United States: More Aggressive Enforcement Policy Announced By New Antitrust Chief Ignores Recent Supreme Court Decisions Regarding Section 2, ´Trinko´ And ´Linkline´

Less than a month after becoming the new Department of Justice ("DOJ") Antitrust Chief, Christine Varney has taken a giant step toward fulfilling her goal of "vigorously enforc[ing] the law"¹ by announcing that the DOJ is withdrawing its Section 2 report. The report, Competition and Monopoly: Single-Firm Conduct Under Section 2 Of The Sherman Act (hereinafter the "Section 2 Report"), was issued only eight months earlier in September 2008. The Section 2 Report was the result of joint hearings by the Federal Trade Commission ("FTC") and the DOJ that were held between June 2006 and May 2007 for the purpose of "assessing the legality of single-firm conduct and to provide guidance to the courts, antitrust counselors, and the business community."² The DOJ issued the Section 2 Report without concurrence from the FTC; the FTC not only failed to concur, but FTC Commissioners Harbour, Rosch and now-Chairman Leibowitz, also issued a statement strongly criticizing the Section 2 Report.

The Section 2 Report was largely an expression of the Bush administration enforcement policy, and the standards espoused in it made it difficult to bring cases for monopolizing and predatory practices. Under the Bush administration, the DOJ did not bring a single action against a firm for violating Section 2 of the Sherman Act. The standards set forth in the Section 2 Report have been criticized, even by Bush nominees to the FTC.

That is all about to change.

In a speech delivered May 11, 2009, Ms. Varney withdrew the Section 2 Report, effective immediately, stating: "[T]he Section 2 report no longer represents the policy of the Department of Justice with regard to antitrust enforcement under Section 2 of the Sherman Act. The Report and its conclusions should not be used as guidance by courts, antitrust practitioners, and the business community."³ Although commending the efforts of the participants at the joint Section 2 hearings, Ms. Varney expressly disagreed with the conclusions of the Section 2 report, stating that they "effectively straightjacket[] antitrust enforcers and courts from redressing monopolistic abuses."⁴

While not proposing any particular standard for evaluating Section 2 cases, Ms. Varney cited three "leading Section 2 cases" as providing "important guidance" for Section 2 enforcement—Lorain Journal v. United States, Aspen Skiing Co. v. Aspen Highlands Skiing Corp., and United States v. Microsoft.⁵ The DOJ intends to "commit[] to aggressively pursuing enforcement of Section 2 of the Sherman Act in furtherance of the principles embodied in these cases."⁶ Significantly, there was no real mention of two more recent Supreme Court Section 2 cases—Pacific Bell Telephone Co. v. linkLine Communications, Inc.⁷ and Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko⁸—that significantly limited the application of Section 2 in cases involving refusals to deal or cases alleging that a vertically integrated monopolist must sell at wholesale, supplies to its retail competitors at prices that ensure the competitors can earn a profit at the retail level. Indeed, in Trinko, the Supreme Court recognized Aspen Skiing Co. as being "at or near the outer boundary of § 2 liability" that involved a "limited exception" to Section 2.⁹ In her speech, Ms. Varney relegated linkLine and Trinko to a footnote, stating that the analysis in those cases "applies in limited, specific sectors subject to significant and specialized regulatory overlay," and that "there is no question that these decisions reaffirmed Aspen Skiing's limits on a monopolist's ability to engage in exclusionary or predatory conduct."¹⁰

This time of economic distress looks to be the start of significantly more active and aggressive Section 2 enforcement. Looking back decades to "lessons" learned from the 1938-1943 period—the era of "the first sustained program of antitrust enforcement on a nationwide scale"—Ms. Varney stated that "there is no adequate substitute for a competitive market, particularly during times of economic distress," and "vigorous antitrust enforcement must play a significant role in the Government's response to economic crises to ensure that markets remain competitive."¹¹ Under Ms. Varney's leadership, businesses can expect significantly stepped-up Section 2 enforcement. It is likely that DOJ will carefully choose its cases with the goal of limiting or even reversing linkLine and Trinko. Armed with this Supreme Court precedent, however, businesses are likely to resist DOJ efforts and settlements, more often forcing cases to a decision on the merits.

Footnotes

^{1.Executive Nominations: Hearing Before the U.S. Senate Committee on the Judiciary, 111th Congress (March 10, 2009) (statement of Christine Varney).}

^{2. Christine A. Varney, Assistant Attorney General Antitrust Division, United States Department of Justice, Remarks as Prepared for the Center for American Progress, Vigorous Antitrust Enforcement in this Challenging Era, at 3 (May 11, 2009) (hereinafter "Varney Remarks"), available at http://www.usdoj.gov/atr/public/speeches/245711.htm.}

^{3. Id. at 4.}

^{4. Id. at 4–5.}

^{5.Id. at 5 (citing Lorain Journal v. United States, 842 U.S. 143 (1951), Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), and United States v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001) (en banc).}

^{6.Varney Remarks at 6.}

^{7.___ U.S. ___, 129 S.Ct. 1109 (2009).}

^{8.540 U.S. 398 (2004).}

^{9.Id. at 409.}

^{10.Varney Remarks, n. 22.}

^{11.Id. at 2-3.}

This article is presented for informational purposes only and is not intended to constitute legal advice.