Requiem for a Neo-Brandeisian Dream: Competition Corner

Issue #32

“Don’t cry because it’s over. Smile because it happened.”

Satya Marar here. With a new administration due to be sworn in early next year that is not expected to renew the tenure of acting FTC Chair Lina Khan, it seems that the Neo-Brandeisian experiment is at an end. Proponents of Khan’s radical interventionist style of antitrust enforcement might be tempted to defer to the words of Dr. Seuss. But they’d have to pull a lot more than a cat out of a hat if they’re looking for anything to smile about.

As I noted in a Mercatus policy brief released in May this year, the casualties of Khan’s Neo-Brandeisian populist approach to merger enforcement and competition regulation, departure from the consumer welfare standard, and eschewing of the traditional tools of economic analysis, include both small and large businesses, workers, and the U.S. economy writ large.

An aggressive approach to blocking even potentially pro-competitive mergers coupled with the rejection of consent decrees that could remedy anticompetitive harms and new merger guidelines that ignored recent recent case law and failed to provide clarity to parties, contributed to chilling merger activity across key economic sectors including banking, and tech. Promulgating new HSR premerger notification rules that would radically increase the costs for parties seeking any merger sufficient to reach the competition agencies’ radars didn’t help either.

In the case of the JetBlue-Spirit merger, the damage from protracted litigation was so severe that the parties not only abandoned the deal, which would have created a potentially stronger competitor against larger airlines. It also caused the airlines to hemorrhage workers and share value.

The Illumina-GRAIL merger raised potential synergies between a developer of a cutting-edge cancer detection test and the operator of a test administration platform. It was abandoned under the pressure of costly FTC litigation despite the judge remanding the case back to the FTC’s internal administrative court. Specifically, Illumina was willing to make its cancer detection test available to other test platform operators, something the court criticized the agency for not considering prior to bringing its case. My colleague Alden Abbott noted that rather than upholding competition, the result was the delayed rollout of life-saving cutting-edge biotechnology.

Abandonment of potentially pro-competitive mergers was not a defect or bug in the Neo-Brandeisian strategy. It was a feature. When quizzed about the agency’s record of losses in court under her tenure, Chair Khan touted abandoned deals that never made it to court as victories for the agency. But it isn’t the agency’s job to block or deter more deals. It’s their job to uphold competition and protect consumers.

Ironically, the aggressive attempt to block a wider range of deals than previous administrations has stretched the agency’s resources, leaving it less equipped to block deals that are more likely to harm consumers and competition. For instance, the Neo-Brandeisian FTC has been criticized for falling short in targeting anticompetitive hospital mergers- an area where the agency under prior administrations and consumer welfare-oriented antitrust historically scored many victories.

To be clear, the Khan and Biden-era FTC deserves credit for many of its consumer protection efforts. And a second Trump administration FTC and DOJ, like the first Trump administration, are expected to continue their scrutiny and pursuit of deals and business practices concerning big tech platforms like Google, Meta and Amazon. But the agencies are generally expected to take a more pragmatic and economics-driven approach to antitrust that more closely resembles the bipartisan consensus predating the current administration. American consumers, businesses, workers and innovators would have much to celebrate about that.

So, where do we go from here? Check out Alden Abbott’s Forbes column on the need for a merger policy reset.

Other news from the world of competition

Alden was proud to host FTC Commissioner Melissa Holyoak at a Mercatus Center webinar this month. You can check it out here. Commissioner Holyoak shared her perspective on evolving antitrust policies and their implications for businesses and consumers. She also highlighted the Commission’s major ongoing priorities. 

Pharmaceutical Benefit Managers (PBMs), the middlemen that negotiate drug prices with pharma companies and pharmacies on behalf of public and private health insurance plans, have copped flak and scrutiny from lawmakers, officials and regulators alike for allegedly anticompetitive practices. But how much truth is there to this narrative? I recently analyzed the FTC’s circumstantial evidence-based case against the nation’s three biggest PBMs for allegedly driving up insulin prices through the rebates they negotiate with drugmakers. Alden Abbott also analyzed the lawsuit for Forbes, finding that it’s weak and lacks economic merit.

In the world of tech, Alden recently commented on the implications of recent lawsuits and decisions impacting the Google Play and iPhone app stores in a Forbes column. Tech platforms might make easy targets due to their perceived “gatekeeper” status for app developers, but competition agencies should think carefully about the long-term implications of their actions for competition and the innovation ecosystem. Alden has also provided an analysis of proposed remedies following the DOJ’s controversial victory against Google in its search engine monopolization lawsuit- a decision that’s likely to be appealed.

That’s all for November. See you next month.

Satya Marar
Visiting postgraduate fellow – Competition, Innovation & Governance
Mercatus Center at George Mason University