize its deleterious spillover effects on public enforcement. Reviving an independent FTC Act Section 5 would be one way, but, as previously noted, that approach has the disadvantage of arbitrarily putting the FTC in a stronger substantive position relative to the Justice Department. If some of the proposals to restructure the agencies were adopted—for example, rolling the FTC into the DOJ or eliminating the FTC’s antitrust enforcement altogether—that might effectively eliminate Section 5 as a distinctive substantive prohibition and leave public enforcers on entirely the same substantive footing as private enforcers.

Alternatively, a Congress interested in a bold substantive reform could give the Justice Department the power to enforce a provision like Section 5. So as not to create further discrepancies between the FTC and DOJ, the cleanest way to do this would be to amend Section 5 to state that the FTC has the power to enforce the Sherman Act, and then pass a new antitrust super-statute giving both federal agencies (but not private parties or the states) the power to sue in equity (and not criminally or for damages) to enjoin unfair methods of competition that harm the competitive process. This would put the two agencies on equal footing substantively, unshackle public enforcement from private enforcement, but also provide the courts with a known legal standard on which to predicate judicial review.

Conclusion

Despite the idiosyncratic and sometimes counterproductive institutional scheme of federal antitrust enforcement created by failed Congressional design and decades of iterative experimentation, the U.S. antitrust agencies function relatively successfully most of the time. Because of this, the temptation is always to let well enough alone. There are many more pressing needs than major overhauls of the federal antitrust agencies. That said, if there is political will for reforms, there are no shortage of sensible possibilities.