Major Merger Enforcement Shift Under Trump Administration

Major Merger Enforcement Shift Under Trump Administration

In his first public remarks, Makan Delrahim, the new head of the Department of Justice’s (DOJ) Antitrust Division, outlined several changes that will impact how the agency approaches antitrust cases. Most notably, Delrahim indicated that the DOJ will limit the use of “behavioral remedies” to address legal concerns with proposed mergers. “[I]f a merger is illegal, we should only accept a clean and complete solution, but if the merger is legal we should not impose behavioral conditions just because we can do so to expand our power and because the merging parties are willing to agree to get their merger through,” he stated.

Use of Behavioral Commitments to Resolve Antitrust Concerns

In his remarks at the American Bar Association’s Antitrust Fall Forum, Delrahim noted that he is frequently asked how President Trump’s directive to reduce federal regulations will impact the enforcement of the antitrust laws. He started by stating that antitrust is law enforcement, not regulation. He added:

At its best, it supports reducing regulation, by encouraging competitive markets that, as a result, require less government intervention.  That is to say, proper and timely antitrust enforcement helps competition police markets instead of bureaucrats in Washington, D.C. doing it.  Vigorous antitrust enforcement plays an important role in building a less regulated economy in which innovation and business can thrive, and ultimately the American consumer can benefit.   

Delrahim went on to address how this approach will impact the agency’s use of behavioral commitments, which he characterized as “fundamentally regulatory, imposing ongoing government oversight on what should preferably be a free market.” In his remarks, Delrahim outlined several theoretical and practical criticisms regarding the use of behavioral remedies to address antitrust concerns.

Theoretically, Delrahim argued that a behavioral remedy interferes with the free market process by “supplanting competition with regulation” and replacing “disaggregated decision making with central planning.” He also noted several practical problems, namely that consent decrees are difficult to both draft and enforce. “Behavioral remedies often require companies to make daily decisions contrary to their profit-maximizing incentives, and they demand ongoing monitoring and enforcement to do that effectively,” he stated. In support, Delrahim noted several instances where the DOJ found consent decrees were being violated but found it too onerous to collect information or satisfy the exacting standards of proving contempt and seeking relief for violations. 

Delrahim emphasized that he was not saying that the DOJ would never accept behavioral remedies. “In certain instances where an unlawful vertical transaction generates significant efficiencies that cannot be achieved without the merger or through a structural remedy, then there’s a place for considering a behavioral remedy if it will completely cure the anticompetitive harms,” he stated. As far as what types of consent decrees might meet the DOJ’s new “high standard,” Delrahim stated the agency should only settle federal antitrust violations when it has a “high degree of confidence that the remedy does not usurp regulatory functions for law enforcement.”

DOJ Challenging Proposed AT&T/Time Warner Merger

The policy shift may have played a role in the DOJ’s decision to challenge the proposed merger between AT&T and Time Warner. “This merger would greatly harm American consumers,” Delrahim said in a statement. “It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy. AT&T/DirecTV’s combination with Time Warner is unlawful, and absent an adequate remedy that would fully prevent the harms this merger would cause, the only appropriate action for the Department of Justice is to seek an injunction from a federal judge blocking the entire transaction.”

In the past, the DOJ has rarely challenged vertical mergers, largely because they do not involve direct competitors. In 2011, the proposed merger of Comcast and NBCUniversal resulted in a consent decree, the type of remedy Delrahim announced would no longer be a preferred option for the DOJ.

Do you have any questions? Would you like to discuss the decisions further? If so, please contact me, Fred Zemel, at 201-806-3364.