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The Year in Review: Economics at the Antitrust Division, 2022–2023

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Abstract

In the past year, Division economists have contributed to the Division’s many investigations and enforcement actions. This review highlights several of the Division’s enforcement efforts that have confronted issues of labor market competition, as well as a merger challenge that focused on the Division’s theory of harm that would occur before the merger was consummated.

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Notes

  1. "Health Care Company Pleads Guilty and is Sentenced for Conspiring to Suppress Wages of School Nurses," U.S. Department of Justice, Press Release 22-1161, October 27, 2022, available at https://www.justice.gov/opa/pr/health-care-company-pleads-guilty-and-sentenced-conspiring-suppress-wages-school-nurses (“U.S. v. VDA Press Release”).

  2. “The Antitrust Laws,” Federal Trade Commission, available at https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/antitrust-laws.

  3. “Price Fixing, Bid Rigging, and Market Allocation Schemes: What They Are and What to Look For,” U.S. Department of Justice, Antitrust Division, February 2021, available at https://www.justice.gov/atr/file/810261/download.

  4. The Silicon Valley conspiracy that took place between approximately 2005 and 2009 involved several high-tech companies that agreed not to recruit each other’s employees. See Final Judgment, United States v. Adobe Systems, Inc. et al., March 18, 2011, available at https://www.justice.gov/atr/case-document/final-judgment-0.

  5. Gibson (2021) analyzes the impact of the Silicon Valley no-poaching agreements and finds significant and negative wage effects of 3 to 4 percent. Several other researchers have analyzed cases where franchise chains (McDonald’s and Jimmy John’s) ended no-poaching agreements and have found that the agreements had negative effects on wages on the order of 1 to 6 percent (Lafontaine et al., 2023; Callaci et al. (2023)).

  6. One exception is Delabastita and Rubens (2022), who analyze historical data from Belgian mines in the early twentieth century and estimate that industry-wide wage fixing can reduce wages.

  7. U.S. v. VDA Press Release.

  8. U.S. v. Hee et al., Docket No. 2:21-cr-00098 (D. Nev. Mar 30, 2021), Document 103 (sentencing memorandum).

  9. See Staiger et al. (2010), Prager and Schmitt (2021), Azar et al. (2022).

  10. Worker preferences may also play a role: For example, nurses that seek employment in schools might highly value work schedules that are largely confined to “school hours.” It is possible that school nurses have such a strong preference for employment at schools over other places that hire nurses (i.e., hospitals) that competition among only a very small set of potential employers effectively determines wages.

  11. Prager and Schmitt (2021) estimate wage reductions for nurses that resulted from mergers among hospitals that were rivals in hiring nurses.

  12. Complaint, United States v. Activision Blizzard, Inc., April 3, 2023, available at https://www.justice.gov/media/1284351/dl?inline.

  13. Proposed Final Judgement, United States v. Activision Blizzard, Inc., April 3, 2023, available at https://www.justice.gov/atr/case-document/file/1577866/download.

  14. See Dietl et al. (2011).

  15. Broadly, the statutory exemption covers union activities like strikes, while the non-statutory exemption covers certain agreements between workers and employers. See Brief of the United States Department of Justice as Amicus Curiae in Support of Neither Party, United States National Labor Relations Board (NLRB) Case 10-RC-276292, February 10, 2022, available at https://www.justice.gov/media/1191811/dl?inline.

  16. The complaint describes the skills required for the jobs as follows: “Poultry processing plant workers develop special skills on the job. Workers learn these skills through the repetitive and, at times, difficult or dangerous tasks they perform on the poultry processing line. Poultry processing plant workers learn how to handle and slaughter live birds, wield knives and blades, section poultry carcasses, clean meat in a manner consistent with health and safety standards, manage other workers performing these tasks, examine and repair the necessary machinery, maintain health and safety standards, and, crucially, perform these tasks efficiently so as not to slow down the plant line.” Complaint, United States v Cargill Meat Solutions Corp., et al., July 25, 2022, ¶ 65, available at https://www.justice.gov/media/1238931/dl?inline.

  17. “Justice Department Files Lawsuit and Proposed Consent Decrees to End Long-Running Conspiracy to Suppress Worker Pay at Poultry Processing Plants and Address Deceptive Abuses Against Poultry Growers,” U.S. Department of Justice, Press Release 22–796, July 25, 2022, available at https://www.justice.gov/opa/pr/justice-department-files-lawsuit-and-proposed-consent-decrees-end-long-running-conspiracy.

  18. “Justice Department Files Proposed Amended Complaint and Consent Decree with Fourth Poultry Processor, Further Addressing Long-Running Conspiracy to Suppress Workers’ Compensation,” U.S. Department of Justice, Press Release 23–567, May 17, 2023, available at https://www.justice.gov/opa/pr/justice-department-files-proposed-amended-complaint-and-consent-decree-fourth-poultry.

  19. The Big Five publishers are PRH, HarperCollins Publishers, S&S, Hachette Book Group, and Macmillan Publishing Group. PRH is the largest book publisher in the world. See Complaint, U.S. v. Bertelsmann SE & Co. KGaA, et al., November 2, 2021, pp. 2–3, available at https://www.justice.gov/media/1184971/dl?inline (“Bertelsmann Complaint”).

  20. Bertelsmann Complaint, pp.16–17.

  21. Horizontal Merger Guidelines, U.S. Department of Justice and the Federal Trade Commission, August 19, 2010, §12, available at https://www.justice.gov/sites/default/files/atr/legacy/2010/08/19/hmg-2010.pdf (“2010 Horizontal Merger Guidelines”).

  22. See Marinescu and Hovenkamp (2019), Marinescu and Posner (2020).

  23. “The Agencies do not view a short-run reduction in the quantity purchased as the only, or best, indicator of whether a merger enhances buyer market power. Nor do the Agencies evaluate the competitive effects of mergers between competing buyers strictly, or even primarily, on the basis of effects in the downstream markets in which the merging firms sell. Example 24: Merging Firms A and B are the only two buyers in the relevant geographic market for an agricultural product. Their merger will enhance buyer power and depress the price paid to farmers for this product, causing a transfer of wealth from farmers to the merged firm and inefficiently reducing supply. These effects can arise even if the merger will not lead to any increase in the price charged by the merged firm for its output.” 2010 Horizontal Merger Guidelines, Section 12.

  24. “Anticipated top-selling books” is not a term of art in the publishing industry, but represents a group of books that are often treated differently than other books and receive special support from publishers. The court’s opinion explained, “[a]lthough the defendants proclaim that no one in the industry uses the term “anticipated top seller” […], that does not mean that such books do not exist.” Memorandum Opinion [Redacted], U.S. v. Bertelsmann SE & CO. KGaA, et al., November 7, 2022, p. 37, available at https://www.justice.gov/media/1257986/dl?inline (“Bertelsmann Opinion”).

  25. United States’ Pre-Trial Brief [Redacted], United States v. Bertelsmann SE & CO. KGaA, et al., July 27, 2022, p. 23, available at https://www.justice.gov/media/1235741/dl?inline (“U.S. Pre-Trial Brief”).

  26. Bertelsmann Opinion, p. 34.

  27. Demonstrative Exhibits for the Direct Testimony of Dr. Nicholas Hill, United States v. Bertelsmann SE & CO. KGaA, et al., August 8, 2022, p. 15, available at https://www.justice.gov/media/1254431/dl?inline (“Demonstrative Exhibits for the Direct Testimony of Dr. Nicholas Hill”).

  28. Only books published by traditional publishers are included in the market. Self-publishing is not a meaningful alternative to traditional publishing, particularly for authors of books that would otherwise receive high advances.

  29. Bertelsmann Opinion, pp. 29, 33.

  30. Demonstrative Exhibits for the Direct Testimony of Dr. Nicholas Hill, p. 23.

  31. The opinion explains, “Thus, the $250,000 cutoff is merely useful; it is not intended to be a rigid bright line, but rather is helpful "[f]or analytical purposes" to facilitate the assessment of anticompetitive effects.” Bertelsmann Opinion, p. 30.

  32. See 2010 Horizontal Merger Guidelines, §4 and Opinion of the Court, United States v. Gen. Dynamics Corp., 415 U.S. 486, 521 (1974), available at https://tile.loc.gov/storage-services/service/ll/usrep/usrep415/usrep415486/usrep415486.pdf.

  33. Opinion of the Court, United States v Philadelphia National Bank et al., 374 U.S. at 360 n.37, available at https://tile.loc.gov/storage-services/service/ll/usrep/usrep374/usrep374321/usrep374321.pdf.

  34. Practical indicia may include “industry or public recognition of the submarket as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors.” See Brown Shoe, 370 U.S. 294, 325 (1962), quoted in Opinion of the Court (U.S. 3rd Circuit Court of Appeals), United States v. U.S. Sugar Corp., No. 22–2806, slip op. at 11, 13–14, July 13, 2023, available at https://www2.ca3.uscourts.gov/opinarch/222806p.pdf#:~:text=The%20government%20appeals%20the%20denial%20of%20its%20motion,of%20the%20Clayton%20Act.%2015%20U.S.C.%20%C2%A7%2018.

  35. U.S. Pre-Trial Brief, p. 20.

  36. Bertelsmann Opinion, p. 36.

  37. The diversion ratio from Publisher A to Publisher B measures the percentage of acquisitions that would be lost by Publisher A—if it reduced its advance offers—that would be picked up by Publisher B. The diversion ratio is relevant to merger analysis because the higher are the diversion ratios between the merging parties, the more that one publisher can profitably reduce advances because the merged firm internalizes that the other merging party is likely to recapture those lost acquisitions. The diversion ratio is described as an indicator of the extent of competition between two firms in the 2010 Horizontal Merger Guidelines, Section 6.1.

  38. Imprints are business units within a publisher with a brand name that is often associated with a particular group of editors and niche. For example, PRH’s Alfred A. Knopf imprint is known for distinguished hardcover fiction and nonfiction. See “History of Our Imprints,” Knopf Doubleday Publishing Group, available at https://knopfdoubleday.com/imprints/.

  39. Demonstrative Exhibits for the Direct Testimony of Dr. Nicholas Hill, p. 50.

  40. The second-score auction model as described in Miller (2014) uses as inputs an estimate of firm margins and diversion ratios. The appropriate calculations of these inputs are fact and case-specific.

  41. In this case there would be downward pressure on the amounts that would be paid as advances to authors.

  42. Transcript of Bench Trial: Order Granting United States’ Motion to Exclude the Defendants’ Efficiencies Evidence [Redacted], United States v. Bertelsmann SE & CO. KGaA, et al., August 17, 2022, p. 14, available at https://www.justice.gov/media/1257816/dl?inline.

  43. This is consistent with the Division’s practice to credit only cognizable efficiencies (“Cognizable efficiencies are merger-specific efficiencies that have been verified and do not arise from anticompetitive reductions in output or service.” 2010 Horizontal Merger Guidelines, Section 10).

  44. Complaint [Redacted], United States v. Booz Allen Hamilton Holding Corp. et al., June 29, 2022, ¶¶ 26–27, available at https://www.justice.gov/d9/case-documents/attachments/2022/06/29/404147.pdf (“Booz Allen Complaint”).

  45. Booz Allen Complaint, ¶¶ 27–28.

  46. Booz Allen Complaint, ¶ 38.

  47. Booz Allen Complaint, ¶¶ 14, 40.

  48. Booz Allen Complaint, ¶¶ 43, 46.

  49. Booz Allen Complaint, ¶ 14; Memorandum [Redacted], United States v. Booz Allen Hamilton Holding Corp. et al., October 17, 2022, p. 5, available at https://www2.mdd.uscourts.gov/Opinions/Opinions/Booz%2019%20Oct%202022.pdf (“Booz Allen Decision”).

  50. Booz Allen Complaint, ¶ 31.

  51. Booz Allen Complaint, ¶ 15.

  52. 2010 Horizontal Merger Guidelines, Sections 3, 4.1.4.

  53. Booz Allen Complaint, ¶ 32.

  54. That NSA is the only major customer of OD Services is not determinative of defining the market on the basis of targeted customer(s). However, in settings that feature procurement auctions there are sometimes many similarly situated customers, and the Division may define a cluster market around those customers. See 2010 Horizontal Merger Guidelines, Sections 3, 4.1.4.

  55. United States’ Post-Hearing Brief in Support of a Preliminary Injunction, United States v. Booz Allen Hamilton Holding Corp. et al., September 24, 2022, pp. 6–7, available at https://www.justice.gov/media/1267191/dl?inline (“Post-Hearing Brief”), citing to Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962).

  56. Booz Allen Complaint, ¶¶ 32, 35; Post-Hearing Brief, p. 8.

  57. Plaintiff’s Reply Memorandum in Further Support of its Emergency Motion for a Preliminary Injunction [Redacted], United States v. Booz Allen Hamilton Holding Corp. et al., August 12, 2022, p. 13, available at https://www.justice.gov/media/1248241/dl?inline. See also (Church and Ware 2000, 232), including the observation that “the profits of a firm depend on the behavior of its competitors.”.

  58. Post-Hearing Brief, p. 23.

  59. Plaintiff’s Proposed Order Cover Letter to Judge Catherine Blake and Proposed Order, United States v. Booz Allen Hamilton Holding Corp. et al., September 14, 2022, p. 3, available at https://www.justice.gov/media/1248256/dl?inline (“Proposed Order Cover Letter and Proposed Order”).

  60. Proposed Order Cover Letter and Proposed Order, pp. 3–4.

  61. Booz Allen Decision, p. 26.

  62. “Proposed Guidelines Would Address the Many Ways Mergers Can Weaken Competition, Harming Consumers, Workers and Businesses,” U.S. Department of Justice, Press Release 23–778, July 19, 2023, available at https://www.justice.gov/opa/pr/justice-department-and-ftc-seek-comment-draft-merger-guidelines.

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  1. Antitrust Division, U.S. Department of Justice, Washington, USA

    Susan Athey, Mark Chicu, Malika Krishna & Ioana Marinescu

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  1. Susan Athey
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  2. Mark Chicu
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All authors contributed to drafting and reviewing this manuscript.

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Correspondence to Malika Krishna.

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Athey, S., Chicu, M., Krishna, M. et al. The Year in Review: Economics at the Antitrust Division, 2022–2023. Rev Ind Organ 63, 525–544 (2023). https://doi.org/10.1007/s11151-023-09931-z

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