RECENT DEVELOPMENTS

Reining in Big Tech 

• GOOGLE‘S RECKONING CONTINUES. In August, a federal court found Google liable for illegally monopolizing the internet search market and now must decide how to remedy Google’s search monopoly and restore competition. Remedies in the case will have major impacts on the technology industry and the future of A.I. DOJ submitted remedy suggestions to the court last week, including forcing Google to divest Chrome and banning Google’s exclusive contracts to be the default search provider on devices. Economic Liberties released a paper laying out those and other potential remedies. Separately, closing arguments were held in DOJ’s case against Google for monopolizing the adtech market. This scrutiny is coming despite years of Google attempting to destroy evidence at the direction of their former General Counsel, Kent Walker.

Blocking Mergers

• ANTITRUST IN FASHION. Despite Wall Street’s critique of the case, a federal judge sided with the FTC and blocked the $8.5 billion merger of “accessible luxury” handbag parent companies Capri, home to Michael Kors, and Tapestry, owner of Coach. The decision cited several 2023 Merger Guidelines, including whether the proposed merger would significantly increase concentration, finding the deal likely would reduce competition in this segment of the handbag market. After the ruling, the companies dropped the deal.
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• PE BEWARE: UPDATED MERGER FORMS. Republican and Democratic FTC commissioners voted unanimously to finalize the first update to the Hart-Scott-Rodino (HSR) form since 1978. Companies file the form with the FTC and DOJ to gain approval for merger deals. Among other changes, the new HSR form requires firms to disclose more information about their ownership structure and prior acquisitions, seen as a move to identify more readily illegal transactions involving private equity. Economic Liberties released a fact sheet providing an overview of the revised form.
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• CAPITAL ONE/DISCOVER WOES. Capital One’s rocky road to acquire Discover continues. New York Attorney General Letitia James issued subpoenas as part of an antitrust investigation into the acquisition. Reporting suggests the CFPB is considering enforcement against Capital One for misleading customers about the returns on savings accounts, grounds per the OCC’s recent bank merger policy guidance to block a transaction. The Federal Reserve Bank of Richmond is asking for more information on the deal’s consumer impacts. Sen. Warren (D-MA,) Rep. Ocasio Cortez (D-NY-14,) and a host of other Democratic members are also warning banking regulators of Capital One’s record of consumer abuses.

Financial Services

• SWITCHING BANKS JUST GOT EASIER. The average consumer keeps a bank account for 17 years because it’s a hassle to switch, and banks take advantage of this stickiness to to charge fees and offer worse service. CFPB recently finalized their “open banking” rule, allowing consumers to transport their data and more easily shop for banking services. The rule covers over 4,000 U.S. financial institutions. Fintech firms like PayPal and Plaid praised the rule, but banking groups preemptively have sued to block its implementation.

Airlines

• SPIRIT AIR FLIES ON. Spirit, North America’s largest ultra low cost carrier, filed for Chapter 11 bankruptcy last week, giving the carrier an opportunity to restructure and reduce debt. While some have suggested Spirit’s financial issues stem from the firm’s failed merger with JetBlue, the carrier’s own leadership denied such an assertion during the trial. Indeed, Spirit did not present a “failing firm” defense, which permits an otherwise anticompetitive merger to proceed if one party faces serious financial issues and is unlikely to find another buyer. Spirit is expected to exit bankruptcy by Q1 of 2025.

Improving Health Care

• UNITED HEALTH MAKES HOME HEALTH MOVES.  UnitedHealth Group, the country’s largest healthcare conglomerate, is attempting to buy Amedisys, one of the largest home and health providers in the U.S. United Health recently purchased home care provider LHC Group, an Amedisys competitor, and if completed, United would control 30% or more of the home health and hospice market across eight states. The DOJ has sued to block the Amedisys deal, claiming it would harm patients, drive up prices, and hurt workers. To learn more about the impact of consolidation throughout healthcare, check out Economic Liberties‘ healthcare “Ledger of Harms.”
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• DRUG KICKBACK SCHEME SHOT DOWN. In 2020, the DOJ Civil Division sued Teva, the world’s largest drug manufacturer, for funneling $300 million into ostensibly independent charities that in reality paid patients to purchase its multiple sclerosis drug, Copaxone. Teva used the charity payments to pay itself kickbacks and obscure the 329% cost increase of the drug. Teva agreed to settle claims they violated the Anti-Kickback Statute and False Claims Act for $425 million and a separate $25 million to se ttle allegations of price fixing cholesterol drugs.

National Security

• RAYTHEON PAYS FOR PRICE GOUGING. Raytheon, a $150 billion company and one of the “big five” defense contractors, is now the sole supplier to the U.S. of certain missiles. A DOJ lawsuit revealed the defense giant leveraged this monopoly power to inflate weapons contract costs and double-bill the Department of Defense (DOD). Raytheon has agreed to pa y $950 million to resolve the allegations, and could be suspended or debarred as a federal contractor. Separately, DOD released the implementation plan for the National Defense Industrial Strategy, which, among other goals, seeks to onshore more production and expand the use of “non-traditional” contractors.

Lowering Prices

• CANCELLING IN A CLICK. Estimates suggest upwards of 35% of Americans are unknowingly paying for a subscription, often because of obscure cancellation procedures. It’s thus no surprise that the FTC received over 16,000 comments to their proposed “click-to-cancel” rule, which requires a simple mechanism to cancel and immediately stop charges on everything from gym memberships to Amazon Prime. All five FTC commissioners voted to finalize the rule, and several members, including Sen. Tim Kaine (D-VA) and Rep. Frank Pallone (D-NJ-6), expressed support for the effort. Companies have to comply with the rule by May 2025, but cable and content studios are suing to block its implementation.
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• EXCISING THE VISA TAX. In 2010, as part of the Dodd Frank Act, Congress passed the Durbin Amendment to break up the Visa/Mastercard duopoly and lower swipe fees in the debit payment processing market, disproportionately used by Americans earning lower incomes. Despite the law, Visa still routed 60% of U.S. debit transactions in 2023. A new DOJ lawsuit alleges Visa maintains this dominance by illegally monopolizing the debit card network market, engaging in exclusionary contracts to block competition, and charging merchants additional fees for using alternative networks, costing businesses billions. Though focused on the credit card market, the Senate Judiciary Committee also hosted a hearing this month on the bipartisan Credit Card Competition Act, which, like the Durbin Amendment, would require banks who issue credit cards to offer more than one network for processing transactions.

ICYMI

• Rep. Davids (D-KS-03) urged the Federal Trade Commission to investigate potential violations of the Robinson-Patman Act.
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• Economic Liberties launched the “End Rental Price-Fixing” campaign tracking the local, state, and national efforts to ban algorithmic price-fixing in the rental market.
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• FTC created a public portal to make it easier for the public to submit comments on proposed mergers.
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• The Copyright Office granted McDonald’s the right to repair their ice cream machines.
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• DOJ Antitrust and DOT launched a Request for Information (RFI) about the state of competition in the airline industry. Anyone can submit a comment by December 23, 2024.
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• Senator Murphy (D-CT) called for the need to break up corporate concentration across the globe as a means to strengthen American industry and break up corporate power.
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• Economic Liberties released a report comparing the antitrust enforcement records of the Biden Administration to the first Trump Administration.
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• Hawaiian Airlines announced non-union job cuts after merging with Alaskan Airlines.
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• Texas AG Paxton is suing insulin makers Eli Lily, Novo Nordisk, and Sanofi in addition to the the top three PBMs (the target of the FTC’s lawsuit)–CVS Health’s Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s OptumRx— for colluding to inflate insulin costs.
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• Michael Jordan, former basketball star and current racing team owner, is suing NASCAR for blocking the development of other stock car racing series.
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• FTC and DOJ met with G7 authorities to discuss ways to ensure competition in the development of A.I.
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• Sen. Warren (D-MA) and Blumenthal (D-CT) expanded their inquiry into veterinarian consolidation in a letter to Mars Petcare.