Biden’s New Antitrust Cop Threatens to Slam Brakes on Mergers
Biden’s New Antitrust Cop Threatens to Slam Brakes on Mergers
(Bloomberg) -- To understand how the Justice Department’s new antitrust chief, Jonathan Kanter, is thinking about his job, take a look around his office.
On one wall hangs a painting of the prosecutor who brought the case that crushed John D. Rockefeller’s Standard Oil monopoly. There’s also a picture of a bison with the words “Ass Kicking Is On My Mind.” And then there are the historic posters from an earlier trustbusting era.
Kanter, an affable 48-year-old with oversized dark-rimmed glasses, is planning an aggressively activist approach to his new job. His mission: to reverse decades of lax enforcement that he said has allowed companies to dominate industries and thwart competition.
“We’re not just bringing a few big cases, we’re changing the way it’s done,” said Kanter in his first interview since taking over in November.
Sitting around a large conference table with his team, Kanter said they’re “turning the page on a failed experiment,” referring to decades of laissez-faire merger policy.
In bringing back the trustbusting tenor of the early 20th century, Kanter is carrying out a key part of President Joe Biden’s economic agenda, which aims to increase competition across the economy after decades of consolidation.
But he faces an array of obstacles -- from unfriendly judges to companies like Alphabet Inc. that have the resources to wage years-long legal battles against antitrust watchdogs.
Kanter and Lina Khan, his counterpart at the Federal Trade Commission, which also enforces competition laws, are trying to halt concentration amid a merger avalanche. The agencies reviewed some 3,500 transactions in the fiscal year that ended in September, a record.
The antitrust division is now juggling five merger challenges and a monopoly lawsuit that accuses Alphabet’s Google of abusing its power in internet search. It’s also investigating Google’s digital advertising business and Apple Inc. over how it runs the App Store, Bloomberg has reported.
The Biden administration is proposing steep jumps in funding for both antitrust agencies in its proposed fiscal 2023 budget as part of its push to make markets more competitive.
One of Kanter’s priorities is to prevent tech platforms from acquiring new, disruptive technologies that threaten their dominance. For years, antitrust cops stood by while tech giants gobbled up smaller companies, a strategy that critics say allowed the platforms to cement their power and conquer new markets. Kanter said he also intends to sue to block more mergers in court rather than accept settlements that allow deals to proceed.
On Tuesday, for example, shipping giants Cargotec Oyj and Konecranes Oyj abandoned a planned merger after Kanter threatened to go to court to block the deal.
The prospect of tougher merger enforcement is sounding alarm bells. “In every deal, there is a great deal of attention being paid to potential antitrust risks,” said Andrea Basham, a partner at Freshfields Bruckhaus Deringer LLP in New York, whose firm is advising clients to consider remedies such as divesting businesses before going into a review, rather than trying to negotiate one later. Basham said she is seeing “caution in all sectors.”
The son of elementary school teachers, Kanter was born in Queens and is the product of the New York City public-school and university systems. After graduating from Washington University School of Law in 1988, he started his career at the FTC, where he had worked as a student intern.
Combing through boxes of papers on a pharmaceuticals deal during his internship, Kanter found what appeared to him to be a smoking gun document. It allegedly showed pharmacies coordinating on prices, yet the agency didn’t act, disappointing Kanter. That’s when antitrust theory became real for him. “It’s about being able to get affordable prescription drugs,” he said.
Kanter made his name in private practice a decade ago representing Microsoft Corp. The software company was pushing the FTC to file an antitrust case against Google, an investigation the agency eventually closed without taking action. At the time, arguing that Google was engaged in anticompetitive conduct was seen as a fringe position, he said, but now there’s widespread agreement that the U.S. needs a tougher approach to digital markets. Kanter also represented software companies that complained about Apple’s App Store practices.
Kanter, a music lover who collects guitars and records soundtracks in his basement studio, has an ability to explain in simple terms how complex digital markets work. This was key to laying the groundwork for Google cases brought by the European Union and by state attorneys general in the U.S., according to people familiar with his work.
Kanter’s detractors say his image as an antitrust crusader taking on the establishment is undeserved because he spent much of his career advocating for Microsoft’s efforts to establish Bing as a search rival to Google.
Google last year pushed the Justice Department to examine whether Kanter is biased and should be recused from cases involving the company. His supporters argue that he has consistently favored vigorous antitrust enforcement, whether in the private sector or in government. Kanter declined to comment, citing department policy.
If Kanter is forced to withdraw from the Google case and a potential Apple case, the division would be left pursuing the biggest antitrust cases since the 1990s without his leadership and expertise.
Antitrust Trio
Kanter, Khan and Tim Wu, Biden’s adviser on technology and competition policy, advocate an activist antitrust agenda known as the New Brandeis School, named after a former Supreme Court justice who warned of the dangers of concentrated economic power. The movement rejects the “consumer welfare standard” ushered in by the so-called Chicago School in the 1970s and 80s, which maintains a narrow focus on prices.
“This really is a swinging back of the pendulum,” said Rick Rule, a former chief of the antitrust division and a former colleague of Kanter’s, now at Rule Garza Howley LLP in Washington. “This is not a flash in the pan.”
Rule, like many veteran antitrust lawyers, is wary of the new dogma. “There are some people who are going to bristle at the reversal because it comes with the implicit message that the previous status quo has failed,” said Jeff Hauser, founder and director of The Revolving Door Project, which tracks government officials’ corporate ties.
To some extent, Kanter and Khan are thumbing their noses at the legal establishment. For example, they’re hosting a livestreamed “enforcers summit” on April 4 to give ordinary citizens access to the agencies’ policy objectives. They will be leapfrogging ahead of the American Bar Association’s annual antitrust conference, which takes place two days later and is the customary venue for FTC and DOJ officials to discuss policy.
It’s not just antitrust tradition at stake. Some lawyers argue that the new leaders’ aggressive stances could result in a big court loss, setting a precedent that makes future enforcement harder. They point to the department’s antitrust case against American Express Co., which went to the Supreme Court and resulted in a 2018 decision that some see as a hurdle to monopoly cases against tech companies.
Kanter said the division has to be ready to lose some cases to move the law in a different direction.
The antitrust chief is building out his team of deputies to help lead the effort, including bringing over Carol Sipperly, who led the government’s case against mobster John Gotti Jr., to oversee criminal and civil litigation.
“My biggest challenge is to make sure that this kind of work has the support to address the modern day Standard Oils of the world,” he said.
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