Don’t worry — this isn’t about that lady from Alaska. This is about antitrust, I promise . . .
In the fourth season finale of “The West Wing”, a terrorist group kidnaps U.S. President Josiah Bartlet’s daughter and he decides to step aside, lest a father’s emotions cloud his judgment as commander-in-chief. Bartlet, a Democrat, invokes the Twenty Fifth Amendment’s disability clause, but because his vice president had recently resigned, the Acting President will be the speaker of the House, a Republican. After announcing his decision, Bartlet has the following dialogue with his cabinet:
CABINET MEMBER
Mr. President, my concern is this: If you and the Acting President were to give contradictory orders, [White House chief of staff] Leo McGarry would be put into an impossible situation which could lead to extraordinary chaos.
PRESIDENT BARTLET
I won’t be giving any orders.
SECOND CABINET MEMBER
But, if you did, I think there are those in this room, myself included, who would want to follow those orders. And now, we have two governments.
PRESIDENT BARTLET
Leo would know what to do.
THIRD CABINET MEMBER
Would he?
PRESIDENT BARTLET
Yes.
In real life, the U.S. hasn’t faced a “two presidents” scenario, but with respect to antitrust policy, we do in fact have two governments–the Federal Trade Commission and the Department of Justice. Congress initially vested antitrust enforcement with the DOJ, but in 1914, the FTC was created to deal with antitrust violations and other “unfair method of competition”–a term that’s conveniently undefined by statute. The two agencies presently exercise concurrent jurisdiction over civil antitrust matters, while the DOJ’s Antitrust Division has exclusive authority over criminal prosecutions. (Of course, the antitrust laws don’t actually distinguish civil and criminal violations, leaving that to the agencies and the courts.)
For the past few years, there’s been a growing division between the FTC and DOJ over certain interpretations of antitrust policy. On at least two occasions during the Bush presidency, the agencies publicly disagreed over what position the Supreme Court should take in applying Section 2 of the Sherman Act — a catchall provision that forbids “attempted monopolization” by any person or business. In these cases, the DOJ supported a more limited view of Section 2 than the FTC, where the majority favors unrestricted antitrust activism.
These battles have apparently led to full-blown civil war. Two years ago, the FTC and DOJ started a series of hearings to determine how Section 2 should be applied to single-firm or “unilateral” conduct. (The fact that the agencies didn’t know what Section 2 forbids more then a century after its adoption should have given everyone pause, but let’s not dwell on that.) The antitrust community has been expecting a final report on the agencies’ post-hearing findings. Today that report came — from the DOJ. The FTC refused to join the report, and three of the four sitting FTC commissioners issued what amounts to a Declaration of Independence from the Justice Department — and by extension, the United States government itself. We have two governments, and it’s not a fictional White House chief of staff that’s caught in the middle, but the entire U.S. business sector.
I won’t go into the details of the agencies’ disagreement. You can read the DOJ report here. Here’s a passage from the FTC’s press release in response:
“In almost every case,” Commissioners [Pamela Jones] Harbour, [Jon] Leibowitz, and [J. Thomas] Rosch wrote, “the Department adopts standards that are tougher – and in some cases much tougher – than existing standards as defined by Section 2 case law.” For example, the Department’s baseline test for Section 2 liability would only condemn conduct, according to the three Commissioners, if the demonstrable anticompetitive effects are “disproportionately” greater than the procompetitive potential. This test distorts the rule of reason standard, which simply asks whether anticompetitive harm “outweighs” the procompetitive benefits.
“In short,” Commissioners Harbour, Leibowitz, and Rosch, wrote “the Department’s Report erects a multi-layered protective screen for firms with monopoly or near-monopoly power. As an inevitable consequence, dominant firms would be able to engage in these practices with impunity, regardless of potential foreclosure effects and impact on consumers. Indeed, it appears that the Department intends for this screen to apply even when a firm uses two or more of these practices collectively, instead of just one practice individually.”
Commissioners Harbour, Leibowitz, and Rosch stressed that the FTC “stands ready to fill any Sherman Act enforcement void that might be created if the Department actually implements the policy decisions expressed in its Report.”
That last paragraph tells you everything. From this point forward, every business in America (and perhaps throughout the world) must appease two different sets of regulators applying wildly different interpretations of the same law. It is, to quote the fictional Bartlet cabinet secretary, “an impossible situation which could lead to extraordinary chaos.”
Nor will the next presidential election resolve matters. In 1935, the Supreme Court — the last bastion of Beltway libertarianism — held the FTC was “separate and apart from any existing department of the government — not subject to the orders of the President.” Paradoxically, the Court said the FTC was subject “only to the people of the United States,” despite the fact the commissioners are not subject to any provision of the Constitution or the Bill of Rights.
Commissioners Harbour, Liebowitz and Rosch — he’s the reputed leader of the troika — can effectively nationalize entire industries at-will. There’s been well-documented attacks in the health care, grocery and technology sectors. As the economy continues to suffer, demand for antitrust violence will continue to rise. The FTC is prepared for a long war. It has well financed allies in the antitrust bar and pro-antitrust front groups. Opposition is non-existent, even from supposedly free-market groups like the Cato Institute. And businesses simply lack the resolve to confront the FTC head on. If anything, the chaos from today’s “report” will simply lead to the inefficient allocation of even more capital to unproductive antitrust lawyers and allied tradespeople.
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” For example, the Department’s baseline test for Section 2 liability would only condemn conduct, according to the three Commissioners, if the demonstrable anticompetitive effects are “disproportionately” greater than the procompetitive potential. This test distorts the rule of reason standard, which simply asks whether anticompetitive harm “outweighs” the procompetitive benefits.”
Determined by their cute econometric “models” I’ll gather. IOW, something they cannot even know in principle.
Actually, Inquisitor, the Rosch majority at FTC is hostile to economic modeling — Rosch has said the FTC should rely on its own value judgments in condemning behavior without regard to any form of economics.
Wow, so it’s pure mysticism? They do not even bother veiling it behind complex formulae?
Well, it’s one of the issues in the civil war. The DOJ/academic side still loves their formulae. The “Law & Economics” hacks like Josh Wright at George Mason still think you can tame antitrust with good models. But the current FTC majority favors an approach like we saw in Whole Foods, where the FTC simply seizes all of a company’s files and then selectively presents them to the public in a way that makes the company look as evil as possible. Rosch has said antitrust is about “storytelling,” which I suppose is a type of mysticism.
The FTC is just one more prong of the attempt to implement the New States Constitution by fiat. If you are unfamiliar with what the New States Constitution is, you should read it. It will make your head spin. And then when you look at what is happening in the government, you will understand that someone is working diligently and stealthily to make it a reality.
Here’s a blast from the past: Don Rumsfeld on Milton Friedman’s 1980 version of Free to Choose doing his best Skip Oliva impression (43:30 mark)
http://video.google.com/videoplay?docid=-2253962402015490587&hl=en
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