Aggressive antitrust actions against tech companies face skepticism and judicial resistance

The voices calling for antitrust action to break up powerful technology companies are growing louder in the legislative and executive branch. But the nascent efforts face skepticism even from allies as well as resistance in the courts.

The U.S. Department of Justice rolled out its most ambitious antitrust case in years when it challenged the AT&T Inc.-Time Warner Cable merger. Last week, it lost unanimously in the D.C. Circuit. U.S. v. AT&T Inc., 18-5214 (D.C. Cir., filed July 13, 2019).

Some Democrats in Congress look to be gearing up for a new push but face an uphill fight in a Republican-controlled Senate. The Federal Trade Commission recently announced a 17-attorney Antitrust Task Force, but critics have cited previous inaction from the agency and called the action "moving the chairs around."

"Why would they announce it with such fanfare if they don't intend to do anything?" asked Gary L. Reback, of counsel with Carr & Ferrell LLP in Menlo Park and a key player in cases involving Microsoft Corp. and Google. "But we were very badly disappointed with the FTC during the Obama administration."

Reback pointed to the FTC investigation of search manipulation by Google that was closed without action. He added a lot of people were "hopeful" when President Donald Trump named antitrust attorney Joseph J. Simons as FTC chairman but said "so far we're still waiting."

A new wave of antitrust attorneys, known as the neo-Brandeisians, is challenging the understanding of antitrust law that has dominated the courts for 40 years. In his 1978 book "The Antitrust Paradox," Robert H. Bork argued the correct way to evaluate antitrust claims was not through the need to preserve competition between companies but through the lens of whether mergers raised prices or otherwise harmed consumers.

Bork is most famous outside legal circles for his failed nomination to the U.S. Supreme Court, but Justice Neil M. Gorsuch is among many powerful jurists who regularly cite his ideas.

The alternative view is laid out in "Amazon's Antitrust Paradox," a 2017 Yale Law Journal article by Lina M. Khan. She argues ignoring factors such as market power and data concentration has allowed overly-dominant market players to emerge right under the noses of courts and regulators.

"The current framework in antitrust -- specifically it's pegging competition to 'consumer welfare,' defined as short-term price effects -- is unequipped to capture the architecture of market power in the modern economy," Khan wrote.

She also made the controversial claim that already-completed acquisitions "should receive greater scrutiny." For instance, she wrote, "Facebook's purchases of WhatsApp and Instagram" were not properly evaluated for the ability they offer to a company to combine user data from multiple sources.

Khan is a senior fellow at the Open Markets Institute, a group calling for stronger antitrust enforcement. The institute declined to offer Khan or anyone else to comment for this story.

Last week, news broke that Khan was in talks with Rep. David Cicilline, D-Rhode Island, to join the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law. This got the attention of attorneys representing companies in the technology industry. Many argue against a wholesale change in antitrust standards.

"Those who advocate this view, I believe, have a high burden of proof if they call for legislative solutions, as the hallmark strength of U.S. antitrust law has been its common law nature and its incremental elasticity," said Ian Simmons, a partner and co-chair with the antitrust group at O'Melveny & Meyers LLP in Washington D.C.

Khan is "brilliant and aggressive," said Robert H. Lande, a professor specializing in antitrust at the University of Baltimore School of Law. But he added any legislation she helped craft would be very unlikely to become law unless Democrats win the Senate and presidency in the next election.

"What about the California attorney general's office?" Lande said. "They have the largest and most active antitrust unit of any of the 50 states."

He said states took up the charge in the antitrust actions against Microsoft Corp. a generation ago. An ambitious antitrust case could take years to play out, Lande added, potentially enough time it would land in a U.S. Supreme Court with some new justices.

Indeed, Attorney General Xavier Becerra received an extra $22.5 million for the state Department of Justice's antitrust division in Gov. Jerry Brown's last budget with a similar amount included in Gov. Gavin Newsom's first budget proposal.

In October, he was one of a dozen attorneys general who signed onto a letter to the FTC asking the agency to take a broader approach to antitrust, especially in the areas of privacy and "big data." Last week, his office announced it would support SB 561, a bill that would expand consumers' right to sue when companies misuse their data.

"Given that a number of these companies are constituents, it's very hard for a California politician," Reback said. "But if the state of California took the lead, maybe people would rally around that."