Large corporations may soon see a different side of the law. On Monday, the Department of Justice (DOJ) withdrew a report, effectively opening up stricter enforcement of antitrust laws.
The report, “Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act” gave guidance to courts, antitrust counselors, and the business community. Its withdrawal gives the DOJ more room to tackle big businesses who cross the antitrust lines.
Although the report gives detailed antitrust enforcement strategies, its “ultimate conclusions, however, miss the mark. In my view, the greatest weakness of the Section 2 Report is that it raises many hurdles to government antitrust enforcement,” said Christine Varney, assistant attorney general in charge of the DOJ’s Antitrust Division, in a speech given to the Center for American Progress on Monday.
Varney explained that although it has its perks, the report has several shortcomings that help defend some ill business practices. “The report advocates extreme hesitancy in the face of potential abuses by monopoly firms,” Varney said.
The withdrawal of the report goes into effect immediately.
Last year, Varney, who headed the Internet practice at Hogan & Hartson, described Google Inc. as a monopolist, according to Bloomberg. Today, she declined to comment on Google specifically, while saying the Internet has “introduced radically different economic models.” She said her staff will study the impact of those new models on antitrust policy.
“We do not lightly withdraw the report,” Varney said, adding that while allowing businesses their right to compete, “we cannot allow them a free pass to undertake predatory or unjustified exclusionary acts.”
In the absence of the report, the department will use the original Section 2 of the Sherman Act to counter corruption. “Reinvigorated Section 2 enforcement will thus require the division to go ‘back to the basics’ and evaluate single-form conduct against these tried and true standards that set forth clear limitations on how monopoly firms are permitted to behave,” Varney said.
Learning From the Past
Antitrust laws came about in the United States with the passing of the Sherman Antitrust Act in 1890, yet the climate of World War I and the Great Depression limited its effect.The Great Depression “brought a close to the government’s previous commitments to trust-busting,” Varney said. “This lack of interest in antitrust enforcement continued through the 1920s.
“Significantly, the onset of the Great Depression did not cause the nation to reconsider the damaging effects of cartelization on economic performance,” she said.
In the 1930s, new legislation was passed. The National Industrial Recovery Act (NIRA) created the National Recovery Administration (NRA) which let industries create “codes of fair competition” and to set the prices and wages for industries.
“What was the result of these industrial codes? Competition was regulated to the sidelines, as the welfare firms took priority over the welfare of consumers. It is not surprising that the industrial codes resulted in restricted output, higher prices, and reduced consumer purchasing power,” Varney said.
This situation continued largely until the Roosevelt Administration when the antitrust laws saw a rise in enforcement.
Varney said that there are two lessons from this. “First, there is no adequate substitute for a competitive market, particularly during times of economic distress. Second, vigorous antivirus enforcement must play a significant role in the government’s response to economic crisis to ensure that markets remain competitive,” she said.
Vargas continued that in light of the current economic situation, “I believe that these extreme conditions require a recalibration of economic and legal analysis and theories, and a clearer plan for action.”
New Ways to Stop Misuse
Large sums of money given as bailouts to businesses through the American Recovery and Reinvestment Act (ARRA) have created more need to monitor misuse and corruption.To better ensure the bailout money is used properly, the Antitrust Division has launched the Antitrust Division Recovery Initiative. It will “assist agencies receiving ARRA funds in detecting and deterring criminal antitrust offenses,” Varney said.
Through this initiative, the Antitrust Division hopes to make a significant impact on the overall prevention of fraud, waste, and abuse relating to the use of ARRA funds,” she said.
Other initiatives will be to move push forward on merger and non-merger investigations, and to “look forward in order to remain at the forefront of the dialogue, economic learning, and the development of legal doctrine,” Varney said.
