Only the most preliminary observations can be made at this date as to the likely antitrust landscape that will take shape under the administration of President-elect George Bush. Certainly, it would be reckless for one to read very much into “off-the-cuff”, unrehearsed campaign remarks concerning any antitrust initiative, especially those related to a particular case, for example, US v Microsoft.
Construction of the administration is in its formative stages, delayed beyond the “normal” schedule by the Florida vote count. Even under more typical circumstances, transitions are chaotic, so this one’s progress to date has been nothing short of heroic. The fact is that people matter, and the philosophy and antitrust agenda will not take shape until the new assistant attorney general (antitrust) and the new Federal Trade Commission (FTC) chairman are in place and have had the opportunity to make their presence felt.
Nevertheless, some forecasting can be made. First, it is unlikely that the central theme of horizontal merger enforcement will be modified to any significant degree. The joint Department of Justice-FTC horizontal merger guidelines were issued in 1992, during the George HW Bush administration. They were embraced and generally followed during the Clinton years by assistant attorney generals Anne Bingaman and Joel Klein and by FTC chairman Robert Pitofsky. The volume of horizontal merger cases initiated in the future will depend more on the level of strategic merger activity than on any changes in enforcement direction.
Two caveats must be added. Antitrust leadership in the coming administration is likely to be substantially more sceptical concerning mergers involving only overlapping research and development capabilities. At least the rhetoric, and to some extent the practice, during the Clinton years has been to exhibit concern about mergers of intellectual property, even where no product of that property had yet reached the market. Many antitrust experts, economists and lawyers have questioned the reliability of enforcement actions involving markets where a product has not emerged, where the total competitive research and development capacity is not clearly measurable, and where it is possible that a merger will enhance rather than dampen innovation.
A second area where there may well be a departure from the current horizontal merger practice relates to remedies. The staff of the Department of Justice Antitrust Division and of the FTC have taken an overly rigid view of a divestiture study based on data from older cases that do not reflect current divestiture successes and failures, or intervening procedural reforms. As a result, there has been a mechanical but not evenly applied application of requirements that a specific buyer for divested assets must be found before a merger can be approved and that massive, clean-sweep, divestitures to a going business will be required. Further study, based on more recent evidence, may produce a more flexible approach.
The one area where there might well be a change involves the focus on single firm, “big case” enforcement. Much criticism has been vented on cases such as Intel, Toys ‘R’ Us, American Airlines, and, of course, Microsoft. Whatever the merits of some or all of these cases, the resource drain on the agencies has been monumental. Staffing in other matters has been stretched, timetables have been extended, and there is a danger that transactions deserving attention may have been overlooked. The theoretical bases underlying these cases and others like them will almost certainly receive a thorough examination and some more cautious policy will surely be forthcoming.
Finally, it must be reiterated that people matter. The heads of the agencies will to a great degree shape antitrust policy. The President’s involvement is extremely rare and is appropriately limited to issues broadly affecting national policy. Stay tuned.
James Rill is a partner at Howrey Simon Arnold & White and was chairman of the US Department of Justice International Competition Policy Advisory Committee 1997-2000.