Baer and Calvani on Antitrust Post Election | Brunswick
Perspectives

Baer and Calvani on Antitrust Post Election

What does it sound like when two antitrust experts talk shop? Let’s just say, footnotes required. By Claire Thomas-Daoulas and Becca Dougherty.

The US Department of Justice’s recently filed antitrust case against Google triggered an instant denial of wrongdoing from the company. What it did not trigger, however, was any big Democratic defense of Google.

At a time of stark cultural and political polarization in America, antitrust turns out to be that rare thing—a field of some agreement between lawmakers. Might this portend a strengthening of antitrust legislation regardless of the Nov. 3 election?

Bill Baer thinks so. “There is, I think, enough common ground between the Democratic position and the Republican position that there is some potential for something to be done, regardless of who controls the Senate,” says Mr. Baer.

In a conversation that follows with Brunswick Senior Advisor Terry Calvani, Mr. Baer points to efforts underway in both houses of Congress to explore the possibility of strengthened antitrust regulation. In fact, Mr. Baer on Oct. 1 testified before the House Antitrust Subcommittee led by Rep. David Cicilline (Dem, R.I.), who co-authored a 450-page “Investigation of Competition in Digital Markets.”

Mr. Baer “is the only person to have led antitrust enforcement at both US antitrust agencies, serving as Assistant Attorney General in charge of the Antitrust Division of the US Department of Justice from 2013 to 2016, and as Director of the Bureau of Competition at the Federal Trade Commission from 1995 to 1999,” says the Brookings Institution, which Mr. Baer recently joined as a visiting scholar in governance studies. Mr. Baer also headed the antitrust practice at Arnold & Porter; Global Competition Review twice named him the best competition lawyer in the world.

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Bill Baer, former Principal Deputy Associate Attorney General, at the US Department of Justice in November 2016.

Mr. Calvani also has extensive experience in public- and private-sector competition law. He served as a Commissioner of the US Federal Trade Commission from 1983 to 1990, including a stint as its head. He also sat on the board of the Irish Competition Authority, where he held the criminal investigations and mergers portfolios. During that period, he was an active member of advisory committees for the EU Competition Directorate. Mr. Calvani is now a Senior Advisor at Brunswick Group.

Their conversation took place over Zoom, days before the DOJ suit against Google. But within hours of that suit being filed, Mr. Baer was quoted in the New York Times.

It's the most newsworthy monopolization action brought by the government since the Microsoft case in the late 90s,” said Bill Baer, a former chief of the Justice Departments antitrust division, told the Times. Its significant in that the government believes that a highly successful tech platform has engaged in conduct that maintains its monopoly power unlawfully, and as a result injures consumers and competition.”

So, what does it sound like when two antitrust experts talk shop? Let’s just say, footnotes required.

CALVANI: Good morning, Bill. How are you?

BAER: We’re doing great. I'm in the dining room that we've been privileged to have you visit on occasion.                   

CALVANI: I thought you'd be in Montana.

BAER: We got out there for three weeks, and came back over Labor Day weekend, just before infections started to peak. It's pretty bad back out there right now.

CALVANI: That's surprising. It's sparsely populated.

BAER: I think you can trace it to the weather getting colder, people being inside more, people impatient with being in lockdown mode. People going to the bars. And it's really hard to drink a beer with a mask on, I've found. (LAUGH)

CALVANI: Having led the antitrust enforcement agencies and managed one of the best competition law firms in the world, how do you like being a policy person at Brookings? Do you miss being in the center of the action?

BAER: Terry, I think you and I share the view that the opportunity to do public service is extraordinarily rewarding. Since my days as a junior lawyer, I’ve jumped at every chance to work in the government.

I never previously had considered doing an academic-type stint. But late this past fall, Brookings called. They told me that they haven't had somebody in the antitrust space for a while and said, "Why don't you come on over?"

My first thought was, I'm not an academic. I'm the one who gets assigned a project and figures out how to build the bridge someone else designed. But it was an intriguing opportunity. It would get me out of my comfort zone, which is a good thing to do every once in a while. And, frankly, I just could not pass up the chance to take that kind of a pay cut.

CALVANI: Let’s turn to the topic on everyone's mind, the election and what happens afterwards. How do you think competition law enforcement in a Biden administration would differ from that of the current administration?

BAER: I think we would return to normalcy. By that, I mean White House interference with the antitrust agencies would halt immediately. I've never seen anything comparable to what's going on in this White House and with this attorney general—at least not since the Nixon years.

That the President of the United States would call the Chairman of Federal Trade Commission into the Oval Office and direct him to use Section 5 of the FTC Act[i] against alleged tech platform bias against conservative viewpoints—and when the Chairman says that that would go too far, the President directs him to do it anyway, and then publicly embarrasses him by interviewing replacement candidates—is clearly an improper use of the power of the president.

That Attorney General Barr would direct the antitrust division to open 10 separate investigations into acquisitions or combinations of small marijuana producers simply because he doesn’t like their business is unprecedented. And it's a misuse of law enforcement resources. Something we haven't seen in the antitrust sector.

So first and foremost, we would get back to the rule of law and not rule by political whim. I respect some of this government’s substantive antitrust actions, but other policies have elevated intellectual property rights over antitrust injury in ways that don't make sense and allowed large corporate price fixers to avoid responsibility for their misconduct.

The administration’s effort to publicly announce an investigation into the State of California's settlement with auto manufacturers over emissions controls showed blatant disregard for Noerr-Pennington[ii] and the state action doctrine. Doing this publicly made it transparent that this was an effort to use antitrust laws to achieve non-antitrust ends.

Under a Biden administration, that would stop. There would be a different direction, first and foremost to insulate law enforcement decision-making from political interference. That's really key to restoring public trust in the integrity of how the antitrust laws are enforced.

CALVANI: The Democratic antitrust bench is in my view a very broad one, running all the way from those who self-identify as very progressive to people who are not yet ready to throw the consumer welfare model[iii] in the trash bin. Where do you think the needle will fall in terms of agency leadership in a Biden administration?

BAER: I'm getting asked that question a lot. And I've learned over the years not to speculate about people or philosophical approaches. But on the appropriate role of antitrust enforcement, the notion that views within the Democratic Party are too divergent to come to a common ground is wrong.

Look at the task force that (Independent Senator) Bernie Sanders and Vice President Biden put together to address how they would approach the Democratic platform and substantive policy. They talk a lot about competition. They talk a lot about economic justice, about appropriate use of the antitrust laws, about behavior that restricts wages, prevents freedom of movement for labor from one job to the next, including non-competes and do-not-poach agreements.

There's a lot of commonality there. And I think there is commonality as well on the notion that our antitrust laws as interpreted today by the courts have allowed highly concentrated, dominant firms to engage in practices that ought to be prohibited.

I think a Biden-led administration would find commonality with some really smart leaders in the House and the Senate. I am referring to, among others, David Cicilline, who chairs the Antitrust Subcommittee and (Democratic Senator) Amy Klobuchar, who works well with the current chair of the Senate Antitrust Subcommittee, (Republican Senator) Mike Lee. I think there’s potential for there to be some legislative action early on in a new administration, assuming Joe Biden and Kamala Harris win and assuming the Senate is Democratic.

Terry Calvani is a Senior Advisor with Brunswick Group and based in Washington D.C.

CALVANI: The other day you gave very interesting testimony to the House Antitrust Subcommittee. I read your testimony as basically an endorsement of a bipartisan record of the past 30 or 40 years with one important caveat.

And that is—a need for some legislation. In particular, I think you focused on your belief that the courts have simply demanded too much in the way of certainty that anticompetitive effects will grow from conduct or transactions under review.

It seems to me you're suggesting two different things. One—antitrust regulators and law-enforcement professionals need more money. That's clear enough. Second, legislation is needed to clarify the burden of proof. My question there is: What do you have in mind? Some have suggested, for example, that transactions at least in certain industries be presumptively illegal. Is that what you're talking about?

BAER: First, I think it's more than the courts applying an unrealistically high burden of proof. That's part of it.

Another part of the Chicago School argues also that we ought to err dramatically on the side of under-enforcement.  I disagree with that. You can never perfectly position the enforcement needle directly in the middle. You're going to have either some degree of under-enforcement or some degree of over-enforcement.

But the presumption that government intervention is more likely to muck things up than to help things out has been embedded in the way courts view government antitrust challenges. And that is a problem.

What do we do about it? One could hope that we could persuade the courts, over the next 20 to 30 years, that they have been way too cautious and move the needle back toward the middle.

That defines the term “long view.” What I've increasingly become convinced of is that some further guidance from Congress to the courts is needed. We need to adjust the antitrust laws for the first time substantively since the '50s. And I would focus on markets that are highly concentrated and markets that are dominated by one firm. I would suggest that the burden ought to be placed the large acquiring firms in concentrated markets to tell the story that consumers and competition will either be better off or not worse off if this transaction is allowed. I think that would set the needle back towards the middle.

CALVANI: So, would you then have a concentration threshold that would trigger a more aggressive review? Is that the idea?

BAER: That's the idea. Some of that is reflected in legislation that Senator Klobuchar has already introduced in the Senate. In addition, what's coming out of the Antitrust Subcommittee in the House is some agreement that we do need to modify the antitrust laws to allow for more intervention in concentrated markets and markets that are dominated by a single firm.

CALVANI: As a preliminary to deciding which kind of a proof standard would follow, I would guess you would have to get into questions like market definition in order to figure out when you trip the concentration threshold.

BAER: Yeah. I don't think this is going to be an easy proposition. You need to do some careful drafting that would tweak the laws. I don't think we need to throw them out. But adjust the statutory language in a way that would steer the courts away from the overly cautious approach they’ve taken for the last 20 to 30 years. In that way, I think we could get back to a more appropriate place in terms of antitrust enforcement.

CALVANI: A big topic in Europe that’s becoming a medium-sized or bigger topic in the United States is the newly proposed EU competition tool that would empower the Commission and other agencies in Europe to undertake a restructuring of markets in the absence of a law violation, when there's a conclusion that the markets are not functioning as competitively as they might. It sounds faintly like the no-fault monopolization proposal that we dealt with in the early days of our career. Is this an idea whose time has come?

BAER: I don't think what they're talking about in Europe is anything close to a no-fault monopoly rule. I do think they are talking about using prospective rules to channel competition in constructive ways where network effects aren't allowing for meaningful competition.

That’s something we here in the US have addressed, sometimes well, sometimes not so well. I think back to 2004 when the FCC promulgated a rule that allowed consumers, you and me and the rest of us, to port our phone number to a competing provider. We always referred to home landlines as “my” phone number. But it turns out until 2004, it actually wasn't. It was AT&T's phone number. And if you wanted to go to another provider, good luck. You basically had to surrender that which had become identified with you, just as an email address or Facebook or Twitter account is part of us today.

I think you can adopt prospective rules that channel competition in constructive ways—rules that deal with externalities like privacy violations. You can develop rules that ensure interoperability and better data portability. I think those sorts of forward-looking rules are one way of addressing legitimate public policy concerns. Whether they fall into an antitrust framework or they fall into a series of public policy choices where we empower an agency like the FTC—or create a new agency—matters less to me than recognizing that there are issues that the current antitrust enforcement regime may be inadequate to address.

CALVANI: Do you sense a bipartisan consensus in the Congress, a Congress not known for its ability to reach consensus? Or does all of this depend on whether Biden is elected as president, and Democrats gain control of the Senate?

BAER: I’m not a political pundit, although occasionally around the dinner table I purport to be. I would say that when I spoke before the House Antitrust Subcommittee on Oct. 1, I was blown away by the seriousness of purpose on the part of members on both sides of the aisle. They were willing 

to listen and to engage about where antitrust may have fallen short, where resources may be inadequate. Republicans were not embracing the more dramatic changes that Cicilline’s report on competition in digital markets[iv] says need to be taken under consideration. But they did talk about concern, not just with the level of appropriations for antitrust enforcement at the federal level, but with growing concentration and with the inadequacy of current law to address dominant firms buying up nascent competitors and basically precluding the opportunity that these nascent firms on their own might have provided some competition.

Both the majority and the minority seemed to share that concern and to consider whether or not Sherman Act Section II—monopolization jurisprudence—is adequate to address certain behaviors by dominant tech platforms.               

CALVANI: More funding, that's pretty easy to do. But I agree that drafting legislation is going to be hard. You’ve got the view that markets will ultimately correct themselves, which I agree with. But it can take time to do so, and significant damage may occur in the interlude. I don’t want to be assigned the task of writing that bill.

BAER: I haven't yet been asked to be a draftsperson. But would be honored to help out. Look, it will be hard. And the industry pressure to not do anything or to temper the language so at the end of the day the bill means very little is going to be challenging. The money in politics affects the way the politics gets decided.

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Claire Thomas-Daoulas is a Director in Brunswick’s San Francisco office and is a founding member of Brunswick’s global competition and antitrust team.

Becca Dougherty is an Associate in Brunswick’s Washington D.C. office focused on antitrust, litigation and tech policy issues.

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[i] Section 5 of the Federal Trade Commission (FTC) Act prohibits ‘unfair methods of competition’ including conduct that violates the Sherman Antitrust Act or the Clayton Act. Under Section 5(b) of the FTC Act, the Commission may challenge “unfair or deceptive act[s] or practice[s],” “unfair methods of competition,” or violations of other laws enforced through the FTC Act, by instituting an administrative adjudication.

[ii] Noerr-Pennington is a doctrine based on the First Amendment right of petition that exempts from antitrust liability the joint efforts of businesses to petition or influence government bodies.

[iii] Under the consumer welfare model, business conduct and mergers are evaluated to determine whether they harm consumers in any relevant market.

[iv] Majority Staff Report and Recommendations: Investigation of Competition in Digital Markets (US House of Representatives Subcommittee on Antitrust, Commercial and Administrative Law of the Committee on the Judiciary)