Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Baer discusses competition policy and enforcement at Chatham House Conference in London, (Jun 18, 2015)

By Michael Menzhuber, J.D., LL.M.

William J. Baer, Assistant Attorney General in charge of the U.S. Department of Justice (DOJ) Antitrust Division, discussed competition policy and competition enforcement in prepared remarks given on June 18, 2015, at the Chatham House Conference in London entitled “Politicization of Competition Policy – Myth or Reality?”

Baer noted that competition policy and competition enforcement succeed where they are based on an unwavering commitment to the competitive process and to protecting consumer welfare. Therefore, according to Baer, enforcement decisions need to be fact-based and should not be made to advance non-competition goals. He also stressed that the commitment to sound antitrust enforcement must be paired with transparency and due process.

Baer observed that he has seen the United States move in a direction of a more coherent and consistent approach to competition enforcement and that a key benefit of this trend is that competition enforcement is increasingly viewed as non-partisan. However, he noted that political pressure is still there. This occurs because competition results in winners and losers and some firms will continue to attempt to use various means, some legitimate and some not, to preserve or obtain a competitive advantage.

According to Baer, one recurring fact pattern where these pressures can be particularly pronounced occurs when disruptive innovation challenges the continued dominance of incumbent competitors. However, while some incumbent respond by choosing to compete with innovation on the basis of price or quality, others respond in ways that do not promote consumer welfare and that violate the antitrust laws.

Baer noted the e-book conspiracy between Apple and five major publishers as an example of incumbents colluding to thwart a disruptive threat to the status quo, in this case Amazon. He also noted that incumbents may impose restrictive contract terms on customers and suppliers in an attempt to block new forms of competition or competitors. He then went on to discuss the DOJ’s recent successful enforcement actions against American Express, Visa and MasterCard.

Citing AT&Ts attempt to acquire T-Mobile as an example, Baer noted that an incumbent may also eliminate a disruptive threat by buying it. He further noted that, three years after AT&T abandoned its bid, T-Mobile remains a disruptive force for change. Discussing Comcast’s proposed acquisition of Time Warner Cable as a case in point, Baer explained how mergers can also be problematic where they further entrench incumbents, enhancing their incentive and ability to block innovation

Baer observed that while the DOJ’s approach in each of the cases he mentioned was merits-based, each encountered significant political pressures because of the companies’ public relations and lobbying campaigns. However, he noted that the DOJ’s recent enforcement decisions demonstrate that it will not be swayed by public opinion, professional pundits, or political influence.

Distorting regulatory processes and outcomes are, according to Baer, other ways threatened incumbents attempt to protect their commercial interests. He cited unwarranted licensing requirements, unjustified health and safety regulations and time-consuming permitting requirements as examples of effective barriers that insulate incumbents from disruptive competition and prevent new products and business models from reaching consumers.

Baer noted that the United States has, in recent decades, witnessed a trend away from government regulations that unnecessarily restrain competition. He further noted that the DOJ, and other antitrust authorities, have contributed to the effort to deregulate many markets.

Because of the state action doctrine in the United States, some anticompetitive actions by states are beyond the reach of federal antitrust enforcement. In these cases, or where advocacy offers a more efficient means of preserving competition, Baer noted that the DOJ works to educate state authorities about the anticompetitive potential of state laws and regulations.

Baer concluded his remarks but stating that, as competition authorities, the mandate is to ensure that marketplace winners and losers are dictated by the competitive process and that there is a need to act, and to be perceived as acting, in a consistent, coherent, and transparent fashion.

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