For decades, antitrust lawyers at the U.S. Justice Department and the Federal Trade Commission have squabbled over turf, but now the two agencies are moving toward a rare level of harmony.
One key: William Baer and Deborah Feinstein. For the first time ever, two lawyers from the same firm stand at the top of federal antitrust enforcement, bringing to their jobs a rapport built over 27 years working on and off together at Arnold & Porter.
It’s a bittersweet loss for the firm, where Baer, 63, led Arnold & Porter’s global antitrust practice and Feinstein, 52, was head of its U.S. antitrust practice, but it’s likely to be a boon to the public.
“We have a shared view of what antitrust enforcement is all about—it’s delivering the benefits of a competitive market to the U.S. consumer,” said Baer, who since January has headed the 314-lawyer antitrust division. “We are like-minded.”
Or as Feinstein put it from her perch as director of the Federal Trade Commission’s 214-lawyer Bureau of Competition, where she started work in July, “If there’s consumer harm out there, we’re going to try to find it, investigate it and stamp it out.”
Some antitrust lawyers are noticing a difference already.
“The battle for primacy between the agencies is becoming much less significant,” said David Balto, a public interest antitrust lawyer and former FTC official. “You’ve got two people who have cooperated through the years, who have been close partners, and who understand each other.”
It hasn’t always been this way, in part because the two agencies share an antitrust enforcement mandate. Prior cases involving Google Inc., Apple Inc., joint ventures in the music industry and the combination of Comcast Corp. and NBC Universal, for example, featured time-consuming bureaucratic infighting over which agency would take the lead.
As former FTC Chairman William Kovacic remarked in a 2007 interview with Dow Jones, the DOJ and FTC are often like “an archipelago of policy makers with very inadequate ferry service between the islands. In too many instances when you go to visit those islands the inhabitants come out with sticks and torches and try to chase you away.”
But Baer said that since he’s been on the job, “there have been no significant disputes. Not because there have been no issues, but because the process of resolving who works on [what] is working well.” Feinstein concurs that the clearance process is “working incredibly smoothly,” and both also credit FTC Chairwoman Edith Ramirez for the interagency cooperation.
To Kevin Arquit, an antitrust partner at Simpson Thacher & Bartlett who once hired Feinstein, the détente isn’t simply because Baer and Feinstein worked at the same firm. Feinstein signed on with Arquit in 1989 as an attorney adviser when he headed the FTC’s Bureau of Competition.
“I think the far more important reason there will be far fewer turf wars is because they are both intensely practical, efficient managers who simply won’t abide petty intramural squabbles,” he said.
Baer and Feinstein first met in 1986, when she was a summer associate at Arnold & Porter and he was an up-and-coming junior partner. She struck him as “extraordinarily operational”—a problem solver, he recalled in a lengthy interview in his cavernous office at Main Justice. He rewarded her by sending her to Buffalo to review a warehouse full of documents in a merger case involving chlorine makers.
No matter—she was hooked on antitrust. “You get to learn about a different industry every time you turn around…and how [the parties] compete, and that’s just really, really fun,” she said in an interview at FTC headquarters a few blocks down Pennsylvania Avenue from DOJ. “I very much saw [Baer] as mentor and still do. To this day, Bill is a great source of advice.”
At Arnold & Porter, the two came to share responsibility for running the firm’s top-ranked antitrust practice. “I’m not going to kid you, it’s a loss,” said Arnold & Porter chairman Thomas Milch. “They’re both extraordinarily talented lawyers, and they contributed to the firm in many ways…We’re incredibly proud of what they both have accomplished.”
Despite tight budgets and looming threats of a government shutdown, Baer and Feinstein have been eagerly—and aggressively—digging into their new responsibilities.
For outside antitrust lawyers, the new leadership may make their jobs a bit easier, especially when it comes to time-sensitive transactions. “Clearance fights are a problem because the clients sit on the sidelines while the agencies mud wrestle over which one will take the lead. It’s an inefficient use of government resources,” said Janet McDavid, an antitrust partner at Hogan Lovells. “Given Bill and Debbie’s long history of working together, as well as Bill’s excellent relationship with Edith Ramirez, I’m optimistic fights will be minimal.”
The Justice Department has dominated antitrust headlines since Baer started work on Jan. 3 with several high-profile suits. Division lawyers are currently preparing for a Nov. 25 trial to block the $11 billion merger of American Airlines and US Airways. “We’ve got a very tight timetable to get ready,” Baer said. “People are working hard and focused and I think the complaint we filed does a pretty good job of describing [our] concerns…We’re talking about hundreds of millions of dollars of potential consumer harm.”
American is being represented by Jones Day and Paul Hastings. US Airways has tapped O’Melveny & Myers; Dechert; and Cadwalader, Wickersham & Taft. In court papers, they say DOJ “concocts an imaginary narrative” and is “ignoring the central facts and economic realities of today’s airline industry.”
The airline challenge came as a surprise to many onlookers who expected the government to green-light the deal. It followed a suit by the DOJ earlier this year to block the $20 billion merger of beer makers Anheuser-Busch InBev SA/NV and Grupo Modelo S.A.B. The case settled in April with one of the largest divestitures of all time.
“Once Anheuser-Busch realized we were prepared to litigate this thing and saw the evidence we’d assembled, they were quite constructive in coming forward and saying, ‘Let’s talk about what we can do together,’ ” Baer said. “ It was hotly contested and then very constructively settled.”
Anheuser-Busch was represented by Skadden, Arps, Slate, Meagher & Flom; Grupo Modelo turned to Cravath, Swaine & Moore.
Albert Foer, who heads the American Antitrust Institute, said the decision to challenge the beer and airline deals was a bold move. “Both represent situations where DOJ for years has overseen increasing concentration [in the industries]. It wouldn’t be unusual bureaucratic behavior for an agency to keep doing what it’s been doing” and simply let the mergers go through, he said, calling the suits “a very commendable start.”
Baer made his reputation as an aggressive antitrust enforcer as the longest-serving head of the FTC’s Bureau of Competition, which he led from 1995 to 2000. His tenure included a dramatic courtroom win challenging the merger of Staples Inc. and Office Depot Inc.
To companies facing contested deals today, he offered some advice. “Everyone wants to get their deal done right away, as quickly as possible, but they’re reluctant to identify fixes early, and that can be a strategic mistake,” he said. “If you’re down at the 11th hour and you haven’t suggested to us what you’re prepared to do to try to resolve the problems we’ve identified, it may take a long time to work out the details. It may be that we don’t have enough time to evaluate a proposal and therefore we need to go to court and protect our rights.”
At the Justice Department, he’s been a hands-on manager, reviewing briefs by office lawyers in major cases for “substance and tone,” he said, and weighing in on potential remedies. In June, he attended two days of a 12-day trial in New York federal court, where the agency prevailed against Apple for conspiring to fix the price of ebooks. Baer called the remedy in the case, which includes automatic refunds of $1 to $3 per book for Kindle users plus lower book prices, “a microexample of how antitrust enforcement can translate into consumers getting protection going forward and the benefit of competition…and to get money back in your pocket.”
Lawyers at the FTC have been active as well, but in cases with more limited public interest. Agency lawyers recently sued to block Ardagh Group S.A.’s proposed $1.7 billion acquisition of Saint-Gobain Containers Inc., alleging the deal would reduce the number of companies supplying glass bottles to brewers and distillers to two from three. A preliminary injunction hearing is scheduled for mid-October, with an administrative trial set for Dec. 2.
Another focus is reverse-payment patent settlements between brand-name and generic drug makers. The agency in FTC v. Actavis scored a win before the U.S. Supreme Court earlier this year, and now, Feinstein said, “We need to roll up our sleeves and go to work with that decision.” The FTC continues to litigate Actavis, as well as FTC v. Cephalon, which raises similar issues.
On the merger front, Feinstein warned that no deal is too small for scrutiny. “It’s just constant vigilance to make sure we’re looking at the reportable and nonreportable mergers and transactions that raise issues,” she said. “I’m always surprised somehow that the only time what we do really gets people’s attention is when we bring a lawsuit challenging a transaction, and I think that’s really missing the forest for the trees. Those are always going to be rare, but our consent decrees are every bit as much an important enforcement tool as going to court.”
Contact Jenna Greene at email@example.com.