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May 31 — U.S. antitrust enforcement has picked up under President Barack Obama, but his overall record on the issue still falls short of what some were expecting based on his campaign promises and sharp criticism of the George W. Bush administration.
The Department of Justice challenged an average of about 17 mergers annually during the first six years of the Obama presidency, an increase of about 18 percent over Bush administration levels, according to a Bloomberg BNA analysis of DOJ data.
Despite the uptick, Obama is on track to leave office with a mixed antitrust record that is not too far from his predecessor's in some ways, competition advocates told Bloomberg BNA.
“We had hopes that there would be more vigorous enforcement,” said Diana Moss, president of the American Antitrust Institute, a think tank. “More could and should have been done.”
John Kwoka, an economics professor at Northeastern University, said the antitrust agencies, under Obama, have taken tough actions in some cases, such as DOJ's lawsuit this year to stop the ultimately-abandoned merger deal between Halliburton Co. and Baker Hughes Inc. But they've also “dropped the ball” in some instances, he said.
“They should have chosen to block rather than tinker with more mergers, and I think we’re seeing concern in a lot of markets about the effects of the mergers that have been allowed,” said Kwoka, who also serves as a senior fellow for AAI.
A total of 7,550 merger deals were filed with the U.S. government from 2009 to 2014. Of those, DOJ and the Federal Trade Commission together challenged about 3 percent of the transactions.
Attorney General Loretta Lynch said in April that DOJ was seeing an unprecedented wave of large, complex mergers (67 ATD, 4/7/16). In fiscal year 2015, the number of proposed tie-ups valued at more than $10 billion was 67—more than double the figure from the previous year, she noted.
While U.S. antitrust enforcement has stepped up to some degree, a recent report from the president's Council of Economic Advisers shows the need for more aggressive federal actions to increase competition going forward, according to Moss.
Indicators suggest that many industries may be becoming more concentrated, that new firm entry is declining, and that some companies are generating returns that are greatly in excess of historical standards, according to the report, which was released by the White House in April.
The study was accompanied by an executive order from Obama that directed federal agencies to report back to the White House with potential steps they can take to promote more competitive markets.
“Ideally, the order would have been issued sooner, but better late than never,” Moss said.
How much the administration can get done on the issue before Obama leaves office is unclear. Competition advocates see the order potentially teeing up proposals for the next administration.
Maurice Stucke, an antitrust lawyer and tenured law professor at the University of Tennessee, said the competition problems highlighted in the White House report are not surprising; they are the effects of lax antitrust enforcement over many years, including under the Obama administration, he said.
Enforcement of Section 2 of the Sherman Act, which prohibits monopolization, has been particularly weak, according to Stucke, another senior fellow at AAI. There haven't been any significant Section 2 cases since the Clinton administration, when DOJ took on technology giant Microsoft Corp., he told Bloomberg BNA.
When it comes to merger enforcement, Obama's record has been mixed, Stucke said. The abandoned Halliburton deal was a clear victory for competition, while missed opportunities include a settlement that allowed Comcast Corp.'s takeover of NBC Universal in 2011, he said.
“Are the agencies more aggressive under Obama than they were under Bush? Perhaps,” Stucke said. “But are they as aggressive as they were long ago, like in the 1950s and 60s, when they were much more on guard about preventing a trend toward concentration? Arguably, no.”
Despite increasing their scrutiny of mergers, Kwoka said the antitrust agencies have remained too permissive, clearing deals that weren't in the best interest of consumers. For example, he cited DOJ's failure under Obama to take a harder, more skeptical look at airline mergers.
“The record over the past several years hasn't been great in my view,” Kwoka said. “It certainly could be worse, but that’s a low bar, and much lower than Obama set out in his initial statements about what his expectations and plans were for competition policy.”
In 2007, then-senator and presidential candidate Obama promised to shake up U.S. antitrust enforcement.
“Regrettably, the current administration has what may be the weakest record of antitrust enforcement of any administration in the last half century,” Obama said at the time, in a statement provided to AAI, which had queried White House hopefuls about their antitrust views.
He noted that, between 2001 and 2006, the FTC and DOJ together challenged an average of only about 33 mergers per year. After Obama's sixth year as president, the agencies had increased that number to about 38.
“If you look at the statistics, you actually do see a bit of an uptick—but it wasn’t much,” Moss said.
Under the Clinton administration, the antitrust agencies challenged many more mergers than they did under Bush and Obama. However, there was also a much greater volume of merger deals during the Clinton years. Taking this into account, Obama's merger enforcement record, on a percentage basis, ends up being slightly more vigorous than that of both Clinton and Bush.
In his statement to AAI, Obama also pointed out that the Bush Justice Department had not brought a single anti-monopolization case in seven years.
Shortly after he became president, DOJ withdrew Bush administration guidance on Section 2, saying that the document favored extreme caution and raised too many hurdles to antitrust enforcement (89 ATD, 5/12/09). The move was widely seen as a precursor to more aggressive Section 2 enforcement. However, the number of cases filed has picked up very little since then.
“One would be hard pressed to claim that the Obama administration delivered on its promise to reinvigorate competition when it comes to Section 2 enforcement—in fact the numbers belie that,” Stucke said.
A DOJ spokesman cited a total of two monopoly-related cases under Obama so far. In 2011, the department announced a settlement with United Regional Health Care System in Wichita Falls, Texas, resolving allegations that the hospital used anti-competitive contracts with health insurers to maintain its monopoly power. And in April of this year, United Continental Holdings abandoned a deal to acquire takeoff-and-landing rights at New Jersey's Newark Liberty International Airport, after DOJ sued to block the deal, citing the carrier's already dominant market share.
David Balto, an antitrust lawyer and former policy director at the FTC, defended Obama's record, pointing to actions such as the Halliburton suit as evidence of vigorous enforcement.
“He ran on a platform of increasing antitrust enforcement, and he’s delivered on that in an important way,” Balto told Bloomberg BNA. “The antitrust agencies are now willing to fight for consumers in court. The Bush administration cases primarily involve cut and paste consents.”
Kwoka said there are some distinct differences between the Obama and Bush records, but “a lot of sameness” as well.
“The agencies under Obama have taken some actions that I’m not sure would have happened under Bush,” he said. “But they’ve also been lax in some ways. So, it’s a very mixed record.”
With assistance from Llewellyn Hinkes-Jones
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