“Missing The Mark” – How Antitrust Remedies Should Address Specific Competition Concerns
Enforcement of antitrust laws is based on more than just investigating whether companies have engaged in anticompetitive behavior. An equally important aspect to consider is that of remedies: If a violation has occurred, what is the best course of action to address it? Antitrust enforcement should be predictable, addressing specific competitive harms by applying remedies targeted toward the identified problematic behavior. If proposed remedies are overly aggressive, they can have significant negative economic impacts for businesses and consumers alike. When regulators bring cases in which they are unclear about what remedies are being sought, it leads to observers asking: what is the endgame? Are such cases about protecting competition, or picking winners and losers in the market?
The Role of Remedies in Antitrust Enforcement
Competition agencies need to do more than just prove a violation in court—they must also propose a way to address the alleged harm. In merger cases, this may result in structural or behavioral commitments. In unilateral conduct cases, where companies are accused of engaging in anticompetitive business practices, crafting appropriate remedies presents a more complex endeavor. Proper remedies in antitrust must balance helping curtail business conduct that might harm competition in the markets, while making sure the proposed cure is not worse than the illness being treated.
Antitrust remedies typically are either structural, behavioral, or a combination of these. Structural remedies include the divestment of certain assets to help protect competition. Behavioral remedies impose restrictions on business practices, such as requiring changes in contract terms or pricing models, and they may include additional ongoing oversight and monitoring by competition agencies. Despite their differences, remedies seek to protect competition by creating circumstances where competition can thrive in the market, or returning competition to the levels it was before an alleged anticompetitive conduct or merger.
Each type of remedy offers different tradeoffs in severity and economic impact, and with differing degrees of effectiveness in promoting competition, and should be carefully defined and tailored on a case-by-case basis depending on the facts of each case. Moreover, as remedies should try to present a “but for” situation that restores and promotes competition in the market, agencies should consider a potential remedy prior to, rather than following, an antitrust investigation. By considering remedies before rather than after anticompetitive conduct has been found, agencies can better tailor the cases they bring, resulting in fewer cases brought with questionable economics. Narrowly tailoring remedies can also help avoid regulatory overreach, as overly broad remedies can have a distortionary effect on the market and undermine competition.
Uncertainty Rather than Predictability
Businesses, particularly those operating in highly dynamic markets such as tech, need predictability and certainty. When regulators file a case alleging anticompetitive harms without specifying what remedies they are pursuing, this creates several issues. First, it raises questions regarding the agency’s motives. If the Federal Trade Commission or Department of Justice are unwilling to articulate how they would address alleged harms, it creates the impression that enforcement is punitive rather than corrective in nature. The lack of transparency can lead observers to question whether agency actions are driven not by concern for consumer welfare, but by political or ideological concerns.
Second, the lack of a clear remedy being sought also creates procedural headaches for defending companies, making it harder for them to challenge the government’s claims. Discovery and fact-finding procedures are likely to take much longer, as companies will be left unsure how to prepare effective defenses, and will likely spend time gathering information that may ultimately be irrelevant to the specific facts of the case. This can lead to prolonged litigation and unnecessary costs for both parties.
Finally, competition regulators pursuing investigations without clearly articulating remedies can also spur negative impacts beyond the scope of a particular case. Enforcement agencies that are vague about their objectives risk stoking business fears about uncertain regulatory actions against them, and might respond by reducing risk-taking ventures. Companies hesitating to introduce new products or enter new markets would ultimately chill innovation and harm consumers.
U.S. antitrust laws do not protect competitors from competition. Antitrust enforcement is most effective and fair when regulators are transparent about their objectives and describe how proposed interventions in the marketplace will promote competition rather than hinder it. Anything less is just missing the mark.
