Washington’s antitrust saber rattling may result in real cases, this time, attorneys say

President Joe Biden’s administration is making a lot of noise about enforcing antitrust laws, with some actions already taken this year to block acquisitions by California companies Illumina Inc. and Nvidia Corp.

Antitrust lawyers say the big question is whether enforcement under the Biden administration will be different from recent presidents, including Democrat Barack Obama.

Steven Cernak, a former in-house antitrust attorney with General Motors Inc. who is a partner with Bona Law PC, believes it will.

“I think the whole atmosphere has changed,” he said in a telephone interview. “There has been a sea change in the number of people who are interested in antitrust enforcement.”

Republicans, who traditionally oppose aggressive antitrust enforcement, have been more interested in using it to pursue actions against Silicon Valley companies. That occurred during the tail end of President Donald Trump’s term.

The U.S. Department of Justice, under then-Attorney General William Barr, filed an antitrust complaint in October 2020 against Google, arguing the Alphabet Inc. subsidiary based in Mountain View unlawfully maintains a monopoly in the search and search advertising markets.

“Republicans are focused on big tech, but across the aisle, there is concern about large companies in general,” Cernak said.

Biden has signaled a more aggressive push against mergers and acquisitions. He appointed Lina M. Khan, a former Columbia Law School professor known for her pro-competition views, as the chair of the Federal Trade Commission.

Jonathan Kanter was confirmed by the Senate in November to head the Justice Department’s antitrust division. His office will inherit the Google case.

Khan has been an academic researcher known for a paper on Amazon.com Inc.’s dominance that challenges what has been the guiding principle of antitrust law since the 1980s — that regulators should not interfere unless consumers are directly harmed.

“In particular, current law underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive,” Khan wrote in a 2017 paper. “More specifically, restoring traditional antitrust principles to create a presumption of predation and to ban vertical integration by dominant platforms could help maintain competition in these markets.”

Khan is turning her theories into FTC policy.

In September, the FTC, divided between three Democrats and two Republicans, repealed Trump-era guidelines that said vertical mergers help consumers by creating efficiencies that lower prices.

The FTC voted 3-2 to rescind the 2020 guidance, with both Republican appointees voting no. The Justice Department, however, maintained the vertical merger policy, creating a split between the two federal government agencies responsible for enforcing antitrust law.

Biden issued an executive order in July calling on the FTC and Justice Department “to enforce the antitrust laws vigorously and recognize that the law allows them to challenge prior bad mergers that past administrations did not previously challenge.”

The president likened the challenges his administration faces to those tackled by President Theodore Roosevelt, who broke up trusts, and President Franklin D. Roosevelt, who filed eight times the number of antitrust enforcement actions as his predecessor.

“When the president starts comparing himself to Teddy Roosevelt, that is a different sort of mindset,” said Carl W. Hittinger, national team leader of Baker & Hostetler LLP’s antitrust and competition practice.

Before Khan even started, the FTC filed a complaint challenging an acquisition by Illumina, the San Diego biomedical company, of Grail Inc., a health care company focused on early detection of cancer.

“If this acquisition is consummated, it would likely reduce innovation in this critical area of health care, diminish the quality of [multi-cancer early detection] tests, and make them more expensive,” FTC acting Chairwoman Rebecca Kelly Slaughter said in March. Illumina is fighting back, arguing the combination is pro-competitive. In the Matter of Illumina Inc. and Grail Inc., 2010144 (FTC, filed March 30, 2021).

Earlier this month, the FTC challenged Santa Clara technology giant Nvidia Corp.’s planned $40 billion acquisition of British chip design provider Arm Ltd., arguing the deal would undermine Nvidia’s semiconductor company rivals. In the Matter of Nvidia Corp. et al., 2110015 (FTC, filed Dec. 2, 2021).

“The FTC’s lawsuit should send a strong signal that we will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations,” FTC Bureau of Competition Director Holly Vedova said in a statement.

Belinda S. Lee, a Latham & Watkins LLP partner who represents Nvidia, countered in a Dec. 21 filing that the acquisition “will dramatically enhance innovation and competition in the semiconductor industry and thus benefit industry participants, consumers and the U.S. economy.”

The U.S. Supreme Court, with its conservative majority, may put a brake on the administration’s ambitions, though Justice Neil M. Gorsuch — a Trump appointee — wrote a June ruling that sided with student-athletes in an antitrust case against the NCAA. He affirmed a 9th U.S. Circuit Court of Appeals opinion allowing colleges to pay extra education-related benefits and what he described as the NCAA’s bid for “immunity from the normal operation of the antitrust laws.” NCAA v. Alston, 20-512 (U.S., filed Oct. 15, 2020).

“The Supreme Court is very interested in antitrust cases and will uphold a good case on the merits,” Hittinger said.

Cernak said the NCAA case still represents a caution for the government because federal judges remain skeptical of aggressive antitrust enforcement due to the popularity of the “Chicago School,” which maintains free markets will correct themselves.

“The NCAA lost, but there’s a lot of language [in Gorsuch’s opinion] that is straight out of the Chicago School,” Cernak said. “That will restrict how quickly the Justice Department and FTC can change antitrust laws.”

But antitrust lawyers say the Biden administration’s recent actions get the attention of company executives. “When they see a merger challenged, that’s when they start paying attention,” Cernak said.

Cernak said the FTC is hiring new employees who will push more antitrust enforcement actions.

“I think you’re going to get a newer generation of lower-level staffers who will be more aggressive,” he said. “That will be the biggest change that will last longer than the Lina Khan administration.”

For some companies considering mergers or acquisitions, the prospect of a battle with the federal government may be enough to prompt executives to drop some deals.

“If you have a deal that’s borderline, that may tip it,” Hittinger said.

Jennifer M. Oliver, a partner with MoginRubin LLP who represents plaintiffs in antitrust cases, is cautious about what the Biden administration will ultimately be able to achieve.

“Lina Khan has limited real world experience, and we’re not seeing them bringing cartel enforcement cases yet,” she said. “They need to win a case in court to have maximum deterrent effect.”

Another factor that may affect matters is the COVID-19 pandemic and the resulting slowdown in the courts. There is a huge backup of criminal cases that will have to be decided first.

“Judges aren’t going to have the time to devote to civil cases, including antitrust,” Hittinger said. “It will cause some of these mergers to get pushed off until the courts get to them.”

Skeptics recall that Obama administration enforcers got off to a fast start, reversing policies of President George W. Bush’s administration after taking office in 2009, talking tough, and opening an antitrust inquiry of Google. But while Obama administration antitrust enforcement was more vigorous than that of a Republican administration, the ultimate impact was limited, attorneys say.

“I think there has to be a win [by the government] to really change things,” Cernak said. “I think that’s going to be necessary for the tough talk to have some effect.”