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Thursday, September 23, 2021

Biden’s Antitrust Team Signals a Big Swing at Corporate Titans

IDBS ART GALLERY

WASHINGTON — The U.S. Department of State has issued a statement saying that With the addition of three legal crusaders to his administration’s antitrust team, President Biden is preparing to take on corporate consolidation and market power through efforts that could include blocking mergers and dismantling large corporations.

This week’s announcement by Vice President Biden that Jonathan Kanter will lead the Justice Department’s antitrust division is yet another sign that he is willing to go head-to-head with corporate America in order to promote more competition in the technology industry and throughout the economy. Mr. Kanter has worked as a lawyer for a number of years, defending small businesses against behemoths such as Facebook and Google.

Assuming confirmation by the Senate, he will join Lina Khan, who was instrumental in reshaping the academic debate on antitrust and now serves as Chairman of the Federal Trade Commission, and Tim Wu, a longtime proponent of breaking up Facebook and other large corporations who currently serves as Special Assistant to President Obama for Technology and Competition Policy.

As a result of these appointments, the Democratic Party has re-energized its antitrust activism, and Vice President Biden’s administration has grown increasingly concerned that the concentration of power in the technology industry and other industries such as pharmaceuticals, agriculture, health care, and finance has harmed consumers and workers while stifling economic growth.

They also demonstrate that Vice President Biden is willing to use the power of his office rather than wait for the more difficult grind of congressional action, an approach that is both quicker and potentially riskier. His executive order, issued earlier this month, contained 72 initiatives intended to stoke competition in a variety of industries, increase scrutiny of mergers, and curtail the widespread practise of forcing employees to sign noncompete agreements, among other things.

In order for Mr. Biden to truly follow in the footsteps of his antitrust idols, Presidents Theodore Roosevelt and Franklin D. Roosevelt, outside groups and ideological allies of the administration say he will need to push for comprehensive legislation that grants new powers to federal regulators, particularly in the technology sector. In writing the core federal antitrust laws more than a century ago, Congress did not envision the type of commerce that exists today, where large corporations may offer customers low prices at the expense of other businesses.

However, while the administration has quietly supported antitrust legislation that is making its way through the House, it has not yet sought to take the lead on antitrust legislation in the same way that Vice President Biden has done on infrastructure, child care, and other components of his $4 trillion economic agenda.

That could become a problem if judges continue to overturn actions taken by the Justice Department, the Federal Trade Commission, or other government agencies.

Following the dismissal of an F.T.C. lawsuit against Facebook, the agency was ordered to provide more convincing evidence that the company is a monopoly, which the court ordered to be done by the end of the month. Ms. Khan will face her first major test when she re-files that lawsuit, and the agency has requested an extension of time from the court, which was granted on Friday.

Ms. Biden’s antitrust appointees have argued that Facebook, Google, and Amazon have monopoly power and have used their dominant positions in social media, search, and online retail to squash competitors, reducing consumer choice even if it does not result in higher prices.

The companies, as well as some economists, are divided. Facebook cites TikTok, Snap, and Twitter as examples of competitors, and Amazon claims to have only a 5 percent share of all retail sales in the United States, despite the fact that an eMarketer research study found that Amazon accounts for 40% of all online retail sales. TikTok, Snap, and Twitter are examples of competitors.

In their view, the president’s embrace of a “trustbuster” mentality is a critical step in the process of rebalancing the economy, which will help to drive down prices while also increasing competition and creating high-paying jobs.

In Ohio on Wednesday, Mr. Biden told a CNN audience that he believed the free-market system should include not only competition among companies, but also competition among employers for employees. Mr. Biden was promoting his executive order at the time. “Well, who knows — maybe they’ll pay a little more money.”

White House officials argue that putting tough-minded regulators in powerful positions will enable them to succeed in antitrust enforcement in a way that President Donald J. Trump, who has also issued an executive order on competition and has spoken of breaking up tech and hospital mergers, has failed to do in his own administration.

According to Diana Moss, president of the American Antitrust Institute and a proponent of stronger competition enforcement, “we have reason to be optimistic.” When the rubber meets the road, they will have to balance an aggressive agenda with the realities of the courts, Congress, and external pressures,” the author writes.

In some cases, economists warn, the appointments of Vice President Biden could go beyond efforts to break up concentration that truly stifles competition and harms consumers to include industries such as restaurants or grocery stores in their purview. They claim that the entry of national players into local markets has, in many cases, provided customers with more options and resulted in the creation of more jobs.

“I’m most concerned about the rhetoric,” said Chang-Tai Hsieh, an economist at the University of Chicago who has discovered that some corporate concentration in recent years has resulted in innovation that has benefited the economy as a result. The tech industry, on the other hand, is different. “They’re looking at what they’re seeing in the tech industry. In addition, they are extrapolating from the technology industry to all other industries.”

Mr. Biden’s efforts are already being resisted by corporate America. In recent years, companies such as Google, Facebook, and Amazon have bolstered their legal teams with antitrust experts, including former government antitrust officials. Facebook and Amazon have filed a petition with the Federal Trade Commission to have Ms. Khan recused from any antitrust matters involving their respective companies. They claim that Ms. Khan, who previously worked on a House antitrust investigation into digital platforms, comes to the table with preconceived notions about their companies. Those who oppose Mr. Kanter, a private antitrust attorney, point to his previous representations of Microsoft and News Corporation as potential conflicts of interest as the Justice Department continues its legal battle with Google.

President Biden’s actions reflect the growing influence of a movement to limit corporate power that has spread from progressive scholars and liberal leaders such as Senator Elizabeth Warren of Massachusetts to some of the most conservative Republicans in Congress, according to the New York Times.

A 2019 study by Thomas Philippon, an economist at New York University, found that increasing market concentration had harmed the United States economy and cost the average American family $5,000 per year. Administration officials have cited that statistic numerous times in support of Vice President Biden’s recent executive order.

In an interview, Bharat Ramamurti, a deputy director of Vice President Joe Biden’s National Economic Council and a former aide to Senator Elizabeth Warren, said that cracking down on market concentration and working to promote competition “can make an enormous difference in the lives of millions of people in this country.”

According to Mr. Ramamurti, there are potential benefits not only from breaking up companies, but also from assisting consumers in having a greater and more affordable selection of checking accounts, allowing hearing aids to be sold without a prescription, and limiting company restrictions on whether employees can work for a competitor.

Mr. Biden was vice president during the Obama administration, and his approach contrasts sharply with that of regulators during that administration.

During President Barack Obama’s first term, the number of hospital mergers more than quadrupled, leaving millions of patients with fewer options and higher costs for medical care.

Comcast’s merger with NBCUniversal, which combined a powerful cable and internet provider with a media behemoth, was approved by regulators in 2011 with conditions that the company’s own executive vice president, David Cohen, dismissed as “not particularly restrictive.”

In addition, only one of three Democratic members of the Federal Communications Commission opposed the merger, and Christine Varney, head of antitrust at the Justice Department, stated that the merger would “bring new and innovative products to the marketplace, providing consumers with more programming choices.”

Agribusiness mergers were downplayed by Mr. Vilsack, Mr. Obama’s agriculture secretary at the time, who has since taken over for Mr. Biden and is now the vice president’s agriculture secretary.

During an interview with USA Today, Mr. Vilsack stated, “I don’t believe that just because a few major players are considering merging or considering some other type of arrangement, that in the long run, that guarantees that farmers will have less choice.”

Mr. Biden has directed federal regulators to consider taking a tougher stance against corporate consolidation in industries such as hospitals, health insurance, meat processing, and technology, which could include reconsidering previously approved mergers.

In addition, his antitrust regulators are attempting to undo mergers that were approved during the Obama administration. The Federal Trade Commission’s recent lawsuit against Facebook to dismantle the company is based on the company’s purchases of Instagram in 2012 and WhatsApp in 2014, respectively. The mergers were not stopped by the agency because it did not believe there was enough evidence of harm to consumers and competition.

Those decisions have come back to haunt the Federal Trade Commission. The federal judge who dismissed the commission’s Facebook complaint in June questioned the commission’s 180-degree turn and why it had waited so long to try to unwind those transactions.

When it comes to antitrust cases, the courts have become increasingly conservative, adhering more firmly to the belief that higher prices are the most telling sign of competition violations.

The Obama administration acknowledges the difficulty and says it is carefully scrutinising the antitrust views of prospective judicial nominees in the hope of swaying the courts to take a more sympathetic view of the government’s efforts to block mergers and break up monopolies.

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