From macaroni to film screenings, from baby food to who controls the trails you follow on the internet, the issue of companies consolidating without igniting the skepticism of the government touches virtually every American’s day-to-day life. All of these matters, and many more, have been sculpted over the past half-century by the battles of legions of lawyers specializing in antitrust law. Among the most important prizes in the balance is who gets to merge with whom.
Iowa Law has trained many of those now in a position to execute and navigate these laws at a time of enormous change in the priorities and guidelines of antitrust enforcement. As Robert Miller, the F. Arnold Daum Chair in Corporate Finance and Law and a longtime practitioner of mergers and acquisitions who contends regularly with antitrust regulations, said, “Antitrust is currently in a degree of flux that hasn’t existed for at least 50 years.”
American antitrust law was born with the Sherman Antitrust Act, signed into law in 1890 by President Benjamin Harrison. The Sherman Act boasted sweeping language, declaring that “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade” would be illegal. It also said that “every person who shall monopolize, or attempt to monopolize, or combine or conspire ... to monopolize” would be guilty of a felony.
The act was signed at the height of the Gilded Age, as the government awoke to the possibility that if corporations—then usually organized as “trusts”—were left untethered to grow ever larger, they could potentially strangle competition by colluding to bolster prices and profits. The act gave the federal government the power to prevent collusion, but it was only in 1914, with the passage of the Clayton Antitrust Act and the Federal Trade Commission Act, that the government’s authority was expanded—and expanded again in the 1950s—to include potentially anticompetitive consequences from mergers and acquisitions. The government obtained the power to prevent business combinations that could result in the “restraint of trade or commerce among the several states, or with foreign nations,” as well as to prohibit any “monopolization” of such trade.
But what constitutes a restraint of trade? How do we, as Iowa Law Professor Sean Sullivan has considered in several papers, define the market that’s being constrained? Where does constraint end and competition—competitors slugging it out and a winner and loser emerging from the fight—begin?
These questions have bedeviled legions of lawyers, not to mention Congress and the courts, for more than a century. Ultimately, as Professor Miller points out, it’s the Supreme Court that determines how the antitrust laws are interpreted. The first two decades of the Sherman Act did not lead to many enforcement actions, but during the Progressive Era the act was used to break up the Standard Oil monopoly. In the 1950s, movie producers were forced to release their hold over movie theaters, and in the ’60s, two macaroni companies were encouraged to end their cooperation, which ensured that both used the same grade of flour for their macaroni to avoid competing over alternative flour sources. In those days, the government often acted after the fact—that is, it attacked a merger as anticompetitive only after the merger was completed.
In 1976 Congress enacted the Hart-Scott-Rodino Antitrust Improvements Act, which requires, among other things, that all large transactions be reported to the Federal Trade Commission and the Department of Justice for review before a merger or acquisition goes through. The idea was to prevent anticompetitive mergers before they occurred, thus protecting consumers from harm and even saving the costs to the companies of completing a merger that would later be undone. The HSR Act sought to obviate the need to retro-actively break up consummated mergers, such as it famously struggled to do in the 1964 El Paso Natural Gas case, where it took the government more than a decade of effort to unwind a merger. With HSR, the hope was to prevent such mergers from being formed in the first place.
Since the ’70s and ’80s, according to Miller, “there has been very broad agreement” around the principles governing when government intervention in such deals was warranted. Restraint on trade came to be defined as whether a merger or acquisition could have the impact of raising prices (or lowering product quality) for the consumer, or what became known as the “consumer welfare” standard. If that was the case, the government could act. If not, mergers were permitted—and many occurred during the mergers and acquisitions boom years of the Reagan, George W. Bush and Clinton administrations. Merger activity in the United States has risen steadily, from $152 billion in deal volume in 1984 to more than $2.1 trillion in 2019.
The consumer welfare standard, however, is now being challenged by the Biden administration’s two highest appointees to the government agencies charged with enforcing antitrust rules: Lina Khan, chair of the Federal Trade Commission, and Jonathan Kanter, assistant attorney general of the Antitrust Division at the Department of Justice. They are expected to introduce new merger guidelines in the fall that will signal a redirection of antitrust enforcement attention to factors other than consumer welfare, such as whether a merger might increase income inequality or potentially weaken the position of organized labor.
Here, prominent members of the Iowa Law community—all of whom are deeply engaged with these shifts—discuss the state of antitrust law today.
Antitrust Scholar and Professor
Professor Sean Sullivan was an antitrust attorney at the FTC before joining Iowa Law in 2017. He has written extensively on the integration of economics and antitrust law. Particularly in the areas of market definition and the detection of market power from market concentration.
Q: Antitrust law seems to be in a period of flux. Can you summarize its evolution?
A: In one sense, antitrust law has not evolved at all. With only a few important exceptions, the antitrust statutes are the same today as they were in early 1900s. All the major evolutions in antitrust law have come from changing interpretation of the statutes. And in this sense antitrust has changed a lot. The evolving norms of antitrust are particularly easy to spot in merger enforcement.
For example, a lot of recent commentary waxes nostalgic about merger cases of the 1960s. Back then, the Warren Court cared deeply about the interests of small competitors and about preventing increases in concentration. In the first major merger case following the Celler-Kefauver Act, the Warren Court held a merger to be illegal largely on the basis that it would make the merged firm more efficient—better able to outcompete less efficient rivals. The 1960s were a period of aggressive merger intervention, but also a time when consumers could be made to suffer for the benefit of propping up inefficient competitors.
In the 1980s, a seismic shift occurred in antitrust enforcement. The Reagan administration jettisoned many previous considerations, like the protection of small competitors, to focus exclusively on “harm to consumers.” In many cases, the “consumer” part of the consumer welfare standard was forgotten, and the objective was taken to be the equivalent of promoting economic efficiency. At any rate, courts largely accommodated these changes, and from the 1980s to the present day, some version of the consumer welfare standard has served as the primary normative concern of antitrust law.
But decades of consensus on the consumer welfare standard have not persuaded the Biden administration, and populist views reminiscent of the 1960s once again seem to be motivating the agencies. Decisional law moves slower than politics, though, and it remains to be seen whether courts will accommodate this attempt to change antitrust law as they did in the 1980s. If not, then political enthusiasm for changing antitrust standards will hit a wall when arguments based on new standards are argued in court.
“A lot of learning antitrust is coming to grips with just how small our own view is of the immense economy we inhabit. My students leave the class unable to look at trash, baby food or plastic wrap the same way they did before.”— Professor Sean Sullivan
Q: What’s it like to teach antitrust law?
A: I love teaching antitrust. It’s a class that rewards immersion. To really understand the facts and arguments in a case, one must understand the trade involved. Who makes the product? Who buys it and for what? How is the product made, stored and shipped, and how are sales completed? You need to understand what would happen if prices rose, or product variants were discontinued, or some of the players exited the market. A lot of learning antitrust is coming to grips with just how small our own view is of the immense economy we inhabit. My students leave the class unable to look at trash, baby food or plastic wrap the same way they did before. It is a thrill to join them on this journey.
Q: How have students today changed from previous generations?
A: I try to structure my classes as extended conversations—and the conversation feels different today than it did a few years ago. One difference is that students need a bit more of a runway to get free of imprecise assumptions about competition that they pick up from blogs and social media. Antitrust is too complicated to be reduced to anything that would fit in a tweet, and students need to get comfortable with the complexity of the world around them. Iowa Law students combine humility and diligence better than any students I’ve ever met, though, and once we get rolling, there’s nothing we can’t master.
Antitrust Enforcer
Milly Dick (15JD) is an attorney with the bureau of competition at the FTC and previously worked in the antitrust division of the department of justice. she participated in this article in her personal capacity: Her opinions expressed are her own and do not reflect the view of the FTC.
Q: What’s it like to go from studying antitrust regulations in law school to enforcing them?
A: Being in antitrust enforcement is one of the best jobs in the field, especially out of law school. As a government lawyer, there are a lot of opportunities. Unlike law firms, there isn’t a billable hour rate. Senior lawyers take mentorship seriously and devote time to training you. And antitrust enforcement is a unique thing. When we review mergers, one of the questions is about the future of a particular industry. Very few areas of the law ask you to predict the future. When we go to court, much of the evidence comes in through the defendant’s executives, who usually are not happy to find themselves on the witness stand defending their company’s behavior.
“I learned from antitrust class that a supreme evil of antitrust is not necessarily just price fixing; it’s also fixing the quality of goods. Pricing is easier to quantify ... but quality is equally relevant.”— Milly Dick (15JD)
Q: When the first antitrust laws were written over a century ago, most businesses were huge enterprises producing physical goods. What’s changed?
A: Businesses have evolved. How companies make money is changing. And who their customers are has evolved. Now you have companies giving consumers a free product in order to collect data to sell targeted advertising or, say, providing core government services like health care. It’s different from when the antitrust rules were written 100 years ago.
Q: What does “consumer protection” mean from an enforcement perspective?
A: There’s a different perspective now. Twenty or 30 years ago, the question was: Will the prices go up or down? I learned from antitrust class that a supreme evil of antitrust is not necessarily just price fixing; it’s also fixing the quality of goods. Pricing is easier to quantify, so a lot of case law relies on that, but quality is equally relevant. Today, we’re identifying better ways to capture quality, which matches what consumers care a lot about. Over the years, the weight we put on each of those factors has changed. And I think a lot of debate today boils down to how much weight you give each factor.
Antitrust Law Practitioner
James Fishkin (83BA, 86JD) is an antitrust partner at Dechert, LLP in Washington D.C., and a former staff attorney with the Bureau of Competition at the FTC. He has had key roles in several of the most significant merger trials of the past 25 years, including in private practice representing Whole Foods Market INC. in FTC V. Whole Foods Market, INC. and representing the FTC as a trial attorney in the FTC v. Staples, INC. and FTC v. H.J. Heinz CO.
Q: You’ve been doing antitrust work for decades, both for the government and in private practice, sometimes opposing the government. What changes have you seen?
A: I was very interested in antitrust law when I started law school based on what I learned as an economics major studying industrial organization and price theory. I had written an economics paper on the FTC for my industrial organization class. I was able to get a summer internship at the FTC between my second and third year after taking antitrust law. The first time I saw the FTC headquarters in Washington, D.C., I was thrilled. I had learned a lot about the FTC and then you see it and are part of it. Since then, I have had the opportunity to lead high-profile antitrust matters for the FTC and in private practice. This work has contributed to developing antitrust law in cases that law students now learn about in class, policymakers and academic scholars discuss, and judges cite to in their opinions.
I have seen the full arc of antitrust enforcement, going from when I started in the late ’80s under the relatively new consumer welfare standard at that time to the current administration’s focus on a wider band of potential harm resulting from mergers. When I started my career, merger enforcement was based on the principle of the consumer welfare standard, and the key questions were whether a merger would likely result in higher prices or lower quality for consumers. But now the current administration is saying, hold on, there has been lax antitrust enforcement because the consumer welfare standard may not capture all of the potential harm resulting from a merger.
“We are seeing significant changes in the government’s approach to merger enforcement. ... Now is a fantastic time to be an antitrust lawyer.”— James Fishkin (83BA, 86JD)
Q: What questions is the current administration asking about antitrust?
A: One of the issues is to what extent mergers may harm workers. Could the merged firm, for example, have monopsony power enabling it to potentially reduce wages, or not raise them as much as it would otherwise have to if it were competing for the same workers as the acquired company? There is also a concern about a decrease in innovation. Could certain types of mergers lead to less rather than more innovation in their particular sectors because acquiring firms would not have to compete against acquired firms that are developing new and better products?
The FTC and DOJ are also similarly focusing on the impact of acquisitions of nascent competitors; that is, but for the merger, would the acquired much smaller company with a newly developed and innovative product grow into a strong competing rival, especially in the Big Tech sector.
Another issue is the impact of a merger on competition from small and independent businesses that may not be able to compete effectively against a much larger firm after a merger. For example, a larger merged company may be able to access sources of supply that are not available to a small business, or the small business may not be able to obtain the same supply as the merged firm at competing prices. The FTC and DOJ are also looking at whether a merger could harm disadvantaged or “marginalized consumers” by, for example, no longer operating retail stores in their neighborhoods or by not offering those consumers the same products and services after an acquisition at the same prices. We are also seeing the FTC and DOJ approve fewer consent agreements to resolve merger issues and bring more cases to trial. The FTC and DOJ strongly favor divesting complete ongoing business units, and the standards for approving buyers of divested assets has increased to minimize the risk of failure by the divestiture buyer.
Q: It appears that corporate consolidations—after being celebrated for years—are now receiving a more skeptical look. What’s it like to be an attorney in this climate?
A: We are seeing significant changes in the government’s approach to merger enforcement. These changes require constantly keeping up with developments at the FTC, DOJ and jurisdictions outside the U.S. for cross-border mergers. Every morning I spend a lot of time reviewing antitrust updates, including policy statements from the FTC and DOJ leadership as well as recent enforcement actions. Government antitrust enforcement is rapidly changing. You cannot be an effective antitrust attorney by relying on what happened in the past—even as recently as a year ago—since so much is changing. Antitrust law has always been exciting work and now is a fantastic time to be an antitrust lawyer.
Antitrust Journalist
Amanda Hamilton (02BA, 05D) a former staff attorney with the FTC, became a journalist with Insiders' Knowledge as a senior antitrust correspondent for the Capitol Forum, a subscription-only publication covering antitrust law, mergers and policies.
Q: What inspired you to go from government regulator to journalist?
A: At some point I realized that it wasn’t the government saying, “Hmm, that’s wrong.” Journalists were the ones saying, “Hey, people are not looking at this. This shouldn’t be the case; it’s abuse.” And then cementing that was the MeToo movement. I saw great women working in journalism and at Capitol Forum calling out bad people and corporate acts. I realized that reporting is actually exposing things and moving Congress to act and companies to reform.
"Companies are waking up to the new principles. They are realizing: Oh, we can’t exchange wage information? ... The enforcement of antitrust laws is changing. And the reconceptualization of antitrust is here to stay.”— Amanda Hamilton (02BA, 05JD)
Q: How has your work with the FTC informed your journalism?
A: The Federal Trade Commission is kind of an antitrust training school. I’ll look at a deal and analyze it from an antitrust enforcer’s perspective. And I’ll be able to consider any theories that the FTC or the DOJ might have when they look at the deal and assess their viability from my experience. And if I don’t know, I know whom to call. My eyes are open for anything that the agencies may or may not be looking at. Many of my stories have the same rigor as if I were an FTC lawyer. But at the FTC, I couldn’t talk with anyone until [the case] became public. Now, I can call a public interest group, federal agency or a congressional representative and get a response.
Q: How have the antitrust principles changed since you were at the FTC?
A: [FTC] Chairwoman Khan and [DOJ Assistant Attorney General] Jonathan Kanter share the frustration of a lot of enforcement-minded antitrust lawyers with what they perceive as a lack of action. Companies are waking up to the new principles. They are realizing: Oh, you mean we can’t exchange wage information? Competitors can’t use the same agency rep to sell ad time? Oh, you mean labor has a seat at the table? The enforcement of antitrust laws is changing. And the reconceptualization of antitrust is here to stay.
NEXT-GENERATION ANTITRUST LEADERS
Kassandra DiPietro and Lauren Knudson, both members of the Class of 2022, will join the newest ranks of the antitrust bar.
DiPietro will start her new position at the Federal Trade Commission in the Bureau of Competition soon after finishing her internship at the agency this summer. Knudson will join Mayer Brown’s antitrust litigation team in the firm’s Washington, D.C. office, after spending a year as a law clerk for Senior Judge Michael J. Melloy (74JD) of the U.S. Court of Appeals for the 8th Circuit.
DiPietro and Knudson say their law school experience made it easier for them to decide early on an antitrust focus.
“I knew I wanted to do something related to consumers because of my previous work in marketing, but I didn’t know what that would look like,” DiPietro said.
After taking an antitrust course with Professor Sean Sullivan, a Housing and Law Policy course with Professor Larisa Bowman, and a Consumer Finance class with Professor Christopher Odinet, DiPietro said she knew what she wanted to do after law school.
“The professors focused on the experiences of consumers and how the law impacts them on a daily basis,” DiPietro recalled.
Knudson, who has an undergraduate degree in political theory and economics, knew she would find antitrust law interesting. But, like DiPietro, she found herself immersed in the area after taking several courses that allowed her to use her economics background.
She said the class that really inspired her was Sullivan’s Law and Economics course. “We did not set out to learn a specific area of the law,” she explained. “Our goal was to see how we could use economics to evaluate the effectiveness of the law.
“Our goal was to see how we could use economics to evaluate the effectiveness of the law.”— Lauren Knudson (22JD)
“I developed an appreciation for the nuances of the arguments involved,” Knudson said. “Each case is so fact dependent, and lawyers must learn how each fact fits into the case.”