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Author: Steven Cernak

Late last month, Department of Justice Assistant Attorney General Gail Slater gave her first major policy address, entitled “The Conservative Roots of America First Antitrust Enforcement.” The thoughtful speech describes an antitrust perspective different from those of any recent Administrations, though consistent with other Trump Administration policies. Antitrust practitioners should prepare for at least subtle changes in the enforcement we have seen recently and for generations.

Location of Speech No Accident

Slater gave the speech at Notre Dame Law School in South Bend, Indiana (technically, Notre Dame IN). While Slater’s Principal Deputy, Roger Alford, taught at Notre Dame, she provided an additional rationale for the location:

We all know the story of the decline in manufacturing in this state. Indiana was at the heart of the United States’ thriving manufacturing industry for much of the 20th century.

But then in the 1960s and ’70s the factories started shutting down. The Studebaker factory closed here in South Bend in 1963, and other Indiana cities experienced similar population declines as manufacturing moved overseas. It took decades for cities such as South Bend to recover, and some have still not recovered. (footnote omitted)

Now, for years I have called for federal antitrust enforcers to get out their Beltway seats. And as a native Midwesterner practicing here for over 35 years, I heartily applaud the choice of Indiana. While I am a Wolverine and not a Golden Domer, my wife is a South Bend native; we were married at St. Joseph parish; and our sons have certainly seen Touchdown Jesus and prayed at the Grotto. So, I especially liked the South Bend choice.

But while I understand the gist of Slater’s point in the quote above, I will quibble enough with the details to push back on the simplistic story that some readers might mistakenly take from it.

Although the 1963 Studebaker plant closure and loss of 7000 jobs certainly was devastating for the company and the city, it was neither the beginning nor the end of problems for either. While Studebaker was “first by far with a post-war car,” the company’s employment had already peaked at 22,000 shortly after World War II and its poor finances forced a merger with Packard in 1954. By 1963, Bendix was actually South Bend’s largest employer and, two years later, the city had “truly come back” from the Studebaker hit as its unemployment rate was one-third of the 1963 rate. Unfortunately, the economic recovery was uneven, leaving behind many minorities, and not destined to last. The city suffered another blow in 1979 when the downtown Sears store closed and moved to University Park Mall in suburban Mishiwaka. So, the Studebaker plant closing was only part of a long-term process.

Any implication that the Studebaker plant closed because “manufacturing moved overseas” probably is about a decade off. In 1963, the percentage of imported cars sold in the US was just over 5%. Instead, Studebaker’s decline after 1950 has been blamed on quality issues, higher costs (especially for labor), and an inability to compete with the lower costs and prices of General Motors, Ford, and Chrysler, especially after the Big 3 started making compact cars in the early 1960’s.

So, did the Big 3 or at least GM abuse its “dominance” or otherwise violate the antitrust laws and kill off Studebaker, Packard, Nash-Kelvinator, and Hudson? Various federal entities certainly investigated several times, including in Congressional hearings in 1955 and 1958. At the latter, George Romney, head of American Motors, the result of the merger of Nash-Kelvinator and Hudson, called for GM, Ford, and the United Auto Workers to be broken up into several smaller competitors and unions.[1] I would argue that the independents failed because of an inability to compete with the Big 3, an ability foreign manufacturers like Toyota, Nissan, and Honda developed a few years later — the share of imports rose to about 15% in 1970 then to over 25% a decade later. (Readers should note that I was an in-house antitrust lawyer at GM from 1989-2012 and learned from many of my predecessors, like Tom Leary.)

Anyone using Slater’s speech to tell a simplistic story of automobile manufacturing and sales should travel about thirty minutes east from South Bend on the toll road and visit Elkhart, IN. Since the end of World War II, about 80% of the recreational vehicles sold in the US each year have been made in and around Elkhart, with most of them produced by a small handful of companies. Why the difference compared to automobiles? Perhaps a uniquely American product sold in volumes too small and erratic to attract foreign competition or mass production techniques? The explanation for Elkhart’s success might be just as complicated as that for South Bend’s troubles.

But while I quibble with Slater’s selection of anecdote, I agree with what I think is her more general argument: The demise of the independent automakers and rise of import automakers did not equally affect consumers, workers, and communities like South Bend (or my Detroit). Slater does acknowledge that “change is inevitable in a dynamic and innovative economy” but also points out, correctly in my view, that “economists call this creative destruction and shrug it off as merely market forces at play.”

Those of us who have praised the free market for the benefits it has brought consumers and society must acknowledge that markets also create winners and losers and often take a long time to adjust. While downtown South Bend is much nicer than it was when I first visited more than forty years ago, it is painful that the main remnant of Studebaker is a museum (although I highly recommend it). Still, I am not yet convinced that these stories show that antitrust law, as compared to other policies, has a large role to play beyond ensuring that the free market really is free.

Three Principles – Some Familiar, Some New to Many Practitioners

Slater described three principles of America First antitrust. I will cover them in the reverse order of their presentation but, perhaps, in decreasing order of familiarity to many practitioners.

First, “Antitrust law enforcement should support deregulation by enabling free market competition that prevents the need for government regulation of consolidated power.” In other words, Slater plans to have “a preference for litigation over regulation,” using the scalpel of litigation “to make targeted, incisive cuts to remove the cancer of collusion and monopoly abuse.” The principle is most clearly demonstrated in the Division’s recently announced task force designed to root out anticompetitive regulations as part of the Administration’s broader deregulation efforts.

This principle seems to be a clear break with the Biden Administration’s efforts at greater regulation, especially through the FTC. Besides the task force’s efforts and more litigation, it could play out in the form of a greater appetite for structural versus behavioral remedies in any problematic mergers. On the other hand, some of the Division’s proposed remedies in the Google search engine market lawsuit, such as forced sharing of data, rules on conduct to prevent self-preferencing, and the required appointment of an officer and a committee to assist in ongoing monitoring, do sound regulatory.

Second, “Antitrust law enforcement should adhere to the rule of law and respect binding precedent and the original meaning of the statutory text.” Slater’s promises to “respect originalism,” maintain a “faithful humility to law’s limits,” and “enforce the laws passed by Congress, not the laws [she wishes] Congress had passed” certainly do sound like a “truly conservative approach to antitrust law.” That conservative approach’s view of precedent and original meaning, however, might not please some businesspeople who call themselves conservative.

Slater believes that new economic theories “do not render older precedent a dead letter” and while “there will be important debates about the weight we should place on older versus newer precedent,” it “is the Supreme Court’s prerogative” to change its interpretations. That attitude can help explain this Administration’s acceptance of the Biden Administration’s Merger Guidelines with its reference to many old cases. Practically, that means that any practitioner must be prepared to explain why old, inconvenient precedent like, for example, Philadelphia National Bank’s structural presumption, should not govern Slater’s merger enforcement with arguments better than a treatise’s assertion that today’s Supreme Court probably would come out differently.

Because the Sherman Act was meant to “codify the [English and American] common law and state antitrust laws,” Slater asserts, terms like “restraint of trade” and “monopolize” “must be understood with respect to the common law that they emerged from.” Many others have spent more time exploring the common law and Sherman Act drafting history than have I; however, my understanding from reviewing works by Werden and Hawk is that the meaning of “monopolize” — and even “monopoly” beyond one established by the government — is unclear or complicated. Still, practitioners might need to bone up on what Senator Sherman, or Senators Hoar and Edmonds, meant back in 1890.

Finally, “Antitrust respects the moral agency of individuals by protecting their individual liberty from the tyranny of monopoly.” Here, we get some principles that might sound odd to antitrust practitioners but provide another good reason the speech was made at Notre Dame.

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Author:  Nicolas Petit

This is a guest post from noted antitrust and competition law scholar Nicolas Petit. Petit is a Professor of Competition Law in the Department of Law at the European University Institute. He is also the co-founder of the Dynamic Competition Initiative with the University of California – Berkeley. Longtime blog readers will remember that I have reviewed Petit’s work before, both here and here. As I discussed in another recent post, Petit joined me on April 3 in Washington, D.C. at the ABA Antitrust Spring Meeting for the Chair’s Showcase Panel “Have We Been Doing It All Wrong” to discuss dynamic competition and related topics. Petit graciously agreed to share this lightly edited version of his opening remarks from that panel with readers of The Antitrust Attorney Blog.  Enjoy! – Steve Cernak

I’m the only non-American on this panel, and as it happens, I’m French. As former President Bush once said, the trouble with the French is that they don’t have a word for “entrepreneur.” This should make me the least qualified today to talk about innovation. Now, while President Bush was incorrect, his joke highlights an important truth: understanding the entrepreneur is crucial for fostering innovation.

Today, I want to discuss how antitrust law can better support innovation. A common term used by antitrust people like me who care about innovation is “dynamic competition”, or competition through technological change.

My main point is this: antitrust law needs smart glasses to effectively support dynamic competition. The goal of the “dynamic competition” view is to supply them. We want to enhance antitrust law’s ability to identify restraints of competition that effectively harm dynamic competition, and those that do not.

The dynamic competition view makes three assumptions:

First, technological change is a vector of competition that can be better seen by antitrust law. Second, perceiving the augmented reality of dynamic competition through technological change can be done at reasonable cost. Third, an agenda of augmentation of the reality of antitrust is more acceptable than the jump in virtual reality proposed by Neobrandeisians or the weird world of Trumpian antitrust.

I want to elaborate on the first point. In some industries, technology is a vector of invisible competitive pressure that may complement, and perhaps dominate, product rivalry. In 1946, Joseph Schumpeter had an interesting line about “the businessman [who] feels himself to be in a competitive situation even if he is alone in his field”. He warned against government experts who, failing to see any product rivalry with other firms conclude that “his competitive sorrows is all make believe”.

Today, the Schumpeter aphorism resonates vividly. The R&D investments of the Magnificent 7 represent effort levels consistent with cutthroat competition. Yet, agency and court cases give them short shrift, reaching one finding of unlawful monopolization in core platform segments after the other.

It is challenging for antitrust to deal with the coexistence of large R&D budgets and monopoly shares. The puzzle is the following: Is dynamic competition seen in R&D expenditure conditional on the maintenance of some base of monopoly power in a bottleneck market? Or is dynamic competition the outcome of collapsing monopoly power in that market?

These “correlations” between static and dynamic competition, as Richard Gilbert calls them, can be positive or negative depending on the industry.[1] Different innovation-minded policies may be required depending on how the correlations work.[2] If an industry works on a negative correlation between static and dynamic competition, antitrust forbearance will be the optimal policy to protect innovation. A generalization of that negative correlation was used by the Supreme Court in Trinko to exonerate nearly every refusal to deal from Section 2 liability.[3] Now, contrast this with an industry where a positive correlation exists between static and dynamic competition. In that scenario, strong antitrust enforcement can support dynamic competition through the commodification of aging firms’ monopoly rents.[4] This may be the implicit, perhaps unconscious, logic underpinning the liability theories in United States v. Google and FTC v. Facebook.

Antitrust law’s selection of one correlation model or the other cannot be made abstractly. A concrete evaluation of (i) whether the industry has dynamic competition potential, and (ii) whether it is monopoly power, or static competition, that supports it, is needed.  And note that if an industry has no dynamic competition potential – in clear, technological change is slow, because of a fixed production possibility frontier – then traditional antitrust enforcement should make markets work well.

A related way to look at this is to ask whether antitrust law should adopt a holistic lens on competition. Let us consider for a minute that innovation, technology, or R&D activity are forms of “broad spectrum competition”, “hypercompetition”, or “superimposed competition”.[5] Now, today’s partial equilibrium logic prevents a twin evaluation of that competitive layer and of rivalry within a relevant market. We do not examine what I have called the “moligopoly” dimension in the picture. The point is this: a business organization is a whole. It is not one thing when it competes with a field of peer firms in the technological environment, and an entirely other thing when it competes with rivals in the product space.

Now, to be fair, antitrust law has attempted to adopt a broader lens. The US Guidelines for the licensing of IP refer to R&D markets. The EU market definition notice of 2024 takes note of “structural market transitions”.[6] The EU horizontal merger guidelines contain an explicit reference to dynamic competition. In merger cases, agencies have experimented with new concepts. AMAT/TEL or Nielsen/Arbitron focused on future R&D or prospective product markets. Dow/Dupont introduced a focus on innovation “spaces” in R&D pipeline industries. Booking/eTraveli used ecosystem language to justify prohibition.

But talking about dynamic competition does not mean seeing dynamic competition. A proposition like “Google competes with Amazon” will generally attract laughter on planet antitrust. The idea that OpenAI had Chinese competitors – and perhaps some European ones – was delusion until the DeepSeek release. And a conventional application of merger tools led the UK CMA and CAT to hold that GIPHY had the ability and incentives to outcompete Facebook.

The issue, in my view, is there is no well-articulated economic and legal framework for dynamic competition, innovation, or technological change, and related analytical tools. In practice, innovation-related concepts pop up randomly in cases, sometimes to support antitrust or merger prohibitions, less frequently to credit pro-competitive justifications.[7]

A more thoughtful framework for dynamic competition requires deepening antitrust law engagement with four high-level issues. The first one is ‘out-of-market’ competition. In some industries, market power is not just constrained by direct entry threats within the relevant market. Indirect entry that moves surplus to adjacent or lateral markets is equally as important.

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Author: Steven Cernak

Years ago when I was working in-house at General Motors, one of my bosses asked just what it was that I did at all those ABA Antitrust Section meetings I attended: “Seems like you just go to nice places and think big thoughts.” He did not mean it as a compliment.

This year, as Chair of the Antitrust Section, I had an idiosyncratic perspective on the Section’s big Spring Meeting last week. I did not get to go to as many panels as I would have liked; however, I did get the chance to moderate two premier panels and interact extensively with numerous foreign enforcers and practitioners. While there were plenty of great panels on the nuts and bolts of antitrust and consumer protection law, I think the key takeaways of the week for practitioners were some of the “big thoughts” – despite what my old boss would say.

Dynamic Complexity

I organized and moderated a panel under the title “Have We Been Doing It All Wrong?” with panelists Nicolas Petit, Neil Chilson, Diana Moss, and Koren Wong-Ervin. Here was the premise: If antitrust law is supposed to protect competition and the competitive process for the good of some group, whether consumers, workers, citizens, or others, shouldn’t we have a good idea of how that competitive process works? And do we?

Antitrust law generally uses the neo-classical economics that so many of us learn in Econ 101 — supply, demand, prices adjust to create market equilibrium, inputs go in a black box that creates outputs. The panel discussed alternative views of competition, one being dynamic competition. Broadly speaking and in my own words, this view sees innovation as the driver of wealth creation and that innovation happens in a longer term, more complex way than captured by neo-classical economics and some antitrust precedent.

A related concept discussed by the panel was complexity economics. Another concept resistant to a simple definition, I describe it as viewing the economy less like a black box and more like an ecosystem, constantly evolving, dynamic, not necessarily ever in equilibrium, and where the participants are always adjusting their actions based on the outcomes that they create. We also discussed emergent order, thinking more like a gardener or park ranger, and even a taste of Austrian economics with some references to Hayek’s Pretence of Knowledge speech. The panelists tried to explain how these concepts, which might be unfamiliar to many antitrust practitioners, might be applied to real cases.

The panel was meant to bring to the audience’s attention a conversation that I and others have been having for years and that will continue. Loyal readers of these posts will remember my reviews of books by Petit and Chilson and other posts on complexity. The conversation continued the next day with a panel sponsored by the Dynamic Competition Initiative and BRG on dynamic competition and innovation. And Section members will get an entire issue of the Antitrust Law Journal devoted to articles going “Beyond Dynamic Competition” later this month.

Here are my summaries of three key takeaways for practitioners. First, Petit made the point that not all industries or companies or the actions they take are examples of dynamic competition; therefore, one research task could be to determine when these concepts make sense to apply. Second, some of the commenters at the DCI panel suggested a need to better understand how innovation occurs in that black box called a company, which might require antitrust folks to study more managerial economics from B-School economists than we have in the past. Finally, I think all the panelists made the point, at least implicitly, that application of any or all of these concepts might lead to more or less antitrust enforcement. All good reasons why antitrust practitioners, enforcers, and policy makers should become more familiar with these big thoughts.

Principles Discussed Globally

As Chair, I had the opportunity to have some informal conversations with many non-US practitioners and enforcers. I also moderated the Enforcers’ Roundtable with the head of the National Association of Attorneys General Multistate Antitrust Task Force and the top enforcers for the EU, Germany, and Brazil. Unfortunately – for the Section but also the antitrust community and them – the top enforcers at the FTC and DOJ chose not to participate in the Section’s Spring Meeting. The attendance and participation of others at the two US agencies also was drastically reduced.

I put the remarks of the non-US attendees in two categories. First, some noted the unfortunate irony of prior US enforcers preaching the need for other countries to apply principles, especially economic ones, in competition law enforcement when the current US enforcers seem to be backing away from any, or at least those same, principles. Personally, as discussed below, I do think the US enforcers will continue to take a principled approach to enforcement, although the principles might be subtly different; however, I think the US enforcers missed a great chance to explain themselves to a large, global audience. Tough to change first impressions.

Second, non-US attendees, as always, appreciated the numerous opportunities to interact with US-based colleagues, collaborators, and current or potential clients. They would have preferred to also interact with US enforcers. Their absence raised concerns that US enforcers might pull back on other formal and informal methods of cooperation, such as the International Competition Network or ICN. The presence of Mario Monti, longtime Italian and EU politician and competition enforcer and considered an ICN founder, at the Spring Meeting only highlighted the drastic changes felt by those outside the US.

Perhaps EU EVP Teresa Ribera captured both categories best with this statement (taken from an unofficial summary) at the Enforcers’ Roundtable: “Ensuring functioning markets, protecting consumers, and fighting abuse — while respecting the rule of law — takes trust and cooperation. Regionally. Globally. We’re in this together.”  I think the global cooperation will continue but this year was the first time in many years when that assumption was questioned.

Hillbilly Antitrust

One of the benefits of being in DC during Spring Meeting week after an election is the chance to hear some initial thoughts from new enforcers on their priorities. Sadly (for many, as explained above), new DOJ AAG Gail Slater chose a different, smaller event last week to make some initial remarks. While some suggested the term “MAGA Antitrust” to describe the policy outlook for the new Trump Administration, Slater said she preferred “hillbilly antitrust.”

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Author: Luis Blanquez

In simple terms algorithmic pricing takes place when competitors make use of a software platform to share competitively sensitive information, which the pricing algorithm uses to recommend prices for all users.

Algorithmic pricing has been in the antitrust spotlight over the past few years.

The FTC has Algorithmic Price-Fixing in its Antitrust Crosshairs

New Antitrust Cases and Statements of Interests About Algorithmic Collusion

The main reason? Antitrust laws apply to algorithms implementing human agreements.

How to Show the Existence of an Agreement: Direct and Circumstantial Evidence

Remember that under US antitrust law, there are two ways to show the existence of an agreement:

  • Through direct evidence (sometimes this is a “smoking gun”), and;
  • Through circumstantial evidence: Alternatively, it’s more common to show the existence of an agreement through a combination of parallel conduct and “plus factors,” i.e., a common motive to conspire, evidence that shows that the parallel acts were against the apparent individual economic self-interest of the alleged conspirators, and/or evidence of a high level of interfirm communications.

But finding an express agreement between companies to fix prices is not super common these days. So, what happens when there is no agreement involved, and the algorithm “only” facilitates tacit collusion between the companies using it? Things get much murkier. That happens, for instance, when competitors use the software platform to share sensitive commercial information.

Agreements to Exchange Information: “Per Se” or Rule of Reason?

Section 1 of the Sherman Act prohibits every contract, combination or conspiracy that restrains trade, so long as those restraints are unreasonably restrictive of competition in a relevant market. This includes both an agreement and tacit collusion.

Restraints analyzed under the “per se” rule are those that are always (or almost always) so inherently anticompetitive and damaging to the market that they warrant condemnation without further inquiry into their effects on the market or the existence of an objective competitive justification. Business practices considered per se illegal under antitrust laws include: (a) horizontal agreements to fix prices, (b) horizontal market allocation agreements, (c) bid rigging among competitors; (d) certain horizontal group boycotts by competitors; and (e) sometimes tying arrangements.

On the other hand, a contract, combination or conspiracy that unreasonably restrains trade and does not fit into the per se category is usually analyzed under the so-called rule of reason test. This test focuses on the state of competition within a well-defined relevant agreement. It requires a full-blown analysis of (i) definition of the relevant product and geographic market, (ii) market power of the defendant(s) in the relevant market, (iii) and the existence of anticompetitive effects. The court will then shift the burden to the defendant(s) to show an objective procompetitive justification. Most antitrust claims are analyzed under this test.

Depending on the type of unlawful information exchange, it might be categorized as:

  • “Per se”unlawful conduct, when facilitates price fixing, bid rigging, or market allocation, so plaintiffs do not need to show actual harm to competition, or;
  • Unlawful conduct under the rule of reason, if the exchange of information leads to some anticompetitive effect, based on factors such as the structure of the industry involved, and the nature of the information exchanged, among others.

This is an important distinction to keep in mind if you want to understand why the District Court for the Western District of Washington in Duffy v. Yardi Systems Inc. recently denied the defendants’ motion to dismiss, while stating—for the first time involving an antitrust case on algorithmic pricing—that plaintiffs’ allegations were sufficient to allege a per se unlawful antitrust conspiracy.

New Legal Standard for Algorithmic Pricing Antitrust Cases? Maybe…

We’ve seen several government and private antitrust lawsuits on algorithmic pricing during the past years, claiming that the use of a software platform to set prices constituted an anticompetitive conspiracy under the antitrust laws.

We’ve previously discussed all these cases in detail here. In a nutshell:

  • In 2022 plaintiffs in Realpage, Inc. Software Antitrust Litigation sued RealPage and its landlord-customers alleging that a management software tool helped them coordinate on prices by collecting non-public information on rents and vacant units. In January 2024, the Court denied the motion to dismiss––plaintiffs were able to show that RealPage’s software uses confidential competitor information through its algorithm to spit out price recommendations based on that private competitor data.

Second, it rejected claims alleging a horizontal price-fixing conspiracy (no agreement and no absolute delegation of their price-setting to RealPage) ––which would have been “per se” illegal––but concluded that those same landlords vertically conspired with RealPage.

  • In 2023, plaintiffs in Gibson v. MGM Resorts International and Cornish-Adebiyi v. Caesar’s Entertainment, Inc., alleged that hotels in Las Vegas and Atlantic City used a pricing algorithm to facilitate collusion, by providing hotel and casino room pricing and occupancy information. The district courts dismissed both cases, on May 8 and September 30, 2024, respectively, based on several grounds. First, plaintiffs did not show a horizontal agreement: the hotels were not using the platforms around the same time, did not agree to be bound by such price recommendations, and did not charge the same prices. And second, plaintiffs failed to show that the pricing recommendations were based on nonpublic, competitively sensitive information.
  • In Duffy v. Yardi Systems, Inc. plaintiffs similarly alleged that competing landlords violated Section 1 of the Sherman Act, by unlawfully agreeing “to use Yardi’s pricing algorithms to artificially inflate” multifamily rental prices. On December 4, 2024, the court denied the motion to dismiss and allowed the case to proceed into discovery. There are two important nuances to highlight here.

First, and similarly to the RealPage case, the Court sided with plaintiffs and agreed on the existence of an antitrust conspiracy. This decision was not only based on defendants’ acceptance of Yardy’s invitation to trade sensitive information, which allow them to charge increased rents, but also on defendants’ parallel conduct (while contracting with Yardi), and “plus factors,” such as the exchange of nonpublic and competitive sensitive information, which suggested defendants acting for their mutual benefit.

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Authors: Pat Pascarella and Aaron Gott

The idea of Elon Musk purchasing TikTok might sound like a headline ripped from a speculative business column, and maybe it is. But as antitrust lawyers, we couldn’t resist. Obviously, Mr. Musk already owns X, and any such acquisition might raise antitrust concerns.

But could you head off those concerns by structuring the deal with an exception to the antitrust laws known as a Joint Operating Agreement? While JOAs were related to the newspaper industry and are largely seen as a relic of the past, their principles could provide a framework for addressing modern concerns.

A Brief History of Joint Operating Agreements

Joint Operating Agreements emerged during the 20th century as a mechanism to save failing newspapers thereby maintaining at least some level of editorial competition. By the mid-20th century, many U.S. cities had two major newspapers, but declining revenues and readership often left one teetering on the edge of closure. To prevent monopolization of the news market, Congress enacted the Newspaper Preservation Act of 1970, which allowed competing newspapers to enter into JOAs.

Under a JOA the two newspapers would be permitted to merge their business operations, so long as they agreed to maintain separate editorial teams. The goal was to preserve journalistic diversity in cities that were about to find themselves with only one surviving paper. But JOAs required approval from the Department of Justice (DOJ) and were contingent on demonstrating that one of the newspapers was “failing.”

JOA Requirements

For a JOA to be approved, the following conditions had to be met:

  1. Failing Firm Doctrine: One of the parties had to demonstrate that it was financially unsustainable and would likely exit the market absent the agreement.
  2. No less anticompetitive alternative: There must not be a less anticompetitive alternative to the joint operation agreement.
  3. Preservation of Competition: The agreement had to preserve a degree of competition, particularly in areas such as content creation or editorial independence.
  4. DOJ Oversight: The DOJ maintained the authority to review and approve any proposed JOAs, ensuring they aligned with antitrust laws.

Applying the JOA Framework to a Musk-TikTok Deal

Elon Musk’s ownership of X likely would raise antitrust concerns about the acquisition of TikTok. But a JOA (or JOA.2) could provide a creative solution to balance these concerns with broader policy objectives, such as ensuring competition with other tech giants like Meta and Alphabet while also addressing national security issues tied to TikTok’s current Chinese ownership.

A critical hurdle, however, would be demonstrating that TikTok meets the “failing firm” criterion. While TikTok is far from failing financially, isn’t “failing” simply another term for “about to involuntarily exit the market.”  Same outcome, hence same justification.

But this difference could mean a crucial difference under the JOA legal framework. As explained above, there must be no less anticompetitive alternative available. When it came to the failing newspapers, there was no alternative: failing newspapers did not have buyers lining up to buy them. But popular social media platforms do.

But there’s an answer here as well.  One idiosyncrasy of the TikTok situation is that the Chinese government has taken the position that the TikTok algorithm is a Chinese national security secret. So any sale of TikTok means, as a practical matter, that it is not likely to come with a functioning algorithm. This limits the potential pool of buyers to those who either have one they can adapt or who can put one together on the fly.

This likely narrows significantly the existing pool of willing buyers to those who already have social media companies, or possibly even to those people who are known to drive their teams to accomplish skunkworks-like missions on impossible timelines.

Political and Regulatory Considerations

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Authors: Steven Cernak and Luis Blanquez

On January 10, 2025, the Federal Trade Commission (FTC) issued its usual annual announcement to increase the Hart-Scott-Rodino (HSR) Act thresholds. The 2025 thresholds will take effect 30 days after publication in the Federal Register, which means February 10, 2025.

HSR requires the parties to submit certain information and documents and then wait for approval before closing a transaction. The FTC and DOJ then have 30 days to determine if they will allow the merger to proceed or seek much more detail through a “second request” for information. The parties may also ask for “Early Termination” to shorten the 30-day waiting period, although for nearly two years the agencies have suspended this option.

The HSR Act notification requirements apply to transactions that satisfy the specified “size of transaction” and “size of person” thresholds. These thresholds adjust annually to reflect changes in the U.S. gross national product.

Three thresholds determine the applicability of HSR filing requirements.

First, one of the parties to the transaction must be in commerce in the United States or otherwise affect U.S. commerce.

Second, the acquiring party must be acquiring securities, non-corporate interest, or assets of the target in excess of $126.4 million––the “size of transaction” threshold. Entities need not file notifications when the value of the voting securities and assets is below this threshold.

Third, if the transaction exceeds $126.4 million but does not exceed $505.8 million–the “size of the parties” threshold–– then at least one party involved in the transaction must have annual net sales or total assets of at least $252.9 million, and the other party must have annual net sales or total assets of at least $25.3 million.

Transactions valued at more than $505.8 million are reportable regardless of the size of the parties, unless an HSR Act exemption applies.

The FTC’s notice also implemented a new filing fee structure from the new legislation. The new structure will be in place starting with filings made on or after February 10, 2025. Below are the new fee thresholds:

2025 

Size of the Transaction                        Merger Fee 

$126.4 million – $179.4 million             $30,000

$179.4 million – $555.5 million           $105,000

$555.5 million – $1.111 billion               $265,000

$1.111 billion – $2.222 billion                    $425,000

$2.222 billion – $5.555 billion                   $850,000

$5.555 billion or more                                        $2,390,000

As a result of the new legislation, those fees will also adjust annually, based on changes to the consumer price index.

The FTC further published revised thresholds relating to Section 8 of the Clayton Act. Section 8 prohibits interlocking directorates in which one “person” serves simultaneously as an officer or director of competing corporations, subject to certain exceptions. Now, Section 8 of the Clayton Act applies when each of the competing corporations has capital, surplus, and undivided profits aggregating more than $51,380,000 and each corporation’s competitive sales are at least $5,138,000 again with certain exceptions.

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Author: Ruth Glaeser

The Third Circuit Court of Appeals held that Merck is exempt from antitrust claims under the Noerr-Pennington doctrine in a lawsuit accusing it of deceiving the government about the effectiveness of its mumps vaccine to prevent competition.

Background from the Third Circuit’s Opinion

Merck was the sole licensed manufacturer of mumps vaccines in the United States for over fifty-five years, until 2022.  The vaccine was FDA-approved and included an FDA-approved label that outlined its shelf life, minimum-potency requirements, and effectiveness. Merck had an ongoing duty to ensure that the drug label was accurate.

In the late 1990s, the FDA expressed concern that Merck’s mumps vaccine did not provide immunity near the end of its purported 24-month shelf life. At the FDA’s suggestion, Merck overfilled the vaccine doses to try to make the doses potent through the end of the shelf-life period.

But this did not resolve the issue, and Merck did not share that information with the FDA.  Merck feared that disclosing this information would lead the FDA to require a change in the vaccine’s label. And a label change was particularly problematic for Merck because it competed with GlaxoSmithKline (“GSK”), which sold a similar vaccine in Europe. Merck thought that GSK’s vaccine would soon enter the U.S. market and a label change on Merck’s vaccine would make it easier for GSK to demonstrate that its vaccine was not inferior to Merck’s.

So, to preserve its market dominance, Merck misrepresented the vaccine’s potency and effectiveness at the end of its shelf life. To support this, Merck ran a clinical trial and claimed that it could reduce the potency of the vaccine without impairing the existing drug-label claims about immunity.  But the appellees in this case said the study did not reliably capture information about the drug’s immune response in the human body. Nonetheless, the FDA continued to approve Merck’s mumps vaccine label and Merck continued to make unsupported claims about the self-life and immunity of its mumps vaccine on the drug label.

GSK eventually demonstrated that its vaccine was competitive with Merck’s. And the FDA approved GSK’s application to sell its vaccine in 2022.

The Noerr-Pennington Doctrine

The Noerr-Pennington doctrine provides limited exemption from antitrust liability for actions intended to influence governmental decision-making in all three branches of government. This doctrine protects the First Amendment right to petition the government, including the courts.

It is, however, subject to a caveat—the “sham exception.” For Noerr-Pennington to apply, the challenged action must be a legitimate government petition rather than conduct intended to interfere with a competitor. Generally, the court will look to see if the anticompetitive conduct arises from the process of the government petitioning rather than the outcome. If the anticompetitive conduct arises from the process, rather than the outcome, of petitioning the government—like baseless litigation bankrupting a competitor due to legal fees—then the sham exception is more likely to apply.  But if the anticompetitive conduct is merely the outcome or result of legitimate government petitioning, then the Noerr-Pennington doctrine protects the conduct.

The Court’s Analysis

The Third Circuit engaged in this process v. outcome analysis. The crux of Appellees’ antitrust injury was that Merck’s actions delayed the launch of GSK’s competing vaccine in the United States for over a decade by maintaining deceptive statements on the vaccine label. They argued that it was the misleading statements on the label that prevented GSK from entering the market because GSK was unable to match Merck’s alleged effectiveness.

But the Court explained that the allegedly false or misleading claims on the drug label were the result of Merck’s successful petition to the FDA rather than part of the process. The Court said that Merck faced a dilemma when it was approached by the FDA:  Merck could either (1) reveal that its vaccine might be mislabeled, leading to potential relabeling by the FDA; or (2) persuade the FDA that overfilling the doses fixed the problem (despite not actually doing so) and the request that the label remain unchanged.  Merck did the latter, and the FDA did not order Merck to change the label or take further action against Merck after learning the truth.

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Author: Sabri Siraj

In a landmark decision, the U.S. Court of Appeals for the First Circuit upheld a district court ruling to permanently enjoin the Northeast Alliance (NEA) between American Airlines and JetBlue Airways. This case offers key insights into the relationship between joint ventures and antitrust and the standards of review for evaluating competitive harm.

Airline Case Summary

Defendants presented NEA as a collaborative effort between American Airlines and JetBlue to streamline services, enhance route options, and compete more effectively in the Northeast region of the U.S. Specifically, the arrangement allowed the two carriers to coordinate schedules, pool revenue, and integrate operations in select markets. The airlines argued that the NEA would create efficiencies that would benefit consumers through improved services and better connectivity. But the Department of Justice (DOJ) and several state attorneys general challenged the agreement, asserting that it undermined competition, raised ticket prices, and reduced consumer choice.

The district court’s findings supported the DOJ and the States, concluding that the NEA’s anticompetitive effects far outweighed any claimed benefits. The court held that the alliance reduced output in critical markets and failed to generate meaningful procompetitive benefits that could not be achieved through less restrictive means. On appeal, American Airlines argued that the NEA deserved lenient antitrust scrutiny because it is a joint venture. The First Circuit, however, rejected that defense, emphasizing that the legality of such arrangements hinge on their substance and actual effects rather than their label.

Antitrust Issues and Decision

This case serves as a critical examination of the standards applied to joint ventures under antitrust law. Joint ventures, when properly structured, can foster innovation, enhance efficiencies, and deliver consumer benefits by pooling resources and expertise. But these benefits do not exempt joint ventures from antitrust scrutiny. The First Circuit’s ruling focused on three key principles:

First, the court emphasized the importance of substance over form. It rejected American Airlines’ argument that the NEA’s classification as a joint venture warranted less rigorous analysis. As the court noted, “One could describe price fixing as a joint venture,” highlighting that the label itself does not insulate an arrangement from scrutiny. The court’s inquiry focused instead on the practical implications of the NEA, particularly its impact on competition and consumer welfare.

Second, the court applied the rule-of-reason framework to evaluate the NEA’s competitive effects. This standard requires a detailed analysis of the agreement’s purpose, its potential procompetitive justifications, and its actual anticompetitive effects. Here, the NEA failed to demonstrate sufficient procompetitive benefits to offset its negative impact on competition. The court agreed with the district court’s finding that the alliance reduced output and increased prices in key markets, with no evidence of justifying efficiencies.

Finally, the decision reinforced longstanding antitrust principles requiring genuine economic integration in joint ventures. The court found that the NEA lacked the necessary integration of resources and operations to qualify as a legitimate joint venture. Instead, it functioned as a mechanism to coordinate behavior between two major competitors, effectively reducing competition without delivering substantial consumer benefits.

The Broader Implications of the Ruling

The First Circuit’s decision has significant implications for businesses and legal practitioners navigating antitrust issues. For companies considering joint ventures or similar collaborations, the ruling serves as a reminder that such arrangements must be carefully structured to withstand legal scrutiny. A legitimate joint venture should integrate resources and create new or improved products or services that enhance market competition. Agreements that merely coordinate behavior between or among competitors without achieving these objectives are unlikely to survive antitrust challenges.

Additionally, the case underscores that businesses should  proactively address potential antitrust risks during the joint venture’s planning and formation. This includes consulting with antitrust counsel, conducting thorough market analyses, and ensuring that any restrictions are ancillary to the venture’s objectives and proportional to achieving its goals. Companies should also document the procompetitive benefits of their agreements, providing clear evidence to support their claims if challenged.

Insights for Practitioners

The NEA case highlights why antitrust attorneys tailor legal advice to the specific facts and context of each arrangement. Joint ventures remain a common strategic tool for businesses seeking to innovate or expand their market presence. But, as this case illustrates, not all joint ventures are created equal. To withstand antitrust scrutiny, an arrangement must demonstrate genuine economic integration and clear consumer benefits.

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Author: Ruth Glaeser

Recent news highlights a growing focus on government antitrust enforcement cases against companies accused of monopolizing markets and abusing their power. But let’s consider another question: if a company lacks sufficient market power to qualify as a monopolist, but competes with only one or a handful of other companies, how does that affect consumer welfare?

American antitrust law seems to champion consumer choice untainted by anticompetitive practices. But it does not prohibit the market dynamic known as an oligopoly, which is a structure prevalent in numerous industries across the United States and the world. In an oligopoly, a small number of firms effectively control the quality, pricing, and supply of a particular market. This departure from perfect competition typically leads to some combination of higher prices and lower quality, and possibly less innovation and fewer consumer choices.

Consider the air-travel industry, where major players like Delta, American Airlines, United, and Southwest hold substantial influence over consumers. Similarly, when purchasing technology devices, most consumers find themselves choosing among a limited array of manufacturers, such as Apple, Samsung, and others. While no single entity monopolizes the market, collectively these firms exert significant control, raising concerns about the implications for consumer choice and pricing.

As the landscape of market power continues to evolve, understanding the dynamics of oligopolies becomes increasingly crucial for consumer welfare.

What is an Oligopoly?

An oligopoly is a market structure characterized by a small number of firms, usually fewer than five, that collectively account for a substantial share of the market. These firms are generally interdependent and the decisions of one firm often directly influence the behavior and profitability of the others. Their interdependence can lead to anticompetitive behaviors, including aggressive pricing to tacit collusion. These practices may harm  competition and consumers.

One of the largest threats to competition from oligopolistic behavior is conscious parallelism. Conscious parallelism occurs when firms in a competitive market make aligned decisions without direct communication or collusion. Instead, each firm observes the actions of its competitors, and reacts accordingly, often leading to similar pricing strategies, product offerings, or marketing tactics. Sometimes, there is one company, often the largest, that will start the merry-go-round, and smaller companies will follow the leader.  Importantly, conscious parallelism is not itself illegal under the antitrust laws, but its effects can mimic the anticompetitive results of monopolies.

There are several ways in which a market can become an oligopoly. The most common are high barriers to entering a market and the need for economies of scale. Many industries, such as the airline industry, require significant financial investment, which can deter new entrants. Relatedly, established firms often benefit from economies of scale, which allow them to produce at lower costs than new entrants, making it hard for smaller firms to compete on price. Sometimes companies may merge or acquire competitors to facilitate this, which reduces market competitors and increases a firm’s market share.

Moreover, it is common for government regulations to create or sustain oligopolies, such as in the utility industry, where governments may grant exclusive rights to certain firms to operate in specific regions, limiting competition, and controlling pricing. And government regulation itself tends to increase economies of scale, which tends to move markets from competitive toward oligopolistic. Indeed, if the federal government truly cared about increasing competition, it would take a long-hard look at excessive, unnecessary regulations that increase market-entry barriers.

Risk of Anticompetitive Behavior

An oligopoly presents a risk for several types of anticompetitive behavior:

  • High Potential for Price Fixing

Price fixing occurs when a small number of firms in the oligopoly agree to set prices at a certain level, rather than allowing competition to determine them. A notable example is the case of In re Domestic Drywall Antitrust Litigation, which involved seven defendant drywall manufacturers, four of which were responsible for approximately 70% of the market share. Plaintiffs alleged that these drywall manufacturers engaged in collusion to raise prices by 35%, announcing the increase to customers well in advance. This move came at a time when the industry was facing a surplus of product alongside a decline in demand. While the case was settled before reaching trial, the court’s findings suggested that the price hike was free from illegal collusion among Defendants.

  • High Potential for Conscious Parallelism

Conscious Parallelism poses a significant challenge to competition. This phenomenon occurs when firms coordinate their behavior without any explicit communication or agreement, often leading to artificially inflated prices. A prime example is Holiday Wholesale Grocery Co. v. Phillip Morris Inc, where Phillip Morris, a dominant player in the cigarette market, announced a substantial price reduction on its premium products. Its three main competitors quickly followed suit, controlling approximately 95% of the market.

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Author: Sabri Siraj

The Federal Trade Commission has survived a motion to dismiss in a high-stakes lawsuit against Amazon, igniting critical discussions about competition in the online marketplace. As a dominant player in global e-commerce, Amazon’s practices have long affected both consumers and competitors. Will this case change those practices or otherwise have implications for online marketplaces?

Important Note

Bona Law is currently representing Zulily in a similar lawsuit against Amazon in federal district court. You can read the complaint here.

About the Case

The FTC’s lawsuit, filed in Washington State federal court, stems from allegations that Amazon engages in anticompetitive practices that inhibit competition and violate the Sherman Act, the FTC Act, and consumer protection laws. The FTC alleges Amazon pricing practices harm competition by limiting consumer choices, and that Amazon engages in coercive tactics that disadvantage third-party sellers, creates barriers for new entrants, overcharges sellers, and makes it more expensive for sellers to offer their products on other platforms. Numerous states have joined the FTC’s lawsuit.

Amazon denies the allegations and asserts that its practices benefit consumers and competition. The court dismissed some state law claims but has otherwise allowed the lawsuit to proceed, with trial scheduled for October 2026.

Will the Case Affect Amazon’s Competitors?

For Amazon’s existing competitors, the FTC’s actions could provide both opportunities and challenges. If the lawsuit successfully restricts Amazon’s anti-competitive practices, it may level the playing field for other marketplaces like Walmart, eBay, and Shopify. These companies have often struggled to compete with Amazon’s extensive resources, alleged anticompetitive conduct, and customer loyalty programs. A more dynamic marketplace could enable them to attract more sellers and consumers, driving innovation and diversity in e-commerce offerings.

Moreover, if Amazon’s pricing strategies are curtailed, consumers could benefit through lower prices and improved service from competitors. This could encourage a competitive environment where companies strive to enhance their offerings, benefiting consumers.

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