More bureaucrats, less regulation?

March 13, 2006 12:05 PM by S.M. Oliva (Archive)

The Wall Street Journal's editorial page has been steadfast in its call for greater “politicization� of federal antitrust policy. Today's paper contains the latest such call in response to the Justice Department's ongoing “review� of Whirlpool's proposed acquisition of appliance rival Maytag. Democratic lawmakers have lobbied the new Antitrust Division chief, Thomas Barnett, to block the deal, and the Republican DOJ has responded by dragging its feet for more than six months, causing Maytag's stock price to fall.

The Journal believes the problem isn't the existence of the antitrust laws themselves, but rather the lack of direct supervision by the president and his political advisers:

One lesson here is that Mr. Bush can't afford to let merger decisions be dominated by antitrust lawyers who have a career interest in seeing the world in static market-share terms. To take one example, the lead attorney representing Whirlpool in this case wrote many of the baffling regulations on horizontal mergers at Justice is now being paid handsomely to untangle. A useful step would be to require that Treasury or the National Economic Council review all antitrust cases, so that broad economic consequences can be vetted. The Attorney General could also put a “shot clock� on investigations so mergers cannot be stalled for months on end.

How adding more officials to the process would be “useful� eludes me. The Journal assumes that the NEC, a collection of White House staff, and the Treasury Department will crack down on economically illiterate Antitrust Division lawyers. But it's just as likely, if not more so, that the agencies will merely bring their own political agendas to merger review. Look at the political opposition to the Whirlpool-Maytag deal. Would a Democratic treasury secretary or NEC director publicly defend a deal that was deeply unpopular with the party's congressional leadership and constituency groups (particularly unions)?

The Journal omits three important facts in its editorial. First, the Antitrust Division is not the only agency that reviews mergers—the Federal Trade Commission has concurrent jurisdiction. The two agencies informally divide up the work, generally along industry lines. The FTC is classified as an “independent agency� within the executive branch, meaning FTC commissioners are appointed by the president but can only be fired “for cause.� It would be difficult for the White House to supervise FTC merger reviews, because legally the president cannot fire FTC members that refused to follow the policy directives of the NEC or the Treasury.

Second, the Journal conveniently overlooks the fact that it was President Bush who appointed the DOJ leadership that is currently deciding merger review policy. Thomas Barnett is the third Bush appointee to head the Antitrust Division. Barnett was promoted from the number-two position despite having supervised the Division's failed litigation to block the Oracle-PeopleSoft merger, and he was part of the leadership team that helped drive US Airways and United Airlines into bankruptcy by blocking their proposed merger. Why was Barnett retained and promoted despite these policy failures? Bush and Attorney General Alberto Gonzales could have cleaned house at the Antitrust Division and chose not to do so.

More tellingly, Bush has now appointed all five members of the FTC, and without exception he has named career antitrust lawyers. Nothing in federal law requires FTC members to be antitrust lawyers, but a supposedly “pro-business� White House refused to appoint a single commissioner with actual business experience.

Finally, putting a “shot clock� on merger reviews would not accomplish much, because the DOJ and FTC can challenge mergers that have already been consummated, even years after the fact. In fact, the Bush appointees at DOJ and FTC have made a point of initiating post-merger challenges. The FTC is currently defending one such challenge—where the agency ordered a merger unraveled after four years—before the Fifth Circuit Court of Appeals.

Rather than criticize the policies that enable the Antitrust Division and the FTC to destroy private businesses, the Journal seems more concerned with insulating its favored president from receiving any blame. The same would undoubtedly occur with, say, a Democratic president and the New York Times. But regardless of party, the answer to bad public policy is not add more bureaucrats to the process—or refusing to acknowledge your mistakes in implementing that policy.