Lina Khan’s FTC seems to have a high rate of litigatory failures, which may be due to a misalignment between the agency and the courts. Antitrust regulators and courts don’t always agree on what constitutes an anticompetitive merger, resulting in more challenges being lost in courts.
Misalignment can occur either temporarily or indefinitely, depending on the novel theory regulators use. An example of the former would be economic theories of antitrust, which often have a lagging effect on legal doctrines in the discipline, as Professor George Alan Hay writes in his paper Oligopoly, Shared Monopoly, and Antitrust Law. This does not mean economic theories will never become a part of the legal framework, as Hay’s paper was released before the Department of Justice’s (DOJ) 1984 Merger Guidelines, which cemented many economic theories into antitrust litigation and review.
Instances of misalignment from such lags are not uncommon historically, as individual cases can frequently test out novel argumentation that the courts may not accept at the time. One case is usually not sufficient to result in long-term outcome differences. A misalignment stems from a structural difference between how agencies and the courts frame antitrust violations.
Such structural differences can result in continuous litigatory losses, such as when the Federal Trade Commission (FTC) attempted to introduce a “shared monopoly” theory to go after accused oligopolies in petroleum and cereal. This theory was meant to address potential oligopolies (two or more firms holding market dominance) and their negative impacts on competition and consumer prices.
In the 1970s, the FTC made a series of cases against cereal and petroleum firms under the theory of “shared monopoly.” The allegation held that because a few firms dominated the industry, they were still liable under Section 1 of the U.S. Sherman Act (1890) as constituting a conspiracy to restrain trade or commerce, regardless of proven collusion. The FTC argued a “conscious parallelism” was occurring, in which price fixing did not require direct evidence of a formal agreement between firms.
Though there was never widespread success from this line of argumentation, it wasn’t until after 1982 that the FTC washed its hands entirely of its legal suit against cereal manufacturers accused of partaking in a “shared monopoly.” The result was a failure by the agency to gain legal traction for their arguments, which courts believed required action on the part of Congress first. After nine years of litigation, the FTC moved on. Unlike the previously mentioned economic theories of antitrust, this was not simply a lag in acceptance but an indefinite misalignment.
The FTC under Lina Khan and the DOJ under Jonathan Kanter have departed from antitrust legal precedent in several significant ways. Coupled with litigatory failures, this shows an example of misalignment.
A review of three recent antitrust court losses reveals philosophical differences between the DOJ, FTC and courts to be an underlying cause of failure. In UnitedHealth/Change and U.S. Sugar/Imperial Sugar initiated by the DOJ and Illumina/Grail initiated by the FTC, the agencies’ theories of competitive harm and market definitions were successfully called into question. The U.S. Sugar/Imperial Sugar case best highlighted this issue when a USDA economist explained how marketplace features prevented the potential for competitive harm from the merger. Thus, it demonstrates how agency analysis no longer seems to align with that of the courts.
Differences in philosophy and legal framework are at the heart of misalignment. As in the 1970s, misalignment can lead to a string of court case failures, only ending when the agency realigns to accepted court precedent, courts take regulator frameworks, or Congress steps in with legislature. However, it remains to be seen how this misalignment will end, given how large of a departure Chair Khan makes from precedent. We’re likely to see many more failures before realignment.
Isaac Schick is with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on X @ConsumerPal