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Lost In A Bureaucratic Sea Or Navigating To The Antitrust Promised Land? – Antitrust, EU Competition



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July 9, 2022 marked the one-year anniversary of President
Biden’s 
Executive Order
 (EO) on Promoting Competition in the
American Economy, which we 
initially described
 as a sweeping whole-of-government
competition policy with potentially wide-ranging
implications. So where are we after one year? Have the
federal agencies deputized by the EO issued regulations or taken
the enforcement actions called for by the President? To date,
every agency identified in the EO has taken some action, with only
three exceptions: the Federal Reserve, the Federal Deposit
Insurance Corporation, and the Office of the Comptroller of the
Currency. But are these actions meaningful, or mere lip
service by agencies that have already moved on to other
priorities? 

The EO established the White House Competition
Council—composed of ten Cabinet members and the heads of
seven independent agencies—to coordinate the implementation
of each of the EO’s 72 initiatives for “deliver[ing]
concrete benefits to America’s consumers, workers, farmers,
and small businesses.”1 The Council itself
has not met since January 2022, but some of its members have used
the one-year anniversary to tout their achievements. Three
members of the administration—including the Commerce
Secretary and Brian Deese, the chair of the Council—published
an op-ed lauding the progress agencies have made towards President
Biden’s directive to restore competition, lower prices, raise
wages, and increase innovation and productivity in the
economy.2 

On the anniversary itself, Chair Brian Deese gave a speech
celebrating the “landmark” EO and stressing the
administration’s commitment to “structural changes that
promote competition.”3 The speech highlighted
several developments, big and small, and cryptically mentioned that
there would be “more announcements coming
soon.”4 But, in trying to assess what to make
of all this, three agency actions that
were not mentioned by the Chair might provide
insights about the things to come:

1. The Treasury Department Released a Report on the State of
Competition in U.S. Alcohol Markets.

  • In February 2022, pursuant to the EO, the Treasury Department
    issued a report summarizing the findings from an
    investigation into competition in the U.S. markets for beer, wine,
    and spirits. In the report, the Treasury Department warned that
    increasing consolidation across markets for alcohol distribution,
    retail, and production may offset the competitive benefits from the
    explosive growth in “craft” production over the last
    half century.5 In particular, the report found that
    state regulatory regimes may be exacerbating the problem by
    limiting vertical integration (i.e., production,
    distribution, and sales) while allowing horizontal consolidation,
    especially among distributors. For example, as distributors
    consolidate, small brewers and market entrants are less able to
    find a distributor, thereby limiting their potential for
    growth.

  • The Treasury Department’s conclusion was that the DOJ and
    the FTC must “continue to vigorously enforce the antitrust
    laws.” To do that, the Treasury Department recommended
    that they consider the effects on distribution when craft brewers
    are acquired by major brewers, question efficiency claims, and
    evaluate how vertical consolidations may lead to the exclusion of
    new market entrants.6 With these recommendations as
    guideposts, the DOJ and the FTC—and possibly state antitrust
    authorities—may likewise be emboldened to evaluate proposed
    mergers in the industry more closely and consider some of the
    broader implications for the industry highlighted in the
    report.

2. The Department of Defense Published a Report on the State of
Competition in the Defense Industry Suggesting Greater Future
Coordination with Antitrust Agencies.

  • In reviewing mergers in the defense sector, the FTC and DOJ
    typically look to the DoD for guidance as to whether or not a
    transaction is likely to be harmful. The DoD is often the main
    or sole customer of the merging parties. Historically, DoD has
    taken national security and other issues into account in addition
    to potential harm to competition when assessing the merits of a
    proposed deal. At times, for national security reasons, the
    DoD has signaled comfort with deals that might result in a
    lessening of competition and allowed those deals to close.

  • Last year, shortly after issuance of the EO, FTC Chair Khan
    responded to a letter from Senator Elizabeth Warren expressing
    skepticism about the level of competition in the defense industry
    and signaling that the antitrust agencies should be more aggressive
    in their review of defense sector deals, even where the DoD does
    not express concerns. She noted that “it is the
    antitrust agencies that determine whether a transaction should be
    challenged, and DoD approval is not required prior to
    consummation.”7

  • In February 2022, the DoD issued a 
    report
     focused on potential competition issues in the
    defense sector.8 The report raises some issues that
    appear to track the concerns raised by Chair Khan and other
    Neo-Brandeisians, including consolidation generally, vendor lock-in
    associated with intellectual property and data rights limitations,
    and labor issues. The DoD also offered several recommendations,
    including strengthening merger oversight by supporting the FTC and
    the DOJ in antitrust investigations and advising them on defense
    markets; creating best practices for handling intellectual property
    to avoid “unnecessary anticompetitive consequences”
    such as vendor lock‑in; and emphasizing “increasing
    competition in priority industrial base sectors” to further
    increase small business opportunities.9

  • Following the DoD’s report, the DOJ in June 2022 sued to
    block Booz Allen in its proposed acquisition of EverWatch
    Corporation—presumably with DOD’s
    support.10 The DOJ speculates that the two
    companies are currently the only competitors for a contract with
    the National Security Agency (NSA), which is part of the DoD, and
    on this basis alleges that the acquisition “would eliminate
    competition for the defense contract, leaving NSA to face a
    monopoly bidder.”11 The DOJ claims that the
    two companies competed “by offering more-talented personnel,
    lower costs, and a reduced markup” for their services, which
    means that the acquisition would result in “higher prices,
    lower-quality services, and less innovation for NSA’s []
    project.”12 The DOJ described this as a
    “heads Booz Allen wins, tails American taxpayers lose”
    scenario.13 On July 8, 2022, the DOJ filed an
    emergency motion for preliminary injunction to enjoin the
    acquisition.14 The court scheduled a mid-September
    hearing on the DOJ’s request for a preliminary injunction
    blocking the acquisition, which would be followed by a full trial,
    if necessary.15 The DOJ’s effort to block
    Booz Allen’s acquisition of EverWatch is consistent with two
    themes in the DoD’s February 2022 competition report: concern
    about the non‑pricing effects of consolidation and a desire
    to leverage small businesses to grow the defense industrial
    base.

3. Partnerships between the Federal Maritime Commission (FMC)
and the DOJ, and the National Labor Relations Board (NLRB) and the
DOJ, Underscore the Administration’s Commitment to
Enforcement in Ocean Shipping and Labor Markets.

  • In February 2022, the Federal Maritime Commission (FMC) and the
    DOJ reaffirmed their commitment to “jointly enforcing
    competition laws and strengthening their cooperation to promote
    competition in the ocean freight transportation
    system.”16 One notable aspect of this renewed
    partnership is that it provides a mechanism for the FMC and the DOJ
    to share information. Because the ocean shipping industry is
    highly regulated, the FMC opening its books to the DOJ may spark a
    flurry of enforcement activity. In fact, President Biden even
    highlighted this development in his State of the Union
    address.17

  • In July 2022, the National Labor Relations Board (NLRB) and the
    DOJ entered into a Memorandum of Understanding (MOU) that affirms
    each agency’s commitment to increased coordination and
    information sharing to protect American workers from
    anti-competitive interference.18 Each agency will
    designate liaisons who will serve as points of contact, and they
    will work together on coordination for investigations, enforcement,
    training, and education. The agencies announced the MOU one
    day after the DOJ announced a civil settlement of wage-fixing
    claims in the poultry‑processing industry.19

Conclusion

On the one-year anniversary of the President’s antitrust
EO, the most concrete results have not been groundbreaking, at
least not yet. But several of the agency actions to date are
suggestive of what this next year under the EO might bring.

The most obvious expected trend for this next year is a further
increase in enforcement activity. The agencies have been more
aggressive in their engagement with industry and have expressed an
increased willingness to litigate. Similarly, the Treasury and
DoD reports signal an increased openness for enforcement to be
spearheaded by the DOJ and the FTC. These developments were
not surprising but have begun to expose one of the weaknesses in
the EO: most federal agencies are not equipped or empowered to
enforce the antitrust laws, and those agencies charged with
enforcement—mainly the DOJ and the FTC—have relatively
limited mandates and resources. We expect the tension between the
aims of the EO and the practical limitations of the agencies and
the law to grow next year.

A second outcome for next year will be enhanced information
exchanges across agencies. The information sharing agreements
between the DOJ and the FMC, and the DOJ and the NLRB, may lead to
even more antitrust scrutiny of the ocean shipping industry and
labor markets, respectively.

Third, beyond additional enforcement zeal and information
exchanges, the EO mandate is still widely expected to enhance the
overall scope of antitrust enforcement, with various federal
agencies reviewing their respective industries—healthcare,
finance, food and agriculture, technology, transportation, and
defense—and looking for opportunities to advance the
administration’s agenda.20 With all this
interest and activity, we anticipate that next year will bring
continued and expanded enforcement across a wider range of
industries and issues.

Finally, rulemaking remains just outside the frame, but also
will likely appear this next year, particularly as a way for the
Biden administration to fulfill its goals in the event that it is
unable to persuade Congress to implement statutory changes.

Footnotes

1. Press Release, White House, Fact Sheet: Executive
Order on Promoting Competition in the American
Economy
 (July 9, 2021).

2. U.S. Dep’t of Commerce, “Op-ed: How
Biden’s Competition Agenda Will Lower Prices, Raise Wages,
and Help Small Businesses”
 (Jun. 27,
2022).

3. Brian Deese, Dir. of the Nat’l Econ. Council,
Remarks on President Biden’s Competition
Agenda
 (July 14, 2022).

4. Id.

5. Competition in the Markets for Beer, Wine, and
Spirits, Treasury Dep’t
 (Feb. 2022).

6. Id.

7. Letter from Lina Khan, FTC Comm’r, to
Elizabeth Warren, Sen.
 (Aug. 6, 2021).

8. State of Competition within the Defense Industrial
Base, Dep’t of Defense Report
 (Feb.
2022).

9. Id.

10. Press Release, Dep’t of Justice, Justice
Department Sues to Block Booz Allen Hamilton’s Proposed
Acquisition of EverWatch
 (June 29, 2022).

11. Id.See also  Complaint, United States v. Booz Allen Hamilton, et
al., ECF No. 1
 (D. Md. June 29, 2022).

12. Id.

13. Id.

14. Pl.’s Emergency Mot. for a Preliminary
Injunction, ECF No. 29 (July 8, 2022); Pl.’s Mot. for
Expedited Briefing & Scheduling of a Hearing on Pl.’s
Mot. for a Preliminary Injunction, ECF No. 36 (July 10,
2022).

15. DOJ
Avoids Compressed EverWatch Merger Trial for Now,
Law360
 (July 20, 2022).

16. Press Release, Dep’t of Justice, Justice
Department and Federal Maritime Commission Reaffirm and Strengthen
Partnership to Promote Fair Competition in the Shipping
Industry
 (Feb. 28, 2022).

17. President Biden’s State of the Union
Address
 (Mar. 1, 2022).

18. Press Release, Dep’t of Justice, Justice
Department and National Labor Relations Board Announce Partnership
to Protect Workers
 (July 26, 2022).

19. Bryan Koenig, Cargill, Others to Pay $85 Million
Over DOJ Wage-Fixing Claims, Law360
 (July 25,
2022).

20. White
House Competition Council

Because of the generality of this update, the information
provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular
situations.

© Morrison & Foerster LLP. All rights reserved



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