Davis Polk & Wardwell Newsflash

Department of Justice Announces Plans to Pursue Aggressive Antitrust Enforcement Policy

May 12, 2009

Christine A. Varney, the Assistant Attorney General who serves as the head of the Antitrust Division of the Department of Justice (“DOJ”), announced yesterday that the DOJ plans to pursue an aggressive enforcement policy against corporations that violate Section 2 of the Sherman Antitrust Act by engaging in monopolistic or predatory practices.  The antitrust policy of the Obama administration, as outlined by Varney, is in contrast to that of the Bush administration, during which the DOJ did not file any cases for monopolization in violation of Section 2.  According to Varney, the new policy more closely aligns American antitrust policy with that of the European Commission.

Varney’s speech, which was delivered at the Center for American Progress, a Washington, D.C. think-tank, had the following key points:

  • The report entitled Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act, issued during the Bush administration in September 2008, is officially withdrawn.  “Withdrawing the Section 2 report,” said Varney, “is a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers.”
  • Varney made clear that no court or party should cite the report, which has been called “a blueprint for radically weakened enforcement” by three of the four current Commissioners of the Federal Trade Commission, as the government’s official view in pending cases.  Instead, according to Varney, “[t]he [Antitrust] Division will return to tried and true case law and Supreme Court precedent in enforcing the antitrust laws.”  The withdrawal of the report was confirmed by a DOJ press release, also issued today.
  • Smaller companies are encouraged to bring complaints to the DOJ about potentially improper business practices by larger rivals. According to Varney, complaints are an important and effective way for the DOJ to expand its enforcement pipeline.
  • Varney stated that the Obama administration will reject the impulse to ratchet down antitrust enforcement in light of the recession, noting that “ineffective government regulation” has contributed to the current economic problems.  She explained that recessions can provide dangerous incentives for large and dominating companies to engage in predatory behavior. 
  • She said that relaxation of the antitrust laws cannot be part of an effective solution to an economic crisis, citing as an example the lax antitrust enforcement during the Great Depression, which resulted in abuses that took years to reverse. “As antitrust enforcers,” Varney stated, “we cannot sit on the sidelines any longer . . . . The recent developments in the marketplace should make it clear that we can no longer rely upon the marketplace alone to ensure that competition and consumers will be protected.”
  • On a related note, it was announced that the Antitrust Division also has launched a program to uncover fraud or anticompetitive collusion in connection with the economic stimulus package.

Varney is scheduled to deliver the same speech today in front of the United States Chamber of Commerce.  A video recording of the speech is expected to be available here via the Center for American Progress website.

In the past, Section 2 enforcement cases have proved to be time-consuming and challenging to litigate.  Even during the Clinton administration, monopolization cases were relatively rare.  The DOJ's track record with these cases is varied - with some significant victories (like the breakup of AT&T) and some significant failures (the decade-long IBM case) and some mixed results (Microsoft).

At a minimum, Varney's speech means that companies with significant market positions will be under greater scrutiny and may need to reconsider carefully certain marketing and sales practices - like certain exclusive dealing arrangements.  Time will tell whether the DOJ successfully pursues more enforcement actions against these firms.



If you have questions regarding this newsflash, please call any of the lawyers listed below or your regular Davis Polk contact.

Arthur F. Golden, Partner
212-450-4388 | arthur.golden@dpw.com

Paul W. Bartel, II, Partner
212-450-4760 | paul.bartel@dpw.com

Arthur J. Burke, Partner
212-450-4352 | arthur.burke@dpw.com

Joel M. Cohen, Partner
212-450-4592 | joel.cohen@dpw.com

Ronan P. Harty, Partner
212-450-4870 | ronan.harty@dpw.com

Christopher B. Hockett, Partner
650-752-2009 | chris.hockett@dpw.com

Stephen M. Pepper, Counsel
212-450-4108 | stephen.pepper@dpw.com


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