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Assistant Attorney General Makan Delrahim's antitrust division has taken on Ford, Honda, Volkswagen, and BMW for striking a deal with California over emissions standards.
Late last week, Donald Trump's Justice Department very publicly opened an antitrust investigation into four auto companies (Ford, Honda, Volkswagen, and BMW). This was clearly a punishment for the automakers for reaching a deal with California, against Trump’s will, to set emissions standards at a slower pace than the Obama administration’s initial fuel economy plan, but beyond what the current White House sought. Major editorial pages decried the administration for abusing its authority and bullying the car manufacturers for attempting to act, however modestly, on the climate crisis.
Neither editorial managed to so much as mention the name of the main player in this charade: Makan Delrahim, the assistant attorney general of the antitrust division of the Justice Department. We've gotten so used this conceit of Trump dictating all decisions in the executive branch that we remove agency from the other participants. But Delrahim's assent to wield his power in this fashion is disturbing, not just because of the climate denialism and intimidation at work, but also because of the potential ulterior motives involved.
To state the obvious, Delrahim has not brought back a golden or even silver age of antitrust enforcement in his two years on the job. His one major case, suing to block the AT&T/Time Warner merger, ended in failure, in part because of a hostile judge but also due to bad strategy. Delrahim waved through the Sprint/T-Mobile deal, although state attorneys general are suing. In general, he has offered little resistance to the continued dominance of large corporations over American life.
Delrahim has also been hesitant on the pressing question of whether the current guidelines for antitrust enforcement reflect current trends in the economy. He has defended the so-called “consumer welfare” theory, which dictates that mergers are beneficial if consumers prosper from the efficiencies created, largely with lower prices. Anything deviating from this economic vision of antitrust, Delrahim warns, would be dangerous.
In a speech to the Open Markets Institute in 2018, Delrahim laid out this perspective. “The consumer welfare standard reduces the risk of what Brandeis called ‘dangers to liberty’ from well-meaning enforcers,” he said. Overly political uses of prosecutorial discretion would be unadvisable. He cites an unnamed state attorney general who allegedly wanted to prevent assets in the AT&T case from going to Fox or Rupert Murdoch, and highlights an Open Markets report that castigates the Koch family for their work on the political right.
“Is that really where we want antitrust enforcement to go?” Delrahim asked. “Whether it's the Kochs or George Soros or anyone else, political positions should have no role in determining the propriety of antitrust enforcement actions. If we take antitrust down the path of considering who is funding Ayn Rand lectures, or the Clinton Foundation for that matter, we will have taken a dramatically wrong turn, in my view.”
This is a pretty standard position for the status quo supporters of the antitrust elite. They claim that antitrust enforcement is fragile, and too susceptible to political winds to be extended beyond the realm of economics. Only the consumer welfare standard can keep antitrust in a protective shell, to be used dispassionately and without favor of any political position.
The events of the past week make Delrahim look like a clown for parroting this claim. His division—and at least according to The Wall Street Journal it was the Justice Department’s idea, not Trump’s—lashed out obviously and deliberately at auto companies for defying the president’s wishes. The notion that the automakers conspired with each other to raise fuel standards in a bid to limit competition is a joke.
If I didn't know any better, I would say that Delrahim just gave his own example of the politicization of antitrust to “prove” that antitrust can be politicized, and should therefore be used sparingly. He engaged in precisely the kind of behavior he condemned in the 2018 speech. One can imagine a member of the antitrust elite arguing that if this is the kind of mischief that can be accomplished under the consumer welfare standard, you wouldn't want to loosen those standards to create more opportunities for politicization. And the intent behind such an argument is clear: to argue that the best way to prevent antitrust enforcement from becoming a political weapon is to never use it at all.
If anything, the conduct of Delrahim and his ilk demands a far more stringent set of guidelines for antitrust. But that means the polar opposite of considering only consumer welfare, where political animals can still massage economic models to get their desired result, as Delrahim has evidenced. The antitrust regimes of yore employed what is called the structural presumption, which simply states that mergers in already concentrated markets are presumed to be anticompetitive and therefore prohibited, absent some compelling rationale. You can even make this automatic, based on the numbers of major companies in a market or the percentage of market share. There would be far less potential for weaponizing antitrust if a merger reducing the four major firms in an industry to three must always be challenged on the basis that it’s presumed to be anticompetitive.
The structural presumption puts the burden on the merging companies to prove that their marriage will not harm competition or markets. A bright-line approach that doesn't give the enforcers much discretion would have the additional salutary effect of “simplify[ing] the test of illegality,” as the Supreme Court opinion in United States v. Philadelphia National Bank put it in 1963.
That would solve the problem Delrahim posed in his speech as well as the problem of his own Trump-enabled actions against the auto companies. I just have the nagging feeling that Delrahim was laying a trap here, warning of political antitrust and then setting out to prove its dangers. Those opposed to our age of monopoly shouldn't take the bait.
