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— Regulatory —
Former Clinton antitrust officials are coming back in force at both federal agencies that police mergers, the Federal Trade Commission and the Justice Department's Antitrust Division. And while "the revolving door" normally refers to people leaving government for lucrative jobs in the sector they were formerly overseeing, now officials formerly at one agency are taking jobs at its counterpart. President Obama's choice to lead the antitrust division at the DOJ is Christine Varney, a former FTC commissioner, and one of her deputies, Molly Boast, now a lawyer at Debevoise & Plimpton LLP in New York.
She used to run the FTC's Bureau of Competition -- which includes responsibility for all merger investigations -- during the Clinton administration. Varney's team also includes University of California, Berkeley, economics professor Carl Shapiro, who has returned to a post he had held at the beginning of the Clinton administration under former Assistant Attorney General Anne Bingaman. Joe Farrell, another UC Berkeley economics professor who has often worked with Shapiro, headed the DOJ's Antitrust Division during the late 1990s. As first reported in The Deal, new FTC Chairman Jon Leibowitz appointed him to head the FTC's economics branch. That department works closely with merger lawyers on all investigations. Because several repeat players are running the agencies, antitrust lawyers in Washington think the biggest difference will certainly be a more aggressive stance at the DOJ, where very few cases were litigated during the past three years, although several mergers were approved with mandatory divestitures. Most importantly, according to several antitrust lawyers who practice before both agencies and did not want to be named, the key difference between Varney and her predecessor, Tom Barnett, is "ideological." "Both Christine and Molly have very liberal instincts," says one lawyer. "They are very aggressive in their views of antitrust enforcement." He says he's expecting them to map an aggressive agenda, although that will depend on the sort of mergers that are proposed. While the current Ticketmaster-Live Nation deal is under review, and has already been subjected to stiff opposition on Capitol Hill, there are not a large number of high-profile deals in the investigation pipeline. Nevertheless, the deals that are proposed will likely get closer scrutiny. "Every merger case is ambiguous" when government officials open an investigation, says one former official now in private practice. "Tom [Barnett] always thought of a reason not to block a deal; Republicans worry about intervening when it's not necessary. "Christine and Molly will worry more about missing something," he predicts. Shapiro, an economist whose work has generally been focused on industrial organization and antitrust issues, is seen as someone more likely to urge intervention. When hired as an outside consultant by the Antitrust Division during Barnett's tenure to evaluate the merger of Whirpool Corp. and Maytag Corp., he encouraged staff to challenge the deal. Barnett rejected that recommendation and approved the deal without modifications. In the ensuing months, Shapiro co-authored a paper saying that merger should have been challenged and argued that merger enforcement during the Republican era was lax. Another lawyer argues that Barnett's tenure at the agency was marked by a high number of cases that were approved on the promise of narrow divestitures. She says that the new leadership is less likely to embrace that sort of "surgical" approach to removing the offending overlap in a merger. Instead, she says, the agency will likely be more inclined to suggest that a narrow divestiture cannot adequately provide sufficient competition. One case where that might have been true is the deal that created newsprint behemoth AbitibiBowater Inc., which combined for more than 40% market share and which led a series of price hikes that nearly doubled the cost of newsprint during the past year. That merger hurt newspapers, which have had to cut back on newsprint. Last week, AbitibiBowater filed for bankruptcy protection. Deputy Assistant Attorney General Phil Weiser is also returning to the Justice Department, where he previously worked on telecommunications matters. He will likely be involved in mergers in regulated industries, though it's not clear how the responsibilities will be divided among the deputies. A new face in the office, William Cavanaugh Jr., joins the Antitrust Division from a successful New York litigation practice at Patterson Belknap Webb & Tyler LLP. New to government service, he's a dark horse in terms of enforcement theories but one with a proven track record in the courtroom, where he's argued dozens of antitrust and intellectual property cases for a range of clients, from pharmaceutical companies to credit card issuers. With that sort of expertise, Varney may ask him to lead litigation teams in court, says one Washington-based mergers and acquistions lawyer. That could provide a boost to the DOJ, which has struggled with its merger cases and has frequently turned to outside litigators on a range of cases, including last year's proposed venture between Google Inc. and Yahoo! Inc., which was abandoned when the DOJ threatened to challenge the agreement. Google is likely not out of the woods, according to one antitrust expert. "Christine has made it clear that she regards Google as a dangerous behemoth," he says. Her past interest in Internet issues and recent statements that monopolies could be better reined in by government intervention could mean the company will be subjected to investigations into how it competes and how it deals with its rivals. Changes at the FTC are far less likely, in large part because, so far, there's been no change among the commissioners. While lawyers say that former head of the Bureau of Consumer Protection Jodie Bernstein, a lawyer at Bryan Cave LLP, is likely to fill the current vacancy on the commission, Leibowitz was generally among the majority already. The agency has been taking cases to court and working to update and rejuvenate its ability to challenge mergers through an in-house litigation structure. The new head of the Bureau of Competition, Rich Feinstein, is another alum and likely to work to keep the agency in the game. Feinstein, who has also worked at the Justice Department and most recently was a partner at litigation powerhouse firm Boies, Schiller & Flexner LLP, is know as a principled, thoughtful litigator who worked well with staff when he ran the agency's healthcare division during the Clinton administration. |
The Obama administration is already hip-deep in a battle to change the business of government. For merger lawyers, there's a "back to the future" element that's hard to ignore. 
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