A federal judge’s decision to block the merger last week of two powerhouse book publishers — Simon & Schuster and Penguin Random House — marks a significant win for the Biden administration, legal experts say, as the federal government attempts to more aggressively crack down on corporate monopolies and alleged collusion by big companies.
After a string of losses, Justice Dept. notches antitrust victories
It was one of several antitrust victories over the past month for the Justice Department — a notable turn after several high-profile losses in cases involving mergers in the sugar and health-care industries. Under Attorney General Merrick Garland, the department has hired big-name antitrust lawyers to run the division. Officials say they want to bring more cases to fight corporate consolidation than previous administrations, even as some critics argue that the department is attempting to use antitrust law inappropriately to tackle labor and social issues.
The antitrust division also secured its first-ever criminal “no-poach” guilty plea last month, with a judge ordering a health-care staffing company to pay a $134,000 fine for an agreement with a competitor that ultimately fixed wages. Earlier in October, the Justice Department announced seven directors had resigned from corporate boards over concerns that they were in violation of the federal Clayton Act, which prohibits people from simultaneously serving on boards of competing companies. And the president of a paving and asphalt contractor pleaded guilty to trying to monopolize the highway crack-sealing services market in Montana and Wyoming, the Justice Department announced last week.
“It demonstrates that we have the litigation chops to go up anywhere that matters,” Jonathan Kanter, the assistant attorney general for the Justice Department’s antitrust division, said in an interview.
In the publishing case, the department argued that acquiring Simon & Schuster would give Penguin Random House “outsized influence” in the publishing industry and weaken competition.
Antitrust advocates and officials say the case is notable not only for the outcome, but for the legal strategies the government employed in court. Typically, lawyers fighting monopolies have argued that concentrating industry power in the hands of just a few companies could drive prices up and harm consumers. But in this case, Justice Department lawyers argued that merging the two companies would be bad for workers — the writers, in this instance — who may get paid less if the companies consolidate.
The opinion from Judge Florence Y. Pan of the U.S. Court of Appeals for the D.C. Circuit, however, which opened with a quote from literary great John Steinbeck, focused on the more traditional antitrust rationale of how mergers could hurt competition in the publishing industry.
Regardless, Kanter said, the approach the government took was significant. “We said that workers matter, this kind of harm matters,” he said.
The last time the Justice Department had successfully blocked a merger in court was in 2017, when a judge ruled that a radioactive waste disposal provider could not join forces with its competitor. The department has thwarted other mergers since then, but those cases did not make it to trial.
German media group Bertelsmann, which owns Penguin Random House, wrote in a statement after Pan’s ruling that it plans to appeal.
“We do not share the court’s assessment any more than we previously shared the Department of Justice’s position,” the statement said. “Both are based on incorrect basic assumptions, including an inaccurate definition of the market. A merger would be good for competition.”
Barry C. Lynn, executive director of the left-leaning Open Markets Institute, called the publishing case “a huge reversal.”
“It is a foundation on which we can build cases,” he said.
To some critics, the Biden administration’s priorities go beyond what traditional antitrust law has encompassed, with lawyers attempting to use antitrust law to battle labor, privacy and other social issues. Tad Lipsky — a former Justice Department official who is now the director of the Competition Advocacy Program at George Mason University’s Global Antitrust Institute — said the administration’s rhetoric delves into arguments about workers’ rights and fairness that, in his view, should be not be intertwined with antitrust law.
“The thing that I object to in Biden’s antitrust is that it is not based on sound legal analysis or sound economics,” Lipsky said. “It is based on the idea that we should address all kinds of social concerns when we think about antitrust, and it is based on this hostility toward businesses.”
The Justice Department has not notched any big antitrust wins against technology giants, despite growing bipartisan momentum for expanding such enforcement. But experts say the antitrust division has been laying the groundwork to make those cases. The department has an ongoing case against Google, set to go to trial next year, that alleges that the company’s search and advertising functions violate antitrust laws.
The clock is ticking for the Biden administration to bring forth groundbreaking tech cases, however, since they often take years to build. And Democrats in Congress have not yet passed proposed antitrust legislation that would make it easier for enforcers to bring cases against large tech platforms, such as one that would prevent big companies such as Amazon and Facebook from boosting their own products and services on their platforms over their rivals.
It is unlikely that these bills would pass with a Republican-controlled House or Senate.
Biden’s appointee to head the Federal Trade Commission, attorney Lina Khan, shares a similar focus to Kanter and his deputies. She made her name in part by writing an academic article that used Amazon as an example of what happens when the government does not enforce antitrust laws.
Khan has said she wants to usher in a new era of accountability for tech companies. But her agency has been beset with internal partisan stalemates and low morale, a situation she has said will change now that a new, Democratic majority is on board.
In the first half of the 20th century, the government regularly went after companies that they felt had grown too big. But in the 1970s, Robert Bork — a law professor who later became famous for his unsuccessful Supreme Court nomination — popularized a backlash to antitrust law, arguing that it no longer took economics into account and that it stymied business innovation and free-market principles.
By the time of Ronald Reagan’s administration, the opinion around corporate consolidation had shifted. The Justice Department did not aggressively enforce antitrust laws for decades. What’s occurring now in the Biden administration, legal experts said, reflects yet another shift, with government lawyers more aggressively cracking down on what they view as corporate malfeasance.
William Baer, who headed the Justice Department’s antitrust division during the Obama administration, said the change didn’t happen overnight. During his tenure, for example, he helped issue guidelines that allowed people who engage in non-poaching contracts to receive civil as well as criminal charges. Such contracts generally prohibit striking agreements with other companies not to hire each other’s employees.
“For a long time, there has been less enforcement than would be ideal,” Baer said. “While the government hasn’t won all the recent cases, they are showing that they are moving the law in the direction that the Biden administration has said it wants to go.”
Cat Zakrzewski contributed to this report.
Source: WP
