If Trump turns attention to antitrust, he has significant power to shape regulation
9 February 2017. By Curtis Eichelberger.
US President Donald Trump demonstrated the power of the Oval Office during his first two weeks in Washington by using executive orders and memorandums to alter the rules on immigration, healthcare and banking policy, all without a single vote of Congress.
If Trump chooses to turn his attention to corporate mergers and the impact these combinations have on national security, corporate political power, job losses and economic benefits, his power to shape antitrust regulation is vast.
Although presidents have traditionally kept an arm's length from merger reviews conducted by the Federal Trade Commission and Department of Justice, Trump has made nontraditional choices about when to become directly involved in an issue. Like many observers, antitrust lawyers are asking: What are the absolute limits of Trump's legal authority, and how might he use it?
Attorneys say a key facet of Trump's authority comes from his responsibility as commander-in-chief to protect the nation's security. His powers are nearly limitless, they say.
Trump could determine, for instance, that a Chinese seed company buying an American fertilizer company undermines national security because it places too much control over the US food supply in China's hands, and scuttle the deal.
He might make a case to block a deal on national security grounds by declaring that increased unemployment or a reliance on foreign sources of goods makes America over-reliant on foreign production.
He could ban a state-owned-enterprise — a company owned by a foreign government, oftentimes Chinese — from acquiring a US company in a critical sector of the economy, such as semiconductors, because he thinks the technology transfer undermines our national security.
Trump met with CEOs from companies going through antitrust reviews, including executives from AT&T, Bayer and Monsanto, in the days leading up to his inauguration (seehere). This raised eyebrows among the antitrust set, but if the president strikes a deal with a CEO to add more jobs and factories in the US, he has the legal right to tell the Attorney General to use his prosecutorial discretion to not challenge an otherwise illegal merger.
Likewise, if Trump dislikes a large corporate merger that will result in additional political power for the new company or sizable job losses — and where the government has even the smallest of grounds for an antitrust complaint — he can instruct the Attorney General to challenge the merger rather than negotiate a settlement. Lawsuits are costly and can sometimes drag out a merger until it falls apart.
The Attorney General is a political hire and can be fired for not following the president's orders. The Federal Trade Commission is different. The members of that agency are independent agency and can tell the president "No."
In cases in which a president forces the DOJ to take an action the FTC disagrees with, the DOJ can issue a statement outlining its own policy intentions. Such a statement could guide the DOJ's actions and could be used in court by companies that disagree with an FTC decision.
President Trump can also lean on the agencies to negotiate consents and remedies that, for example, delay the firing of employees to give local markets time to absorb the workforce, attorneys say. On the other hand, a judge has to review such agreements and can throw them out if they are found to not be in the public interest.
If Trump acts to shape the outcome of a merger case, it wouldn't be the first time a president has done so.
In 1983, British Prime Minister Margaret Thatcher planned to sell British Airways as part of a privatization program. The US Department of Justice was about to announce an investigation into the airline for colluding with other airlines to destroy discount carrier Laker Airways, and the possibility of criminal or civil charges in that case made investors reluctant to buy British Airways.
Thatcher asked her friend and ally, US President Ronald Reagan, to intervene and delay the investigation until a diplomatic solution could be achieved. Reagan turned down Thatcher's request, and within a year the DOJ had convened a grand jury.
The Department of State entered the picture and argued that a criminal indictment of British Airways would harm US-British relations, and took the dispute back to Reagan.
According to a Thatcher biography titled, "Margaret Thatcher: At Her Zenith: In London, Washington and Moscow," a high-level meeting was convened with Reagan, Deputy Attorney General Carol Dinkins, Secretary of State George Schultz, Defense Secretary Caspar Weinberger, Counselor to the President Edwin Meese, National Security Adviser Robert McFarlane and Assistant Attorney General for Antitrust Paul McGrath.
Robert Kimmitt, the National Security Council executive secretary and general counsel, was also there, according to the Thatcher biography by Charles Moore.
"The president," he recalled, "had a quick laugh, paused for a second and said … 'We live in a very dangerous world. We don't have any friends better than Margaret Thatcher. If this is important to her, even I, as a law-and-order man, am not going to proceed, in the interests of US national security.' "
Antitrust attorneys say that while Trump can target certain big deals for scrutiny, it will be harder for him to use national security or prosecutorial discretion as a means of permanently affecting broader policy without collaborating with Congress.
Still, he can have an influence.
The Horizontal Merger Guidelines are contained in a non-binding document that has been developed from years of court decisions and economic experience analyzing deals. It focuses almost entirely on a straight economic analysis of mergers and was most recently updated in 2010.
Lawyers and economists say Trump could encourage the FTC — and instruct the Attorney General — to amend the guidelines to include such considerations as a merger's impact on employment or a net-benefit analysis.
Attorneys, however, say that changes forced on the agencies by Trump without agreement from the FTC and DOJ are more likely to meet resistance and be reversed in court.
When acting Attorney General Sally Yates told DOJ attorneys to stop defending President Trump's ban on new arrivals from seven Muslim-majority states, she was fired and replaced, but a federal court issued a temporary restraining order on the ban. A three-judge appeals court panel of the Ninth Circuit in San Francisco heard oral arguments Tuesday evening and is expected to rule later this week.
Existing interpretations of US antitrust law favor mergers that increase output and decrease prices. So while an executive order requiring companies to maintain premerger employment levels would be out of bounds, it would be acceptable to require that plants stay open so their closure wouldn't harm output and increase prices.
The president could also encourage the agencies to consider labor monopsony, where consolidated markets give the merged company too much power over job mobility and wages. This view was promoted last year by Jason Furman, the chairman of President Barack Obama's Council of Economic Advisors.
Such a monopsony could be said to exist in a highly specialized labor market or at a company in an isolated part of the country — for example, in the case of a hospital merger in which emergency room nurses are laid off and have no other nearby hospitals where they can find work.
US antitrust laws originally took a broader view of antitrust policy to include dispersion of economic and political power. But since the 1980s, US policy has been directed at economic measures, focusing on issues such as prices, output and product quality.
Other countries, however, view antitrust more broadly. Many consider national interests in matters such as the environment, economic impact, employment, corporate political power, government subsidies to companies, and the preservation of domestic control over critical resources.
So if Trump exercises his influence to include these analyses through prosecutorial discretion or an appeal to national security interests, it would challenge the status quo, but also might bring the US more into line with the rest of the world.