President Bush has embraced a pro-growth economic policy focused on lower marginal tax rates, open markets, ownership and light-touch regulation. But one critical part of our nation’s economic policy – the implementation of our antitrust laws – needs addressing by policymakers.
Antitrust laws aim to promote consumer welfare through robust competition. But the antitrust laws can’t be divorced from economic policy. Antitrust policy and economic policy are inextricably linked for the ultimate benefit of workers, consumers and growth of the U.S. economy.
When enforced in a vacuum, the antitrust laws are inevitably applied with too much rigor that could be contrary to our country’s broader economic interests and paradoxically pose a direct risk to our economic competitiveness.
The Department of Justice’s Antitrust Division has created for itself a monopoly on antitrust review. Economic policymakers seeking to participate in the process are chastised for not understanding the law, not believing the virtue of competition or for intervening in an "ongoing investigation." This is particularly acute in the area of merger review.
Fortunately, the Bush administration’s approach to antitrust does not need radical reform; it merely needs recalibration. Here’s my seven-step suggestion:
1. Aside from cartel enforcement or price fixing, the Antitrust Division should not be viewed as a law-enforcement entity. Companies that propose mergers have committed no crime – they are merely trying to acquire an asset. The wall between the administration’s economic policymakers and the Antitrust Division needs to come down.
2. The Antitrust Division needs to be embraced as part of the administration’s economic policy team. Antitrust lawyers simply do not bring the perspective necessary to make decisions that can be determinative of U.S. competitiveness or economic growth.
3. Merger reviews need to embrace a more dynamic analysis of markets. Antitrust practitioners tend to focus on narrow markets, seeking any evidence of whether a merger may substantially reduce competition. But as we have seen, that static analysis can lead to perverse results, particularly in innovation markets, where disruptive technologies can alter market structure overnight.
4. The Antitrust Division needs to act quickly, particularly in mergers of non-regulated industries such as technology. The merger review process cannot be viewed as an opportunity to subject unregulated companies to months of scrutiny under the heavy hand of regulation.
5.The Antitrust Division needs to focus on both macroeconomic and microeconomic analysis. The rapidly changing global economy can radically impact the competitive environment. For example, a U.S. firm may experience competitive disadvantage against a foreign firm due to the effects of currency, labor supply or tax, trade or regulatory environments. All of these effects are not considered as part of current merger analysis.
6. The Antitrust Division needs to recognize that many U.S. companies are subject to merger review in multiple jurisdictions, typically including the European Community and numerous other foreign countries. It needs to be the responsibility of the Department of Justice – working through our trade representative – to rationalize this system and to work out a protocol for review. It is unacceptable to force U.S. firms to navigate numerous, often contradictory regulatory regimes.
7. The regulatory burden of merger review needs to be closely monitored. Because of the manner in which the Hart-Scott-Rodino law is structured, there are incentives for the Antitrust Division to overregulate. After the relatively simply HSR filing, the division has 30 days to either clear a merger or seek a longer review. Once the division decides to seek a longer review, the so-called second request process is burdensome, typically tying management in knots for months and costing millions of dollars.
Given the overwhelming number of mergers that face extended scrutiny from the Antitrust Division, many that could very well be beneficial in a larger economic context are simply abandoned. Most companies cannot afford the time, money and damage to their reputation when confronted with an extended fight with the government. The result: Many pro-competitive mergers critical to our economic growth and competitiveness are never consummated or never proposed in the first place.
Antitrust analysis should not be undertaken exclusively by a tight-knit monopoly of lawyers posing as enforcers. That’s a monopoly game that should not pass the word "Go" in this or any other pro-growth administration.