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AAI Files Comments in the FTC’s Notice of Proposed Rulemaking on Labor Non-Compete Clauses

On April 3, 2023, the American Antitrust Institute submitted comments in response to the Federal Trade Commission’s Notice of Proposed Rulemaking on the Non-compete Clause Rule in Docket FTC-2023-0007-0001. AAI’s goal in providing comments is to aid agencies in promulgating rules and guidance that support robust competition and make the best use of agency enforcement and policy tools for achieving pro-competition goals. AAI’s comments applaud the FTC for exploring the use of rulemaking to address a major competition concern in labor markets. The initiative is an important part of an enforcement program to expand antitrust’s focus on labor markets.

AAI’s comments applaud the FTC for exploring the use of rulemaking to address a major competition concern in labor markets. AAI’s comments focus on how the FTC can minimize potential setbacks for the proposed rule that could arise on judicial review. One issue is how a final rule could be better supported by additional studies and more sophisticated analysis of economic evidence, including meta-studies, to reinforce the basis upon which a near total ban on non-competes rests. A second issue is how the Commission can and should deploy other policy tools, such as guidelines, to aid transparency and predictability regarding how the agencies will go about evaluating whether non-compete clauses are anti-competitive.

Read the full letter here: AAI Comments FTC NPRM Noncompetes

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Airline Consolidation and Labor: A View From the Cockpit

In this podcast episode, AAI President Diana Moss sits down with two airline pilots, Kelly Ison and Eric McEldowney, to talk about the effect of airline consolidation on labor workforces. There have been almost 20 airline mergers involving U.S. carriers in the last two decades, six of which have involved mergers of major legacy and low-cost carriers. Today, the sector is dominated by a tight oligopoly of carriers. But consolidation continues, with merger proposals such as JetBlue and Spirit, joint ventures like the Northeast Alliance codeshare, and increasing complexity in the international immunized airline alliances. While the effect of consolidation on consumers remains important, not enough has been said about effects on labor. This episode fills this gap. Moss, Ison, and McEldowney do a deep dive into airline consolidation and how it affects pilots. Their discussion ranges from changes in the industry since airline deregulation in the late 1970s, to consolidation and loss of competition, to policy proposals for promoting competition in airlines for the benefit of airline labor forces.

Moderator: 

Diana Moss, President, American Antitrust Institute

Guests:

Kelly Ison began his airline career as a pilot for Piedmont Airlines, serving as Chair of the ALPA Negotiating Committee, and leading high-profile projects for US Airways. Kelly is a Captain for American Airlines on the Airbus 320. He is Chair of the International Alliance Committee for the Allied Pilots Association and a member of APA’s strategic planning team. He lectures on airline economics and competition at the University of Westminster’s Aviation Masters program.

Eric McEldowney grew up wanting to be a pilot. He took his first biplane ride at the Flying Circus in Bealeton, VA at age 10 and was hooked. Eric built his flying experience through instruction, flying air ambulance, and commuter airlines. He has 23 years of experience flying at major airlines and is presently a captain on the Airbus 320. Eric currently serves on the APA’s Strategic Planning Committee.

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AAI’s Diana Moss Testifies at Senate Commerce Committee Hearing, Says Consolidation in the U.S. Passenger Air Transportation Harms Quality, Choice, and Connectivity for Consumers

On March 23, 2023, AAI President Diana Moss testified before the United States Senate Committee on Commerce, Science, & Transportation. The hearing: Enhancing Consumer Protections and Connectivity in Air Transportation “…examine[s] the need to strengthen consumer protections for the U.S. flying public, including bolstering Department of Transportation rules, enhancing accessibility for the disability community and exploring the intersection of competition and customer service. This hearing will also discuss the importance of air service connectivity for small and rural communities. The Committee will hear from witnesses about potential solutions to improve consumer protections and competition across the airline industry.”

Moss’s testimony touched on four major issues:

• A loss of competition in passenger air transportation markets affects airfares and ancillary fees and quality of service. As an important non-price metric of competition, the quality of products and services has only recently gained attention by antitrust enforcers. More attention should be paid to how consolidation in the U.S. passenger air transportation markets reduces competitive pressure to maintain and enhance quality of service.

• Airline mergers and joint ventures are unlikely to produce enhanced “connectivity” for travelers. U.S. air carriers have long justified proposed mergers and joint ventures on the basis of enhanced consumer benefits, or the ability of merged carriers to offer new or more frequent service on combined networks. But analysis shows these claims do not always materialize and, in fact, some mergers actually create inefficiency.

• Competition is essential for consumer choice and the stability and resiliency of the passenger air transportation system. Consolidation in U.S. passenger air transportation markets has reduced choice for consumers. This means fewer options for consumers who want to purchase service that meets their needs. An air transportation system that features fewer rivals is also less likely to withstand shocks such as pandemic and extreme weather and to recover quickly from them.

• Promoting competition and protecting consumers requires strong antitrust enforcement and coordinated regulatory oversight. Historically, there has been less coordination on airline competition matters such as mergers, joint ventures, and slot allocation between the U.S. Department of Justice (DOJ) and Department of Transportation (DOT). Coordination across these two prongs of government is essential for promoting competition and protecting consumers.

Read the full testimony here: Moss / Senate Commerce Committee Hearing – March 23

Watch the full committee hearing here: Senate Commerce, Science, & Transportation Hearing – March 23

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AAI Urges Fourth Circuit to Correct District Court’s Erroneous Readings of Supreme Court Precedent that Risk Giving Free Pass to Monopolists in Regulated Industries

On March 20, 2023, AAI filed an amicus brief in the Fourth Circuit in support of NTE Carolinas’ appeal of the district court’s grant of summary judgment on its Section 2 claims against Duke Energy. The brief argues that the district court made two crucial mistakes in its analysis that mandate reversal — failing to consider the cumulative anticompetitive effects of Duke Energy’s conduct in thwarting development of NTE’s competing electricity generating plant and applying an incorrect and overly stringent test for NTE’s refusal to deal claim.

On the first issue, AAI pointed out that the district court opinion wrongly required that each aspect of Duke Energy’s conduct in obstructing the Reidsville plant individually satisfy the requirements for Section 2 liability. AAI argued that this analysis ignored entirely the cumulative effect of the conduct and thus failed to follow clear precedent from the Supreme Court. AAI noted that the failure to do so in this case was particularly problematic because NTE alleged a series of interrelated and mutually reinforcing actions as part of Duke Energy’s self-described “combat strategy” to “stop the NTE train.”

On the refusal to deal issue, AAI argued that the district court misapplied the Supreme Court precedent in both Trinko and Aspen Skiing by requiring that NTE show a voluntary prior course of conduct at a retail price. In so doing, the district court misread Trinko as granting blanket immunity for monopolists in regulated industries and read unnecessary, fact-specific requirements into the Aspen Skiing analysis of refusal to deal claims. AAI argued that the district court, by making regulation outcome determinative, improperly transformed Trinko from a shield against new kinds of antitrust liability into a sword that attacks even well-established antitrust violations. AAI further noted that the district court’s narrow focus on the “voluntariness” of Duke Energy’s prior course of dealing incorrectly applied the analysis in Aspen Skiing.

AAI noted that these misreadings led the district court to overlook clear evidence of anticompetitive intent and effect. As a result, the district court made no demand on Duke Energy to provide any procompetitive justification for its conduct. AAI argued that, given these mistakes, the grant of summary judgment on NTE’s Section 2 claims should be reversed.

The brief was written by AAI Vice President of Legal Advocacy Kathleen Bradish, with assistance from AAI Research Fellow Mathew Simkovits.

Read the full brief here.

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Second Circuit Agrees With AAI Amicus That a Cartel Cannot Immunize Its Actions by Working Through a Single Entity

On March 8, the Second Circuit released its opinion in Relevent Sports, LLC v. United States Soccer Federation, Inc, et al. The decision vacated a district court decision to dismiss Relevent Sports’ claim that a 2018 policy enacted by FIFA and its national members violated Section 1 of the Sherman Act. Relevent Sports alleged that the policy was an illegal market allocation because it prevented promoters like Relevent from hosting league games outside a team’s home geography.

The Second Circuit’s analysis of the sufficiency of a Section 1 claim reflects the framework AAI advocated in its amicus brief to the court. The opinion affirms that, as AAI argued, an allegation that separate economic actors are restrained from pursuing individual economic interests is sufficient to allege an “agreement” under Section 1. The Second Circuit further agreed that a binding association policy reflecting that competitive restraint is direct evidence of an agreement under Section 1, and there is no need to allege “an agreement to agree” or other circumstantial evidence of agreement.

As AAI emphasized in its amicus, the Second Circuit’s decision is vitally important. The district court standard would have essentially immunized the most durable and harmful type of cartel behavior, allowing cartel members to escape antitrust scrutiny simply by ceding decision making authority on price or output to a single entity, like a trade association.

Read the full amicus brief here.

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Taking Stock of Merger Enforcement Under the Biden Agencies: A Conversation With Steven Salop

In this podcast episode, AAI President Diana Moss and Steven Salop, Professor Emeritus at Georgetown Law, take stock of the Biden antitrust agencies’ merger enforcement record. The antitrust chiefs at the Federal Trade Commission and U.S. Department of Justice Antitrust Division were chosen specifically for their commitment to invigorating antitrust enforcement. As we head into the third year of the Biden administration, now is a good time to assess how the agencies are doing on merger control. Vigorous merger enforcement under Clayton Act Section 7 acts to prevent the emergence of oligopolies and dominant firms, serving as a first line of defense against the accumulation of market power that harms consumers and workers. Moss and Salop cover the ground on two major topics. They first unpack the recently released 2021 merger statistics. While one year of data does not reveal much about longer-term trends in merger enforcement under the Biden agencies, it does shed light on what to watch for moving forward. Their conversation then turns to issue spotting, or what is likely to unfold for merger control at the agencies based on what we have seen under the Biden enforcers thus far.

 

MODERATOR:

Diana Moss, President, American Antitrust Institute

 

GUEST:

Steven C. Salop is Professor Emeritus at Georgetown Law. His research focuses on antitrust law and economics and the economic analysis of industrial competition and imperfect information. Professor Salop’s recent writings include articles that focus on exclusionary conduct, including the antitrust standard for exclusionary conduct, exclusionary conduct by buyers, and the antitrust standard for refusals to deal and price squeezes. He has other articles on the consumer welfare standard, raising rivals’ cost conduct, the first principles approach to antitrust, and vertical mergers. Before joining the Law Center faculty in 1981, he served at the Federal Trade Commission, the Civil Aeronautics Board, and the Federal Reserve Board.

 

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AAI Warns Court in Google Case that Grant of Summary Judgment in Favor of Google Could Open Up Significant Loopholes in Section 2 Enforcement

AAI has submitted a motion for leave to file an amicus brief and a proposed amicus brief in the District Court for the District of Columbia in State of Colorado, et al. v. Google LLC arguing against Defendant Google’s motion for summary judgment on claims by the U.S. Department of Justice and several State Attorneys General that Google has monopolized markets for search and search advertising in violation of Section 2 of the Sherman Act. The States and the DOJ allege that Google has constructed a web of restrictive contracts and conduct that blocks the path of any challenger to Google’s monopolies in general search and search advertising. AAI’s amicus argues against Google’s claim that there can be no violation because each of its restrictions, viewed in isolation, does not meet the criteria for Sherman Act Section 2 liability. AAI’s brief points out that Google’s argument mischaracterizes the precedent in two ways, both of which present a danger to effective Section 2 enforcement.

First, AAI argues that Google’s motion for summary judgment ignores the Supreme Court’s directive to consider the whole of the alleged antitrust violation and not “wipe the slate clean” after analyzing each component. AAI points out that precedent requires that the anticompetitive effect of each individual restriction be assessed in light of the overall anticompetitive scheme. AAI notes that any other rule would, as a practical matter, carve a giant loophole in Sherman Act enforcement and allow a sufficiently clever monopolist to legalize monopolistic conduct by imposing a variety of interrelated and mutually reinforcing restrictions instead of a one-size-fits-all approach.

Second, AAI argues that the court should reject Google’s attempt to “immunize” the anticompetitive conduct alleged by the States regarding Google’s treatment of Specialized Vertical Providers, like TripAdvisor, and use of its SA360 search advertising tool to disadvantage competitors by invoking inapplicable precedent on product design, refusal to deal, and price-squeeze. AAI’s brief shows that, in all three cases, Google’s argument impermissibly broadens the scope of the previous precedent on exceptions to antitrust scrutiny, and it describes how the conduct alleged by the States falls outside of any of these three areas of precedent and squarely within Section 2 liability. On this basis, AAI argues that Google’s motion for summary judgment should be refused and the States’ claims should be allowed to proceed to trial.

The brief was written by AAI Vice President of Legal Advocacy Kathleen Bradish, with invaluable assistance from AAI Research Fellow Mathew Simkovits. Several AAI Advisory Board members also provided assistance.

Read the full brief here: AAI Google Amicus Brief

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New AAI Analysis Focuses on Buyer Power Concerns Raised By Merger of Retail Grocery Chains Kroger and Albertsons

Today, the AAI sent a letter to FTC Chair Lina Khan with new analysis and perspective on the likely anticompetitive effects of the proposed merger of retail grocery chains Kroger and Albertsons. The letter explains that the Kroger-Albertsons merger raises seller market power concerns for consumers. But it could also change the terms of trade with input suppliers by enhancing Kroger-Albertsons buyer power, including both monopsony and bargaining power. The effects of the merger could be felt in every part of the supply chain. Consumers could face higher food prices, less choice, and lower quality; input suppliers could see lower input prices from the exercise of buyer power; and smaller, independent grocery rivals that already struggle with higher input prices could be further disadvantaged.

The letter proceeds with an overview of the proposed merger, followed by analysis of how the public rationale for the merger conceals its real economic motivation. That is, to garner significantly more monopsony and bargaining power over input suppliers. The letter then turns to why the efficiencies claimed by Kroger-Albertsons are unlikely to pass muster under the Horizontal Merger Guidelines (“Guidelines”), or be passed through to consumers. The analysis concludes with arguments for why the FTC should seek to enjoin the merger rather than accept a remedy, if the FTC finds the merger to be illegal. This approach stands in contrast to repeating the mistake in Safeway-Albertsons of settling an illegal merger with an ineffective remedy. The costs of such failed remedies are borne by consumers and facilitate rising concentration in a critical sector.

Major conclusions and recommendations include:

  • A Kroger-Albertsons merger would significantly increase concentration in already highly concentrated markets. Past grocery mergers indicate that local markets for the retail sale of food and other grocery products in supermarkets are highly concentrated. This will inevitably be the case in Kroger-Albertsons as well. The merging parties’ up-front fix is, therefore, an admission of the merger’s presumptive illegality. The merger is also likely to lead to large increases in the merged company’s buyer power in input supply markets, where adverse effects could be felt both regionally and nationally.
  • If the genuine rationale for the Kroger-Albertsons merger is to expand distribution, then the merging parties would be acquiring other players, not each other. A brief review of consolidation in the retail grocery sector, including supermarkets and supercenters, indicates that combining Kroger and Albertsons will do little to advance “omnichannel” distribution, including making inroads into E-commerce and delivery, for the benefit of consumers. If this were the genuine motivation for the deal, as they attest, Kroger and Albertsons would be better off making different types of acquisitions, not merging with each other.
  • The merger will significantly enhance Kroger-Albertsons’ buyer power in input supply markets. A close look at the efficiencies projected by the merging parties reveals the not-so-hidden motivation for the merger. That is, namely, to amass monopsony and bargaining power vis-à-vis input suppliers with which Kroger and Albertsons do business. The merger would enhance the ability and incentive for a larger and more powerful Kroger-Albertsons to exercise enhanced buyer power, to the detriment of input suppliers, with adverse knock-on effects on smaller, independent rival grocers.
  • Projected merger-related efficiencies are unlikely to meet the rigorous standards in the Horizontal Merger Guidelines, or be passed on to consumers. The cost efficiencies claimed by the merging parties are unlikely to pass muster under rigorous Guidelines standards, for a variety of reasons. That includes claimed cost savings that are likely to result not from genuine efficiencies but from anticompetitive reductions in output in input supply markets. Moreover, in a litigated merger challenge the parties would for basic economic reasons be unable to demonstrate the pass-through of cost savings consumers to a court’s satisfaction.
  • The burden on a remedy to restore competition sacrificed by a Kroger-Albertsons merger is unacceptably high. Given the concentrative nature of the Kroger-Albertsons merger, the risk of a failed remedy is commensurately high. An attempt to create a new rival out of stores spun-off from Albertsons pits a tiny, unproven competitor against a tighter oligopoly of large grocers. Evidence of previous failed remedies proves that the costs of failure are borne by consumers. Moreover, the parties’ divestiture proposal does nothing to address buyer power concerns. A Commission move to enjoin the merger is, therefore, likely to be the only effective remedy for preserving competition.

You can read the letter and analysis here: Kroger-Albertsons_Ltr to FTC_2.7.23

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AAI and Brookings Fellow William Baer Ask the U.S. District Court for the District of Columbia to Adopt Proper Framework for “Litigating the Fix” in Merger Cases (In Assa Abloy AB/Spectrum Brands Holdings, Inc.)

AAI has joined with the Hon. William J. Baer, a Visiting Fellow in Governance Studies at the Brookings Institution and the former Assistant Attorney General of the Antitrust Division and Director of the Bureau of Competition of the Federal Trade Commission, to file an amicus brief in the D.C. District Court in the ASSA ABLOY/Spectrum merger. The brief urges the Court to require that defendants in a Section 7 case bear the burden of showing any remedy they propose will restore competition. The brief follows AAI’s brief in the Illumina/Grail matter, arguing for a standard in so-called “litigating the fix” cases that enables effective Section 7 enforcement.

ASSA ABLOY AB proposes to acquire Spectrum Brands Holdings, Inc. The transaction would create a near-monopoly in premium door locks and leave only two significant competitors in smart locks, digital door locks that can be operated through connection to a wireless device. The parties are proposing to address the anti-competitive effects of the transaction by selling two of their lock brands to Fortune Brand Innovations, another home and security supplier.

The brief on behalf of AAI and Baer argues that the governing Baker Hughes burden shifting framework requires that the merging parties rebut a government showing that the original merger will substantially lessen competition, including by proving that their self-crafted “fix” is enforceable, administrable, and will fully restore the competition lost from the anticompetitive merger.

The brief emphasizes that requiring defendants to present the remedy in their rebuttal case is necessary to remain consistent with the text and incipiency goal of Section 7 of the Clayton Act. Further, the brief argues, this burden shifting framework is required by D.C. Circuit precedent, as has been recognized by other D.C. district court decisions. Finally, the brief explains that placing the burden on plaintiffs to show that a defendant-proposed remedy will not work has significant potential to undermine Section 7 enforcement. Plaintiffs will be incentivized to propose weak remedies as part of a “litigate the fix” strategy in court rather than designing a more robust remedy to convince the antitrust agencies that competition will be restored. This is particularly concerning given the historical evidence showing that even agency-approved divestitures are risky and prone to failure.

AAI is grateful to the law firm of Brownstein Hyatt Farber Schreck, LLP (BHFS), which served as pro bono counsel. The brief was written by Rosa Baum and David Meschke of BHFS, whose drafting was overseen by BHFS Shareholder and AAI Advisory Board Member Allen Grunes. Joshua P. Davis, Berger Montague Shareholder, AAI Senior Fellow, and Research Professor at UC College of the Law, San Francisco, and Brookings Visiting Fellow Bill Baer also assisted.

Read the brief here: AAI_Assa Abloy Amicus Brief (DDC).

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AAI’s Kathleen Bradish Testifies Before the Senate Judiciary Committee on Live Entertainment Competition

On January 24, 2023, AAI’s Vice President for Legal Advocacy, Kathleen Bradish, testified at the Senate Judiciary Committee hearing on promoting competition in the live entertainment industry and protecting consumers.

In her testimony, Bradish described Ticketmaster-Live Nation as a monopoly whose dominance up and down the supply chain creates the incentive and ability to limit competition to protect its market position. She noted this harms concert-goers, artists, and smaller competitors alike through higher fees, less choice, and less innovation. 

Bradish also discussed the lessons of failed conduct remedies in the Department of Justice’s 2010 Consent Decree. She urged the DOJ to take a new enforcement action that seeks effective structural remedies instead, either through Section 7 of the Clayton Act or Section 2 of the Sherman Act.

Finally, she testified to the need for multiple policy tools to address the Ticketmaster-Live Nation monopoly, including strong antitrust enforcement, legislation to enhance and clarify U.S. antitrust laws, and potential “rules of the road” to increase ticketing transparency.

AAI is the leading authority on the impacts of the Ticketmaster-Live Nation monopoly. For more than a decade, AAI analysis has shown how a lack of competition in the live music space hurts artists, music fans, and consumers generally.

Read Bradish’s full testimony here: Bradish_SJC Hearing_Live Events_1.24.23

Watch the full committee hearing here: Senate Judiciary Ticketmaster Hearing January 24