Will Kanter Transform Cartel Enforcement?

October 05, 2021

The hearing on Jonathan Kanter’s nomination to lead the U.S. Department of Justice’s Antitrust Division is scheduled for Oct. 6.

When viewed alongside President Joe Biden’s appointment of Lina Khan to chair of the Federal Trade Commission, his selection of professor Tim Wu as special assistant to the president, his formation of the new White House competition council and his signing of the executive order on promoting competition in the American economy, Kanter’s nomination feeds the conventional view that the Biden administration is preparing to take an aggressive posture on antitrust enforcement — much more aggressive than the Trump administration or even the Obama administration.

That view, though, glosses over an important distinction: whether the Biden administration’s enthusiasm for reversing the trend of domestic market consolidation — by challenging a single company’s tactics to develop and entrench its own monopoly, including by merging and acquiring other companies — indicates a corresponding enthusiasm for prosecuting major companies for engaging in cartel conduct with each other, like price-fixing, bid-rigging, group boycotts and agreements to constrain supply.

The customary view is that Democratic administrations bring more cartel enforcement cases and prosecute them with greater intensity than Republican administrations. However, there are exceptions.

Some view the Obama White House, for example, as having been lackluster in its willingness to prosecute these types of cases aggressively.^[1] Whether the customary view accurately describes the Biden administration is not obvious, but we ultimately think that President Joe Biden will follow the Clinton administration’s more assertive posture with respect to cartel enforcement activity.

In Biden’s first few months, cartel conduct did not appear to be much of a concern. The July executive order on promoting competition made a big splash, but it was surprisingly light on discussing cartel conduct, making only a few references to foreign cartel activity, how that activity impacts U.S. markets, and whether foreign cartels are a legitimate excuse for tolerating domestic consolidation.^[2]

The White House’s monthslong delay in selecting a candidate to lead the Justice Department’s antitrust unit raised additional questions about the seriousness with which the Biden administration was going to pursue cartel enforcement actions.

While antitrust advocates appear to feel comfortable with Kanter, his long history as a partner at major corporate defense firms has included representing companies as defendants accused of colluding with their competitors.

For instance in, U.S. v. Learfield Communications LLC, Kanter represented defendant IMG College for Paul Weiss Rifkind Wharton & Garrison LLP, in a cartel case against Learfield Communications, IMG College and A-L Tier I for using joint ventures and noncompete agreements to block competition in the market for multimedia rights for college athletics programs. The U.S. District Court for the District of Columbia issued its final notice in the case in October 2020.^[3]

Additionally, Kanter’s career may suggest a worldview that sees cartel conduct cases differently than monopolization cases. Nor does Kanter’s purported interest in pursuing enforcement activity involving monopolization and market consolidation necessarily indicate a complementary interest in pursuing major companies for engaging in price-fixing, bid-rigging or entering agreements not to compete with each other.

Despite all this, our view is that the Biden administration is preparing to take a more aggressive approach with respect to cartel enforcement activity. A few of its signals are worth highlighting.

The first involves collusion in the agribusiness and related food markets. These markets have historically been important targets for cartel enforcement in Democratic administrations because price-fixing, bid-rigging and supply restrictions in those industries have clear downstream impacts on the prices that U.S. consumers pay for everyday goods.

The Clinton administration launched a slew of major agribusiness and food cartel cases in the 1990s, involving:

• Lysine, in U.S. v. Archer Daniels Midland Co., U.S. v. Ajinomoto Co. Inc., U.S. v. Kyowa Hakko Kogyo Co. Ltd., U.S. v. Sewon America Inc. and U.S. v. Cheil Jedang Ltd., all in 1996 in the U.S. District Court for the Northern District of Illinois;^[4]
• Citric acid, in U.S. v. Archer Daniels Midland Co. in 1996, U.S. v. Haarmann & Reimer Corp. in 1997, U.S. v. F. Hoffmann-La Roche Ltd. in 1997, U.S. v. Jungbunzlauer International AG in 1997 and U.S. v. Cerestar Bioproducts BV in 1998, all in the U.S. District Court for the Northern District of California;^[5]
• Sodium gluconate, in U.S v. Akzo Nobel Chemicals BV in 1997 and U.S. v. Fujisawa Pharmaceutical Co. Ltd. in 1998, both in the Northern District of California, and discovered from cooperators in the lysine and citric acid cases;^[6] and
• Sorbates, in U.S. v. Eastman Chemical Company in 1998; U.S. v. Hoechst AG in 1999 and U.S. v. Nippon Gohsei in 1999, all in the Northern District of California.^[7]

The Archer Daniels Midland Company paid a $100 million fine for its participation in the lysine and citric acid conspiracies.

The most significant case, however, involved a global conspiracy among vitamin producers in the U.S. District Court for the Northern District of Texas, including:

• U.S. v. Lonza AG and U.S. v. F. Hoffmann-La Roche Ltd. in 1998; and
• U.S. v. BASF AG, U.S. v. Daiichi Pharmaceutical Co. Ltd., U.S. v. Easai Co. Ltd, U.S. v. Takeda Chemical Industries Ltd., and U.S. v. Chinook Group Ltd., all in 1999.

The vitamin case was one of the largest cartel cases of all time, resulting in, among other penalties, a $500 million fine imposed on F. Hoffman-La Roche Ltd., which the Justice Department’s Antitrust Division at the time called “the largest fine ever imposed in any Department of Justice proceeding under any statute.”[9]

More than 20 years later, the Biden administration has communicated an interest in returning to this playbook. Under Obama, the Antitrust Division initiated some agribusiness and food antitrust prosecutions, involving conspiracies in, for example:

• The tuna industry, as in U.S. v. Bumble Bee Foods LLC in 2017, U.S. v. Lischewiski in 2018 and U.S. v. StarKist Co in 2018, all in the U.S. District Court for the Northern District of California;^[10] and
• The chicken industry, as in U.S. v. Pilgrim’s Pride Corp. in 2020; U.S. v. Norman W. Fries Inc., d/b/a Claxton Poultry Farms, et al. in 2021 and U.S. v. Jayson Jeffrey Penn in 2020, all in the U.S. District Court for the District of Colorado.^[11]

Those cases progressed relatively slowly during the Trump administration, and a ramp-up now seems to be on the horizon.

In her remarks to the National Farmers Union on Sept. 21, Associate Attorney General Vanita Gupta — the No. 3 leader in the Justice Department — highlighted the department’s interest in working with other agencies like the U.S. Department of Agriculture, “to pursue price fixing, bid rigging and market allocation across the economy, including in agricultural markets ranging from food to farmland.”

Given that the political interests implicated by agribusiness-related collusion fit neatly within Biden’s political priorities and campaign messaging — to help middle-class and working-class Americans control the high cost of everyday items — the associate attorney general’s remarks are a clue that the Justice Department is preparing to take a more aggressive and systematic approach to investigating cartel conduct in the agribusiness and food industries, like that of the Clinton administration.

Along the same lines, collusion in labor markets has been gaining more attention over the last few years. These types of cases include, for example, agreements among competitors on what to pay their employees, or agreements not to poach employees.

The effect of this type of conduct is to block competition for labor and depress wages. While the Trump administration foreshadowed the prosecution of cases involving wage-fixing and no-poach agreements, the Biden administration appears to be doubling down on those cases in a more systemic fashion.

In his executive order on competition, the president encouraged the attorney general and the FTC chair “to consider whether to revise the Antitrust Guidance for Human Resource Professionals of October 2016” so as “[t]o better protect workers from wage collusion.”

On Oct. 1, Richard Powers, the acting head of the Antitrust Division, cited the president’s executive order and stated at a conference that the division “has become increasingly alert to and concerned by business conduct and transactions that harm competition for working people.”

This priority fits squarely within Biden and the Democratic Party’s focus on improving the conditions for workers in the U.S. Depending on how stringent the guideline revisions ultimately are, the Biden administration may ultimately trigger reverberations throughout the entire U.S. labor economy — and set the stage for more criminal prosecutions of collusion in the labor markets.

These signals are important, but Kanter remains the most important variable. The circumstances leading to his appointment have already placed significant pressure on him and the Justice Department to ramp up its enforcement activity across the board. The competition for head of the Antitrust Division was rigorous, with Kanter ultimately prevailing over a variety of contenders.

Kanter’s competitors faced criticism about — among other things — their role in the Obama administration’s Antitrust Division, called cautious by some; their willingness to work for dominant industry players like Google, Facebook and Amazon; and their long histories at corporate defense firms that have played an instrumental role in creating the market consolidation dynamics that Democrats are now challenging.

Kanter’s success over his competitors appears to have been at least in part due to his advocates successfully portraying him as a potentially transformational figure for antitrust enforcement.

If he is confirmed, all eyes will be on Kanter to see if he lives up to this portrayal — and he probably understands that any perceptions short of that hype will invite considerable skepticism at a time when antitrust is a major component of the political environment.

In that context, taking major cartel enforcement actions can communicate a seriousness that may be appealing to Kanter — and his ultimate boss, Biden.

Kanter’s hearing this week is his opportunity to present himself as the antitrust champion his proponents have held him out to be, and it will likely be the most important clue regarding how he plans to lead the antitrust unit in its prosecution of what has historically been considered its most important and high-profile cases.

Richard J. Leveridge is a partner and Adam H. Farra is an associate at Gilbert LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

^[1] See American Economic Liberties Project, “The Courage to Learn: A Retrospective on Antitrust and Competition Policy During the Obama Administration and Framework for a New, Structuralist Approach,” at 65-70 (January 2021); Daniel A. Crane, “Has the Obama Justice Department Reinvigorated Antitrust Enforcement?,” Stanford Law Review Online, (July 18, 2012).

^[2] See Leslie Kostyshak, Craig Lee, and Alex Glazer, “What Cartel Enforcement Under Biden’s DOJ Might Look Like,” Law360 (July 15, 2021).

^[3] E.g., United States v. Learfield Commc’ns, LLC et al. , No. 19-0389 (D.D.C. Oct. 23, 2020) (representing IMG College in a cartel case against Learfield Communications, IMG College, and A-L Tier I for using joint ventures and non-compete agreements to block competition in the market for multimedia rights for college athletics programs).

^[4] E.g., United States v. Archer Daniels Midland, Co., (N. D. Ill. 1996); United States v. Ajinomoto Co., Inc., (N. D. Ill. 1996); United States v. Kyowa Hakko Kogyo Co. Ltd., (N. D. Ill. 1996); United States v. Sewon America, Inc., (N. D. Ill. 1996); United States v. Cheil Jedang, Ltd., (N. D. Ill. 1996).

^[5] See United States v. Archer Daniels Midland Co., (N.D. Cal. 1996); United States v. Haarmann & Reimer Corp. and Hans Hartmann, (N.D. Cal. 1997); United States v. F. Hoffmann-La Roche. Ltd. and Udo Haas, (N.D. Cal. 1997); United States v. Jungbunzlauer International AG Rainer Bichlbauer, (N.D. Cal. 1997); United States v. Cerestar Bioproducts BV and Sylvio Kluzer, (N.D. Cal. 1998).

^[6] E.g., United States v. Akzo Nobel Chemicals BV and Glucona BV, (N.D. Cal. 1997); United States v. Fujisawa Pharmaceutical Co., Ltd. and Akira Nakao, (N.D. Cal. 1998).

^[7] E.g., United States v. Eastman Chemical Company, (N.D. Cal. 1998); United States v. Hoechst AG, (N.D. Cal. 1999); United States v. Nippon Gohsei, (N.D. Cal. 1999).

^[8] E.g., United States v. Lonza, AG, (N.D. Tex. 1998); United States v. F. Hoffmann-La Roche, Ltd., (N.D. Tex. 1999); United States v. BASF AG, (N.D. Tex. 1999); United States v. Daiichi Pharmaceutical Co., Ltd., (N.D. Tex. 1999); United States v. Easai Co., Ltd., (N.D. Tex. 1999); United States v. Takeda Chemical Industries, Ltd., (N.D. Tex. 1999); United States v. Chinook Group Ltd., (N.D. Tex. 1999).

^[9] U.S. Department of Justice, “Selected Criminal Cases, Antitrust Division – Appendix A: Antitrust Division Selected Criminal Cases, April 1, 1996 through September 30, 1999),” https://www.justice.gov/atr/selected-criminal-cases-antitrust-division.

^[10] E.g., United States v. Bumble Bee Foods, LLC, (N.D. Cal. 2017); United States v. Christopher Lischewski, (N.D. Cal. 2018); United States v. StarKist Co., (N.D. Cal. 2018).

^[11] E.g., United States v. Pilgrim’s Pride Corp., (D. Colo. 2020); United States v. Norman W. Fries, Inc., d/b/a Claxton Poultry Farms et al., (D. Colo. 2021); United States v. Jayson Jeffrey Penn et al., (D. Colo. 2020).

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