Antitrust Update: Big Tech Animus May Trump Consumer Welfare

This is an update to a previous post regarding antitrust law in the second Trump administration. Read that post here.

Led by former Chair Lina Khan, the Federal Trade Commission (FTC) pivoted hard toward a progressive, neo-Brandeisian view of antitrust enforcement under the Biden administration. Straying from the commission’s more recent history as a more deliberative, consensus-driven body, the three Democratic commissioners enacted a multitude of major policy changes and rulemakings, steamrolling their Republican counterparts until both eventually resigned in protest, leaving a 3-0 commission.

It appears the Trump administration will repay that behavior in kind by firing both remaining Democratic commissioners and proceeding with a 3-0 Republican majority. Under a generally pro-business Republican administration, one might expect this change to mean returning to the more economics-driven consumer welfare approach to antitrust that characterized the commission for decades prior to the upheaval brought on by Khan. However, although it remains early in the new administration, it is looking more like some of the new normal in antitrust is here to stay.

One of the most significant policy changes Khan and her Department of Justice (DOJ) counterpart, Jonathan Kanter, made was withdrawing their agencies’ joint guidelines for vertical merger enforcement and replacing them with a new set of horizontal and vertical merger guidelines in 2023 that radically changed how merger activity would be scrutinized and challenged. Thus, it was somewhat of a surprise when new FTC Chair Andrew Ferguson announced that the latest guidelines would remain in place. While he conceded that the guidelines “are not perfect,” he also stated that “[b]y and large, the 2023 Merger Guidelines are a restatement of prior iterations of the guidelines, and a reflection of what can be found in case law. That is good reason to retain them.” Gail Slater, the new head of the DOJ Antitrust Division, echoed this statement during her confirmation.

To be fair, Ferguson makes a worthwhile point: “If merger guidelines change with every new administration, they will become largely worthless to businesses and the courts. No business can plan for the future on the basis of guidelines they know are one election away from rescission, and no court will rely on guidance that is so obviously partisan.” Merger guidelines are not laws or regulations, as courts may consult them but are not bound by them, and Ferguson made clear that the commission would not necessarily enforce them as written.

That said, Ferguson greatly undersells the degree to which the 2023 guidelines represent a massive shift in philosophy regarding how mergers and acquisitions are to be viewed—particularly vertical mergers, which do not involve combining two direct competitors in similar markets. Prior versions employed rigorous economic and legal analysis and were not only useful for judges to consult in antitrust cases, they also gave businesses much-needed clarity around the types of transactions they could undertake without falling under expensive and time-consuming antitrust scrutiny.

In spite of Ferguson’s assertion that the current guidelines represent a good reflection of current case law, they in fact disproportionally cite antiquated antitrust case law that has been updated or entirely displaced over succeeding decades. Most notably, they cite Brown Shoe Co. v. United States twice as often as any other decision. Brown Shoe was a 1962 decision that invited the blocking of vertical mergers even if they decreased prices and increased product quality for consumers. While courts are unlikely to be persuaded by appeals to long-discarded case law, these guidelines send a message that nearly all merger activity involving larger businesses could be subject to costly court challenges.

If the process of rewriting the merger guidelines once again truly requires too much time and effort, Ferguson could simply withdraw the updated guidance and roll back to the 2010 horizontal merger guidelines. The decision to leave the updated merger guidelines in place adds to the nagging concern that the new administration does not fundamentally disagree with the direction in which the neo-Brandeisian antitrust reformers were headed—only with how far they went.

Sadly, it appears that the Trump administration’s continued animus toward Big Tech platforms for perceived bias against conservatives may compel them to intersect with progressive theories of anti-corporate bigness for its own sake. Most of the investigations that led to the current spate of major antitrust suits against nearly all of the largest tech companies began under the first Trump administration, and the Facebook/Instagram merger and Google Search monopolization cases were both filed in 2020.

Unfortunately, this antitrust grudge match against America’s tech giants undermines innovation and real competition in our tech industry. Mergers and acquisitions are particularly important to tech startups, which rely on the option of acquisition by larger incumbent companies as a potential exit strategy for securing venture capital. And vertical mergers have long been recognized as posing a lower risk of harm to competition while often creating beneficial efficiencies that tend to profit consumers. Hamstringing the option for innovative tech startups to achieve scale by integrating with large incumbent tech firms will limit our ability to compete in artificial intelligence development and other key areas against less-restrained competitors like China.