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Obama, Antitrust, and the Great Recession

On the campaign trail, Barack Obama made an issue of the ostensibly lax state of antitrust enforcement during the Bush administration. Christine Varney’s first public act as head of the Antitrust Division was to withdraw the Bush Antitrust Division’s unilateral
monopolization report and announce that trustbusting against dominant firms was back on the agenda.  Expectations were high for an antitrust revival.  The antitrust world waited for the first shoe to drop in Washington.

So far, the shoe hasn’t dropped.  For all of the sound and fury, things have been relatively tame at the Antitrust Division.  At least from the outsider perspective, things look like business as usual: anti-cartel enforcement, consent decrees on controversial mergers.

Things have been a little different at the FTC, with the filing of the Intel case.  But it’s hard to put that one on the Obama administration, since the complaint was authorized by three commissioners appointed in previous administrations.  And, in any case, the FTC is supposed to be a politically independent commission (thanks to Humphrey’s Executor).

Last November, the St. Petersburg Times interviewed me for their PolitiFact.com service, which follows up on politicians’ campaign promises.  They wanted to know whether Obama had lived up to his campaign promise to reinvigorate antitrust enforcement.  At that time, I was cautious, telling them: “We haven’t seen the filing of any big cases, but that could be because it takes time to develop those cases, and they’re still working on them.”

I’m now ready to abandon my earlier caution and declare that there is some apparent dissonance between Obama’s campaign rhetoric and the reality on the ground at DOJ.  Mind you, I’m not criticizing for now: just observing.

Assuming I’m right about the dissonance, what’s the story?  My leading contender — one that is the subject of a forthcoming essay in the Antitrust Law Journal — is that antitrust enforcement is almost always put on the back burner during major economic crises.  Although I have little inside information about decision-making inside the beltway, I have some reason to believe that the White House has put the brakes on the Antitrust Division because of the economic circumstances.  (If any readers of this blog have contrary knowledge, I would be happy to stand corrected).

It also may be that I’m jumping the gun and the DOJ has a slew of big cases waiting in the wings.  They are certainly conducting some big investigations that could lead to Microsoftesque cases.  One of the downsides of blogging about something not happening is that it could happen the next day.  (One of the nice things about a blog is that your prior statement can then be updated the next day).

But this last possibility raises a different and quite subtle issue: how do we measure the real effectiveness or vigor of antitrust enforcement, when its chief function is deterrence?  In a world of perfect deterrence, there would be no antitrust cases filed.  This is a paradox of law enforcement.  The Bush Administration collected record fines in cartel cases, but that might be nothing more than evidence of an explosion of cartel behavior because of a perception that enforcement would be lax.  Perhaps the current mildness out of the Antitrust Division is merely the consequence of the President and AAG having threatened large companies with severe sanctions for misbehaving with the consequence that the ostensible offenders retreated from their worst practices to wait out the current administration.  If so, the dissonance between rhetoric and practice is merely the sound of deterrent success.

I don’t pretend to have firm answers to the questions I posed.  These sorts of questions are best analyzed with the benefit of hindsight after the close of the relevant events rather than midstream.  So let’s see how the story develops.

Filed under: antitrust, federal trade commission, mergers & acquisitions

Full post as published by Truth on the Market on July 26, 2010 (boomark / email).