On July 20, 2021, President Biden nominated Jonathan Kanter, a longtime advocate for more aggressive antitrust enforcement against large technology companies, to lead the Department of Justice's Antitrust Division.
In the statement announcing his appointment, the White House stated that Kanter has "been a leading advocate and expert in the effort to promote strong and meaningful antitrust enforcement and competition policy."
On Capitol Hill and among interest groups, supporters of sweeping new changes in antitrust enforcement applauded the pick. If confirmed, Kanter will fill the post currently held by Richard Powers, who has led the Antitrust Division on an acting basis since the departure of former Assistant Attorney General Makan Delrahim on January 20, 2021.
Kanter is a founding partner of Kanter Law Group, a self-styled "antitrust advocacy boutique." Prior to founding his own firm last year, Kanter co-chaired the antitrust group at Paul Weiss and worked at several other large law firms over the past two decades.
Unlike the past several heads of the Antitrust Division, Kanter has never served at the Department of Justice, but he began his career as a staff attorney at the Federal Trade Commission. He is no stranger to the world of antitrust enforcement, having represented technology companies such as Microsoft and Yelp in pushing antitrust officials to take action against Google. In writings and speeches, he has advocated in favor of government enforcement action against Google.
Following President Biden's appointment of Lina Khan as chair of the Federal Trade Commission (FTC) and Columbia Law School professor Tim Wu as Special Assistant to the President for technology and competition policy, as well as the President's recent executive order[1] on competition, the selection of Kanter signals that the Biden administration is serious about pursuing the most aggressive antitrust enforcement agenda in decades, with an emphasis on reining in large technology companies.
With Kanter now potentially moving from advocate to enforcer, here are some specific things to watch.
Moving Beyond the Consumer Welfare Standard
The traditional standard for assessing whether a merger or other action is anticompetitive, the "consumer welfare standard," focuses on whether the behavior is likely to lead to an increase in prices or a reduction in output.
This standard, which has its roots in Supreme Court cases going back to the 1970s, has guided the antitrust enforcement agencies' decision making for decades. But increased concentration in multiple industries, and the emerging dominance of large technology companies, has led many commentators, including Kanter, to rethink whether the consumer welfare standard should still be the guiding principle.
In a 2017 speech at a Federalist Society conference, Kanter was harshly critical of this standard, calling it "out of step," "limited" and "narrow." In the speech, Kanter explicitly rejected the idea that the consumer welfare standard should guide enforcers' decisions, stating "the FTC and the DOJ antitrust division are not supposed to be, or created to be, folks to decide what's maximally efficient and to make decisions. They were designed to enforce the laws written by Congress."[2]
At the FTC's 2018 hearings regarding the future of antitrust, Kanter asserted that "if the free-market sector of the economy is allowed to develop under antitrust rules that are blind to all but economic concerns, the likely result will be an economy so dominated by a few corporate giants that it will be impossible for the state not to play a more intrusive role in economic affairs."[3]
These statements align with the views of FTC Chair Khan, who in one of her first acts as chair put before the Commission a vote to rescind a 2015 policy statement that focused the FTC's enforcement actions on cases that promote the consumer welfare standard and that are guided by the "rule of reason."
Although that policy statement was meant to bring predictability and objectivity to FTC enforcement actions, Khan stated that "[i]n practice, the [2015] Statement has doubled down on the Commission's longstanding failure to investigate and pursue 'unfair methods of competition.'"[4] The proposal to withdraw the FTC's prior policy passed on a 3-2 party line vote.
Even if Kanter does not immediately take such dramatic steps, it seems reasonable to expect that a Kanter-led Antitrust Division will look beyond the price and output effects of anticompetitive behavior and increasingly consider non-price effects such as quality, innovation and privacy.
The DOJ's ongoing case against Google shows that the Antitrust Division is already bringing non-price considerations to bear. Although principally focused on traditional theories of economic harm, the complaint includes allegations that Google's conduct stifled innovation, lessened quality, and diminished options for consumers, including options with greater privacy.
With Kanter in charge, the Antitrust Division could begin bringing cases based primarily on such types of harm. At a minimum, we can expect the Antitrust Division to step up enforcement against mergers and other corporate conduct that adversely affects employees and consumers.
Continued Focus on Reining in Big Tech
Kanter's background as a leading advocate for increased enforcement against Google suggests that the tech industry will continue to be a focus of the Antitrust Division's enforcement efforts.
In addition to his work in private practice, Kanter's advocacy against Google included a May 2016 op-ed piece in the New York Times,[5] in which he urged caution in the Federal Communications Commission's bid to "unlock" cable set-top boxes by requiring cable companies to give video streaming, programming and encryption data to companies like Google that make stand-alone alternatives to the traditional cable set-top box.
He argued that the FCC proposal risked "replac[ing] one set of powerful gatekeepers [cable companies] with a new one: Google."[6]
The op-ed goes on to criticize Google for "follow[ing] the same playbook for years: introducing a free product into a competitive space, subsidizing that product with advertising revenue, and then closing off competition through discriminatory and exclusionary practices."[7]
Kanter's criticisms of Google mirror those of Khan and Wu, both of whom have been outspoken critics of large tech companies.
Khan's advocacy began while a law student at Yale, where she published a note that made headlines both inside and outside of antitrust circles with its expansive view of antitrust enforcement, including the argument that Amazon's business model is anticompetitive.[8]
Her advocacy continued in her roles as legal director at the Open Markets Institute, as a staffer at the House Judiciary Committee's antitrust subcommittee, and as a Legal Fellow at the FTC under Commissioner Rohit Chopra.
Wu has written extensively on the threat posed by increasing corporate consolidation, most notably in his 2018 book, The Curse of Bigness: Antitrust in the New Gilded Age.
If confirmed, Kanter will inherit a case he advocated for in private practice, the DOJ's case against Google. The DOJ's complaint alleges that Google employed a series of anticompetitive and exclusionary agreements that foreclosed competition in the internet search market, which harmed consumers by impeding innovation and diminishing the quality of products and options available.
A complaint filed by a bipartisan group of states includes similar allegations as the DOJ's and also alleges harm based on exclusion of vertical search engines that focus on specific topics (e.g., airplane tickets) rather than general web searching.
With the case not scheduled for trial until late 2023, it will be interesting to see whether Kanter seeks to amend the DOJ's complaint to add new theories and claims, such as those pled in the states' case.
Another interesting aspect of the Google case to watch is whether Kanter is forced to recuse himself from working on the case based upon his previous advocacy against Google. Amazon and Facebook have recently sought to have Khan recused from the FTC enforcement matters involving those companies because of her writings and advocacy against those companies.
Continued Aggressive Merger Enforcement, Including Nascent Competitor and Vertical Cases
In addition to conducting enforcement actions against Big Tech companies, we can expect Kanter's Antitrust Division to step up enforcement against mergers across all industries.
This increased enforcement will likely include not only routine challenges to horizontal mergers that increase market concentration, but also cases where the government faces tougher standards, such as challenges to acquisitions of nascent competitors and vertical mergers.
We can also expect Kanter to continue the recent trend, at both the FTC and DOJ, towards litigating merger cases rather than settling them.
Kanter has expressed support for government enforcement against acquisitions of nascent competitors. At the 2018 FTC hearings, speaking on a panel exploring nascent competition, Kanter stated that government enforcers often rely too heavily on traditional formulaic tools of merger analysis such as market definition rather than the practical realities of what is happening in a market, such as where a merger eliminates a nascent competitor.[9]
Although Kanter's comments at the FTC hearings may have been slightly ahead of their time in 2018, they are consistent with broader trends in antitrust policy and enforcement today.
For example, Senator Amy Klobuchar's recently proposed antitrust legislation would create a presumption against nascent competitor acquisitions by dominant firms.[10] And the DOJ has already been aggressively challenging acquisitions of nascent competitors.
Last year, the DOJ went to trial to block Sabre's acquisition of Farelogix, arguing that despite Farelogix's small size, it had potential to act as a market disruptor if not acquired. That deal was abandoned in response to similar concerns from the United Kingdom's Competition and Markets Authority.
Similarly, the DOJ's challenge to Visa's acquisition of nascent competitor Plaid in November 2020 caused the parties to abandon the deal.[11]
One area to watch will be Kanter's approach to vertical mergers, particularly in light of the DOJ's unsuccessful challenge to the AT&T/Time Warner merger in 2018. Kanter's advocacy in favor of aggressive enforcement suggests that he will not shy away from a merger challenge simply because the acquisition is vertical rather than horizontal.
This was the FTC's approach earlier this year, when it unanimously voted to file a complaint challenging biotech company Illumina's proposed vertical acquisition of Grail, which makes cancer detection tests.[12]
Relatedly, another test for Kanter will be whether he aligns the DOJ with FTC leadership on the vertical merger guidelines that the DOJ and FTC jointly issued last year. Both Khan and former Acting FTC Chair Rebecca Slaughter have called for withdrawing the guidelines and replacing them with new guidelines that take a more aggressive approach to vertical mergers.
Continued Aggressive Criminal Enforcement, Particularly in Labor Markets
Kanter can be expected to continue the Antitrust Division's effort to prosecute labor market collusion. In December 2020, the DOJ brought its first-ever criminal labor market indictment, charging the former owner of a Texas therapist staffing company with a wage-fixing scheme.
Since that indictment, the DOJ has brought similar charges against both companies and individuals, including the indictment last month of a major dialysis company and its CEO, for allegedly conspiring with competitors not to solicit employees. All of the charges so far have been in healthcare-related industries, but the principles apply to all sectors, especially those with skilled workforces.
Although Kanter has no background in criminal law and his advocacy has focused on civil enforcement, the push to bring criminal cases in labor markets represents just the sort of active use of the government's enforcement authority that Kanter has supported throughout his career.
Another reason such cases will likely continue is that Richard Powers, the current acting head of the Division, will likely return to his former role as Deputy Assistant Attorney General for Criminal Enforcement; Powers has made labor market collusion a priority for the Division.
Robust criminal antitrust enforcement will likely continue in other areas as well. Consistent with the Biden Administration's strong consumer protection agenda, we should expect to see price-fixing prosecutions, particularly related to foods, pharmaceuticals, and retail products, and increased global cartel enforcement.
Further, the DOJ's recent push against the misuse of government funds suggests that the Procurement Collusion Strike Force, the Department's multi-agency effort to combat antitrust crimes related to government programs, is likely to remain active.
More Conduct Cases Through Increased Use of Section 2
Finally, Kanter will likely look for opportunities to bring more monopolization cases under Section 2 of the Sherman Act, like the case filed against Google last year. In recent decades, the DOJ has brought relatively few Section 2 cases, as compared to Section 1 cases (such as price-fixing) or merger challenges under Section 7 of the Clayton Act.
Kanter has been critical of the government's failure to use Section 2. Kanter was especially pointed at an event sponsored by the New America Foundation in January 2016 where he said,
[m]erger enforcement is alive and well. Antitrust enforcement is barely on life support. ... When was the last time you can remember a major antitrust agency bringing a monopolization case? The reason you can't remember it is because they haven't done it.[13]
At a panel discussion sponsored by Yelp in 2018, Kanter decried the lack of Section 2 enforcement, noting that the DOJ's monopolization case against Microsoft in the 1990s was the only big Section 2 case brought in several decades:
Section 2 — monopolization cases — are the antitrust equivalent of jaywalking. You just don't see them, people don't care about them, and the consequences of being investigated are seen as so remote, low risk and unlikely to impact a company that adhering to the law is a greater cost than the behavior you're engaging in.[14]
In the same discussion, Kanter stated that enforcers should focus on large companies such as Google, rather than smaller companies, because it is the larger ones distorting the competitive process.
Based upon these comments, it would be surprising if we did not see a number of Section 2 cases brought during the Kanter regime. It will be interesting to see which large companies—and which industries—will be subject to Section 2 enforcement.
Conclusion
In his executive order on competition, President Biden stated that "it is the policy of my Administration to enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly."
The President's nomination of Jonathan Kanter to lead the Antitrust Division demonstrates that the administration is committed to an aggressive agenda to advance this policy goal.
Based upon his advocacy over many years, we can expect Kanter to pursue such an agenda, in at least the following ways:
- Moving beyond the consumer welfare standard to pursuing cases that allege theories of harm other than price or output effects.
- Continued aggressive enforcement against large technology companies.
- Continued aggressive merger enforcement, and an uptick in enforcement against acquisitions of nascent competitors.
- Continued aggressive criminal enforcement, particularly in labor markets.
- Increase in conduct cases, particularly under Section 2 of the Sherman Act.
Perhaps the most telling signal of what we should expect from Kanter came from his supporters while he was under consideration by the Biden administration, who posted photos on social media of coffee mugs[15] emblazoned with the phrase "Wu & Khan & Kanter." If he is confirmed, Kanter, along with Khan and Wu, will usher in a new, more aggressive, era in antitrust enforcement.
Brian Pandya, a partner in Duane Morris' Washington, D.C., office, previously served as deputy associate attorney general at the U.S. Department of Justice, where he oversaw litigations and investigations by the antitrust and civil divisions. Christopher Casey, a partner in the firm's Philadelphia office, also previously served as deputy associate attorney general at the DOJ. Sarah O'Laughlin Kulik, an associate in Duane Morris' Philadelphia office, focuses her practice on antitrust litigation.
Notes
- https://bit.ly/3sbqMYN
- https://bit.ly/3lRBanC
- Federal Trade Commission, "Competition and Consumer Protection in the 21st Century," October 17, 2018.
- https://bit.ly/3AqGsKS
- https://bit.ly/3yEnujf
- https://nyti.ms/3lPDSdk
- Id.
- Amazon's Antitrust Paradox, 126 Yale Law Journal 710 (2017).
- Federal Trade Commission, "Competition and Consumer Protection in the 21st Century," October 17, 2018.
- https://bit.ly/31Umo4n
- https://bit.ly/3s6YQFI
- https://bit.ly/3CFa60Y
- See https://bit.ly/3xP2YeR ("Amazon and the Law," Feb. 4, 2016). See also https://bit.ly/3Au7eBY (discussing speech).
- https://bit.ly/2Ufa7Hy
- https://bit.ly/2XaBFic
Reprinted by permission.
