Antitrust “Enforcement” in Aid of Putinism

good for GM

N.Y. Times, June 6, 2019, Automakers Tell Trump His Pollution Rules Could Mean ‘Untenable’ Instability and Lower Profits

N.Y. Times, uly 25, 2019, Automakers, Rejecting Trump Pollution Rule, Strike a Deal With California

N.Y. Times, Sept. 6, 2019, Justice Dept. Investigates California Emissions Pact That Embarrassed Trump

Joe Nocera, Sept. 6, 2019, The Trump Administration Is Playing Dirty With Automakers: A questionable crackdown on companies that already meet stringent emissions standards.

In a properly run plutocratic brothel, the president is the flunky and head towel boy for the great corporations of our nation. (See graphic supra.) This is plainly the way God intended things to operate.

Not the other way around—where the Ford Motor Company is the president’s flunky.

That is Putinism.

Background

The Trump Administration reduced car emissions standards, on the ground that Obama had raised standards, and all things Obama did were wrong. Also because the automobile industry initially asked for some relief from the Obama regulation. And most especially because the people who make gasoline wanted a whole heap of deregulation, so that they could go on selling lots and lots o’ gasoline.

California and other states reacted by threatening to set their own standards—which in turn would have meant that the automakers would have had to produce different vehicles for the states with more extensive regulation. Not good for the bottom line.

So four major auto makers began talks with California, and those talks resulted in an outcome whereby California reduced the Obama standards by a moderate amount, but kept them considerably higher than Trump wanted to peg them.*

Good for the auto companies, because now they could make and sell the same cars all over the country. Bad for the petroleum companies, because they would be selling lots less gasoline.

Abd really bad for Dear Leader’s ego.

Hence, an investigation by the Justice Department’s Antitrust Division into whether the four auto companies violated the antitrust laws by agreeing with one another and with California to sell more environmentally friendly vehicles than Trump and the oil industry wanted them to sell.

Four Legal Rules

“Can they do that?” readers have asked. Here, distilled from 129 years of Sherman Act judicial decisions, are the four main principles of antitrust law that apply to this situation.

One. Business firms, acting separately or together, have a constitutional right to free speech, to freedom of association, and to petition for redress of grievances. These constitutional rights imply that business firms, individually or jointly, may lobby any branch of government, and any level of government, to adopt laws or regulations or rules to the firms’ liking, or otherwise to do as the lobbyists request. These constitutional rights override anything to the contrary in the antitrust laws.

As long as the firms are lobbying, it does not matter if the outcome they seek could be called “anticompetitive” or “unwise” or “harmful” or “contrary to the public interest.” Nor is there an exception if the lobbying pricks the thin skin of Dear Leader.

Two. Sometimes businesses try to take advantage of principle one to reach a side agreement on how they will behave, regardless of governmental regulation. (Example: “let’s ask the government to regulate the price of widgets at no less than $1, but if the government doesn’t act, then let’s sell widgets for no lower than $1, anyway.”)

An illegal side agreement is still illegal, even if it’s made in connection with lawful joint lobbying activity.

That thought, in turn, raises the question which agreements between competitors are illegal, which are not illegal, and which fall into a gray area.

Three. It’s “illegal per se” for competitors to agree to act like a cartel. Thus, it is automatically illegal for competitors to agree to fix prices, rig bids, divide up customers, divide up geographic markets, divide up product markets, or reduce output.

There is no suggestion that the four auto companies have entered into any such “illegal per se” agreement.

Four. Aside from the kinds of cartel behaviors identified in point three, competitors sometimes enter into all manner of other agreements. Some are pretty clearly legal, while others may fall into a gray area—and sometimes a very dark gray area.

On occasion, competitors will agree on some aspect of how their products should be made or how their products should be marketed. These kinds of agreements are subject to antitrust scrutiny—in legal lingo, they are agreements “in restraint of trade” tested under the antitrust “rule of reason” to see whether they are legal or illegal.

How does principle four apply here? In the first place, it probably doesn’t apply at all. That’s because the publicly available facts don’t suggest that the four auto companies said, “Let’s negotiate jointly with California, but if we don’t get what we want, let’s all agree to abide by the regulations we wanted California to adopt.”

In the second place, if the companies had entered into such an agreement, it would be defensible under the rule of reason, because taking steps to retard global warming is profoundly in the public interest.

Much more likely, however, is that the gist of the agreement was, “Let’s get California to walk back its stringent requirements just a little, and, if they do that, let’s all agree with one another, and with the state of California, that we won’t take legal or political action to challenge the California regulation.”

An agreement of that nature would fit squarely within principle one, and any attempt to challenge it would be legally frivolous.

And One More Thing

All of the companies involved are represented by highly competent counsel. And, in a world of great uncertainty, let me tell you one thing of which you may be certain. Highly qualified antitrust counsel for all four companies would have looked at what the companies were doing and given it their blessing.

And that’s a strong clue that the Antitrust Division is acting to soothe the ego of Dear Leader, not to enforce the law as it has been understood in decades of antitrust jurisprudence.

* The articles speak of a deal, or an agreement, between four auto companies and the state of California, with the possibility that other auto manufacturers might sign on as well. The quid for the auto companies was some relief from Obama regulations. I have not seen a description of the quo that the companies gave. But I assume it was a promise not to raise legal or political objections to the California regulations, as long as the regulations were modified to the companies’ satisfaction.