Energy and Commodities Outlook 2021

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The Biden administration’s recent appointees are poised to implement several significant changes to antitrust enforcement. Federal Trade Commission (FTC) Chair Lina Khan and the nominee to lead the Department of Justice (DOJ) Antitrust Division, Jonathan Kanter, have advocated robust antitrust enforcement and departures from prior enforcement priorities. Khan and Kanter’s aggressive approach will result in more challenges to mergers and business practices, including transactions that have historically been considered permissible.

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‘Holistic’ antitrust approach on the horizon

The consumer welfare standard, the bedrock of U.S. antitrust policy for the last 30 to 40 years, holds that any transaction or course of conduct that tends to lower prices for consumers usually should not be challenged by the government.

However, the appointment of Lina Khan as FTC chair in March 2021 threatens to upend this bedrock principle. Khan rose to prominence through a piece she wrote in the Yale Law Journal, “Amazon’s Antitrust Paradox,” which critiqued the definition and application of the consumer welfare standard. Khan argued that the consumer welfare standard is ill-equipped to handle growing forces in the modern marketplace. Khan believes that the current standard is too narrowly focused on price, and neglects to take a holistic view of the idea of consumer welfare. Khan wants to move past the established standard of evaluating only price effects and instead consider how a course of conduct or transaction affects consumer choice, the quality of the products available, the impact on labor, and more.

This theoretical argument has recently become policy at the FTC, with Khan distributing a memorandum to staff on Sept. 22, stating that the FTC needs to take a holistic approach to identifying harms, focus on power asymmetries, crack down on rampant consolidation, and address the “dominant intermediaries” who are in a position to dominate the supply chain based on their size and power. Khan also wants to focus FTC resources on the restrictive contract terms that are often imposed by dominant firms. Nominee Kanter has also offered some critiques of the application of the consumer welfare standard. Although he has not been as vocal as Khan in advocating antitrust reforms, Kanter is expected to increase antitrust enforcement and apply enhanced scrutiny to types of arrangements that have traditionally been viewed as competitive and lawful.

Key takeaways
  • Enforcement authorities adopt stricter approach to antitrust issues.
  • Previously accepted arrangements could be deemed anticompetitive.
  • Businesses can manage investigations by taking affirmative steps now.
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