The Benefits and Limits of Effectuating Progressive Antitrust Policy Through Policy Statements
The executive branch enforces the law and effectuates antitrust policy through a variety of mechanisms. Two predominant avenues include the targeted use of an enforcement agency’s prosecutorial discretion. The conduct targeted by antitrust agencies is understandably a necessary component of enforcement policy and is perhaps the clearest statement of an administration’s underlying antitrust philosophy. For example, in previous administrations, the Federal Trade Commission (FTC) went out of its way not just to avoid prosecuting monopolists but explicitly enforced the antitrust laws against workers seeking to organize their workplaces to enhance their working conditions and increase their pay. In a recent article published in Commonweal, I explained that previous FTC antitrust lawsuits have targeted “Washington D.C. public defenders in 1990, music teachers in 2014, and electricians in 2015.” The Biden Administration has fortunately used its prosecutorial discretion to shift enforcement away from workers and smaller firms to instead target dominant corporations and highly concentrated markets.
The second predominant avenue to effectuate antitrust policy is through agency rulemaking. Some agencies with broad congressional delegated antimonopoly powers, like the FTC, Consumer Financial Protection Bureau (CFPB), or Federal Communications Commission (FCC), regulate entire sectors of the economy by enacting new legal obligations after a specified process detailed in the Administrative Procedure Act (APA). For example, the FCC has historically prohibited broadcast corporations from owning newspapers and required internet service providers not to throttle consumers’ internet speeds (commonly known as net neutrality). Another example is the FTC using its long-dormant unfair methods of competition rulemaking powers to ban all noncompetes in the United States.
Both enforcement avenues essential are an essential means for the government to determine who is prosecuted, what conduct is illegal, and how businesses are incentivized to stay within the bounds of the law. However, there is a third, less direct, enforcement mechanism administrative agencies like the Department of Justice and Federal Trade Commission can use to steer the antitrust law in the direction they want - issuing policy statements. In this post, I want to describe what policy statements are, why the Biden Administration has taken a particular interest in them, and what their strengths and limitations are.
What is a Policy Statement?
Policy statements (also known as guidance documents or guidelines) are documents issued by agencies of the executive branch. Policy statements accomplish two primary goals for agency officials. First, policy statements provide the public notice of how an enforcement agency understands and will enforce the law Congress has tasked it to administer. Policy statements can cover an agency’s interpretation of a gambit of material, including the legislative history, text of the enabling statute, and also the controlling jurisprudence.
By detailing how the agency understands these sources of information, policy statements effectively provide the agency the opportunity to detail what social, political, and economic values are worth prioritizing by selectively using the agency’s enforcement discretion. Should values such as fairness and building a more resilient economy be a guiding principle of enforcement, or should other values like low prices, no matter how they were obtained, be an agency’s lodestar? In other words, policy statements are not only expressions of social values and enforcement priorities but act as quasi-vision statements for how the law should be interpreted and enforced to advance certain political priorities.
Policy statements, thus, also serve as opportunities for agencies to differentiate themselves as much as possible from prior leadership. Bolder policy statements, therefore, not only push the respective agency to make full use of its enforcement powers but also increase the political cost of the policy statement being rescinded when new leadership takes control. Such a situation provides a clear signal to the public of what political values the administration chooses to prioritize and, thus, assists them in holding both the current and future administrations accountable.
Second, policy statements serve as organizing documents that can sharpen the agency’s internal goals and serve as a source of guidance and motivation for the staff. Guidance documents, thus, serve as a political pronouncement directly from the administration's officials as to how they view the purpose of the law (in contrast with their predecessors) and how the agency will use its limited resources and overwhelmingly broad prosecutorial discretion to enforce its legal mandate from Congress.
Although policy statements do not establish new legal obligations, they play a crucial role in supporting and enhancing the agency's enforcement efforts while also providing greater clarity to the public regarding the scope and nature of applicable laws. Moreover, by pronouncing which issues will be prioritized and litigated and those that will generally be ignored, policy statements are also clear signals to the public about how the agency would like to change the jurisprudence of the laws they are enforcing.
The long-term goal of a policy statement now becomes clear - it is to take their unenforceable words and transform them into enforceable jurisprudence and law. Using policy statements in this manner was specifically suggested by Richard Posner and George Stigler in a now infamous memo written to President-Elect Reagan in 1980. The advice was heeded.
In 1982, the Department of Justice published new merger guidelines, which detail how the agency would enforce Section 7 of the Clayton Act. The guidelines included a new econometric test for how relevant markets should be defined. The new econometric process was much more complicated than the original procedure and (as history has shown) created overly burdensome procedural barriers to effective enforcement of the antitrust laws by complicating the process and requiring economists to be a fundamental part of antitrust litigation. Although the econometric process the guidelines outlined to define markets had no basis in the jurisprudence (and still doesn't), because it has been used for over 40 years, courts have now routinely accepted and expected this method to be used to define relevant markets in antitrust cases.
In another notable instance, the FTC’s 1980 policy statement on its unfairness authority became codified into law with the enactment of the Federal Trade Commission Act Amendments of 1994. That law added 15 U.S.C. § 45(n) to the statutory code and formally limited what factors the FTC can use to determine what constitutes an unfair act or practice. While not common, policy statements can, with time, change the rule of law.
Notably, a policy statement can be issued, withdrawn, or modified with almost no effort from an agency. In some cases, a simple majority of the agency’s leadership can vote to enact or withdraw a policy statement. Contrast this procedure with that of an agency seeking to enact a new regulation via rulemaking. In general, the APA requires an agency to provide public notice of its actions, initiate a public comment period, and then publish a final rule explaining the justification for it. Moreover, an agency’s rule will almost certainly be challenged in the courts.
This significant procedural difference makes policy statements an attractive tool to quickly publicize new enforcement priorities and attract media attention to the agency’s codification of its new enforcement priorities, typically occurring at the start of a new presidential term.
Antimonopoly Policy Statements Under the Biden Administration
Simply by referencing the data presented below, antimonopoly agencies like the Department of Justice (DOJ), FTC, and CFPB in the Biden Administration have made issuing and rescinding policy statements a prominent part of its antitrust policy agenda to both publicize where the administration stands on certain antimonopoly issues and detail how the administration plans on enforcing the law they have been tasked with enforcing by Congress. By my count, the DOJ, FTC, and CFPB have enacted thirteen statements related to antimonopoly policy, rescinded fourteen in total, and one guidance document is still pending. The data is shown below. The full data set can be viewed here. Feel free to email me at dhanley.usa@gmail.com if you think I missed a policy statement (I read every email I receive).
Below is the list of actions concerning policy statements by the DOJ, FTC, and CFPB.
Some of the exceptionally newsworthy policy statements include the FTC’s statements on its Section 5 unfair methods of competition authority, deceptive practices on gig workers, and restrictions on the repair of products. Another important policy statement comes from the CFPB detailing its abusiveness authority.
A meme best exemplifies the interest of Biden Administration enforcement officials in policy statements.
The policy statements released by the Biden Administration are notable for their often extensive references and discussions of current scholarship, evidence, existing jurisprudence, and legislative history of the law granting the agency enforcement power - all of which is done to anchor the agency’s actions to Congress’s legislative mandate. The best example showcasing the difference between policy statements issued in the Biden Administration compared to previous administrations is by comparing the FTC’s 2015 policy statement on its unfair methods of competition authority with the 2022 policy statement.
The 2015 statement is merely one page long and contains three main points. First, the statement says the FTC’s enforcement will/should promote (the unduly narrow and dubious) consumer welfare standard. Second, the FTC stated it would be guided by the rule of reason when challenging conduct, which, as the data clearly shows, is effectively a demarcation of per se legality. Lastly, the statement says that the FTC will restrict its enforcement to the Sherman and Clayton Acts and generally not enforce its “unfair methods of competition” authority “on a standalone basis.” Given that the FTC’s unfair methods of competition authority is one of its primary tools to police corporate conduct, the statement was clearly an abdication of the agency’s mission and totally out of line with the legislative history and mandate of the Federal Trade Commission Act.
To give a sense of the scale of the statement’s brevity, here is the relevant text of the 2015 statement.
The 2022 statement, on the other hand, is sixteen pages long, contains extensive references to the purpose of the agency, and provides a historical background for its enforcement powers. The statement also clearly repudiates the ideas expressed in the 2015 policy statement by declaring the agency’s unfair methods of competition authority (as Congress intended and as the Supreme Court has clearly authorized) goes beyond the acts prohibited by the Sherman and Clayton Acts and implicitly recognizes that the consumer welfare standard is wrong and the antitrust laws have a much broader purpose. More uniquely, however, the 2022 statement details example situations where the agency would consider an enforcement action and the legal burdens on the violators to justify their conduct.
A similar situation is present with the Consumer Financial Protection Bureau's policy statement prohibition of abusive acts or practices in the financial services industry. The original policy statement, released in 2020, unduly restricted the agency’s enforcement authority, and the new one seeks to take advantage of the full breadth of the powers Congress gave the agency.
Biden administration officials have also enacted policy statements on novel enforcement topics. Such actions not only open potentially new litigation, which would itself create jurisprudence applying the law in new ways, but such actions are clear signals that Biden’s enforcers are willing and are actively trying to push interpretations of the law to enhance protections for workers and create fairer markets. Two policy statements from the FTC highlight these observations. The FTC released a policy statement on how restrictions on product repairability and how practices affecting gig workers can be unfair methods of competition or be an unfair or deceptive practice.
Biden’s policy statements, however, are not strong as they could have been. For example, concerning the FTC’s new policy statement on its unfair methods of competition authority, the agency failed to provide bright line indicators, either the use of certain methods of competition or market share thresholds, which would trigger an enforcement action. Including policies like bright lines provides the clearest notice possible to the public of what conduct will be litigated.
Policy Statements Have Real Limitations; Enforcement and Rulemakings Should be the Biden Administrations Priority
Policy statements are not a perfect mechanism to effectuate antitrust policy - indeed, far from it. There are at least four main limitations. First, as stated above, a policy statement does not create new legal obligations on the public. Thus, while an agency can sue a party for violations of the law, it cannot sue a party for violating a policy statement. Policy statements, in other words, do not create binding obligations on the public and only detail how the agency will enforce the law, what circumstances the agency considers to initiate an enforcement action, and how it interprets the underlying law.
Second, policy statements can be quickly rescinded in future administrations. Similar to what Biden officials have done, nothing prevents new agency leaders from rescinding policy statements and publishing new ones expressing new enforcement priorities or interpretations of existing law.
Third, policy statements also take time to be fully accepted by the public and, more importantly for antitrust purposes, the courts. As detailed above concerning the merger guidelines, historically, courts have shown significant deference to policy statements due to their expertise and mission to enforce the law in the public interest. The problem is that it takes time for the courts to accept what the agency has done. In other words, the longer it takes for an agency to publish a new policy statement, the less impact it will have on the administration seeking to change the underlying jurisprudence. This situation currently affects the new merger guidelines the DOJ and FTC are working on, which after more than a year, have yet to be published. By the time the new merger guidelines are released, there will be little time left in Biden’s first term to bring enforcement actions advancing its goals. Undoubtedly the antitrust agencies will try their hardest, but they will have to move quickly.
Last, policy statements still have to generally work within the limitations of what the controlling law is and the agency’s limited budget.
While policy statements are important and Biden’s agency officials have done exceptionally admirable work, given the limitations and the number already enacted, Biden enforcement officials should now completely divert resources to enforcement and rulemakings, which will have more staying power should there be a change in administration in the next presidential election.
Image credit: Tara Winstead via Pexels.