Featured Expert Contributor – Antitrust & Competition, U.S. Department of Justice
Mark J. Botti, Squire Patton Boggs (US) LLP with Anthony W. Swisher, Squire Patton Boggs (US) LLP
*Editor’s Note: With this post we welcome the participation in The WLF Legal Pulse of Featured Expert Contributor on Justice Department-related competition law and policy matters, Mark Botti. Mark is co-leader of Squire Patton Boggs’s Global Antitrust & Competition Practice Group and previously spent 13 years at DOJ’s Antitrust Division.
In 2001, the Department of Justice Antitrust Division (DOJ) declined to block the proposed merger of General Electric and Honeywell, allowing the deal to proceed with certain limited divestitures. Announced in October of 2000, that deal would bring together two significant players in a number of related market segments, including aircraft engines, avionics, and landing gear. Despite DOJ’s decision not to block the deal outright, the European Union reached a different result, forbidding the transaction under a “conglomerate merger” theory that has long been out of favor in the United States and has drawn significant criticism in the economic and legal literature.
These diverging enforcement decisions spawned a wave of criticism directed at both jurisdictions. How were multinational businesses in a global economy to order their affairs in the face of such conflicting enforcement theories and outcomes? Were they facing a “race to the bottom,” where the most aggressive enforcers effectively held a veto over the decisions of other competition agencies?
Following GE/Honeywell, DOJ began a very public campaign of international engagement, with the stated goal of reaching consensus on global competition policy norms. As Deborah Majoras, the then-Deputy Assistant Attorney General at the Antitrust Division remarked in late 2001, “We have no power to change EU law, other than by persuasion, and vice versa. For this reason, we believe it is important that we discuss this issue in depth, both in private and in public.” DOJ recognized that divergent outcomes—and the divergent competition policy norms that lead to those outcomes—impose “serious externalities” on the global economy and “risk sacrificing important efficiencies to prevent speculative future harm to competition.” In the face of these challenges, Charles James, then-head of the Antitrust Division, reiterated DOJ’s commitment to international cooperation to “formulate and develop consensus on proposals for procedural and substantive convergence in antitrust enforcement.”
In the years since, antitrust enforcement has become an ever more global phenomenon. More and more countries are expanding their substantive and procedural competition regulation, including merger control regimes with premerger notification requirements. Even more than in 2001 when GE/Honeywell first sparked debate, companies operating in the global arena potentially face a web of sometimes inconsistent competition standards. In this environment, the need for international engagement by competition enforcement authorities is acute.
What is needed, however, is not engagement for engagement’s sake, but engagement in service of a robust exchange of views, to challenge outdated ideas and infuse global competition policy with current economic thinking. Divergent enforcement decisions premised on questionable economic reasoning impose costs on economic actors, and more importantly deny consumers and the economy more broadly of the benefits that flow from economic dynamism. Engagement, at its most effective, should result in consistent global competition standards that reflect sound economic principles.
In a recent speech, Bill Baer, current head of the Antitrust Division, reiterated the need for engagement, and had some strong words for what he thought the results of that engagement should be:
We must continue to seek broad international consensus on the principle that enforcement decisions be based solely on the competitive effects and consumer benefits of the transaction or conduct being reviewed. We must ensure that enforcement decisions are not used to promote domestic or industrial policy goals, protect state-owned or domestic companies from foreign competitors, or create leverage in international trade negotiations.
Mr. Baer recognized, however, that global competition enforcement is not yet where it needs to be. Referring specifically to historically planned economies with nascent competition enforcement regimes, Mr. Baer called for “such jurisdictions . . . to . . . commit to making enforcement decisions based solely on competitive effects and consumer benefits,” or “risk losing the trust and confidence of businesses that are looking to enter or expand in their markets.”
Mr. Baer correctly captures the risk facing modern international companies. It is encouraging to see DOJ’s continued commitment to promoting sound, economically rigorous antitrust policy in support of consumer welfare. As business people are increasingly all too aware, Mr. Baer’s frank acknowledgement that “work remains” to be done on convergence in international competition enforcement is correct. DOJ’s continued leadership and advocacy for consistent, effective competition policy is as crucial now as it was in 2001.