Remarks as prepared for delivery
Good morning. Thank you, Jim, for that kind introduction, and special thanks to you and your co-chair of this Fall Forum, Debbie Feinstein, for inviting me. It is an honor to join the distinguished attorneys in attendance here.
As you just heard, the Office of the Associate Attorney General works closely with the Antitrust Division, and I’d like to begin by saying just a few words about the men and women who work there. The Division is led by a superlative team. Assistant Attorney General Makan Delrahim is an expert in the field and a tireless advocate for the American consumer. Andrew Finch, his principal deputy, draws on his broad private-sector antitrust experience to supervise all aspects of the Division’s civil and criminal matters. Barry Nigro, another deputy, is a walking encyclopedia of merger law and practice. And the many other front office appointees bring to the Division an incredible breadth and depth of knowledge and determination. Behind them, of course, stand the career lawyers, economists, and staff of the Antitrust Division who, as many of you know firsthand, are smart, resourceful, and tenacious in upholding the law and protecting competition for the benefit of the American economy. We appreciate their public service and hard work, and we are so fortunate that they have chosen to lend their expertise and talent to our shared mission at the Department of Justice.
Speaking of which, it is worth reciting the DOJ mission statement for those of you who have never heard it. It reads as follows: “To enforce the law and defend the interests of the United States according to the law; to ensure public safety against threats foreign and domestic; to provide federal leadership in preventing and controlling crime; to seek just punishment for those guilty of unlawful behavior; and to ensure fair and impartial administration of justice for all Americans.” Much of this mission statement is outward facing—we are the cops and we go after the robbers. But the first and last clauses of the mission statement require something more: we must “enforce the law” and “ensure fair and impartial administration of justice.” And if we are truly to “enforce the law” and fairly administer justice, we cannot be focused solely on how legal commands apply to those outside the Department. We must also focus on how the law constrains and cabins the Department—and the federal government as a whole.
This is a theme, and a tension, as old as our government itself. James Madison, famously lamenting in Federalist 51 that men are not angels and thus need a government, explained: “In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.” Our government is adept at creating rules to control the governed, but it sometimes fails to control itself. Over the last two years, some of our priorities at the Department have been aimed at this latter virtue—at controlling ourselves.
I would like to discuss one of those priorities today—namely, regulatory reform, which is an imperative need for an administrative state that has grown mightily over the last seventy-five years and in ways that Madison and his compatriots could have never imagined when they created the checks and balances they thought would oblige the government to control itself.
Early in 2017, the President issued several executive orders on regulatory reform. For example, Executive Order 13771 directs agencies to eliminate two regulations for each new one and to impose zero net regulatory costs. Executive Order 13777 directs agency heads to appoint Regulatory Reform Officers and Task Forces to implement regulatory reform initiatives and identify burdensome regulations for repeal, replacement, or modification. These are important measures. As Neomi Rao, Administrator of the Office of Information and Regulatory Affairs (OIRA), recently explained in a Washington Post editorial, lifting unduly burdensome regulations promotes economic growth and “the spirit of liberty that animates our productive and innovative society.”
Accordingly, at the Department of Justice, we take this regulatory reform mandate very seriously. While the Department does not generate the same volume of regulations as, say, the Environmental Protection Agency, we do have components that issue regulations, such as the Drug Enforcement Agency, which regulates doctors, pharmacies, and hospitals under the Controlled Substances Act; the Bureau of Alcohol, Tobacco, and Firearms, which regulates the firearms and explosives industries; and the Civil Rights Division, which regulates state and local governments, public accommodations, and commercial facilities under the Americans with Disabilities Act. Each of these components is working to ensure that their regulatory agendas comply with the executive orders.
But, in my view, the Department’s most critical contribution to regulatory reform has not come by way of any particular substantive regulatory change, but rather through our focus on improving the regulatory process by promoting transparency, accountability, and public participation. Such procedural reforms can often outlive more newsworthy substantive changes to individual rules, and they can lead to better and less burdensome substantive decisionmaking.
One of the first areas of procedural reform we focused upon is reigning in the use of guidance documents. To understand why this is so important, let me first set the stage by returning to Federalist 51. There, Madison wrote that “[i]n republican government, the legislative authority necessarily predominates.” Accordingly, as Madison explained in Federalist 48, “it is against the enterprising ambition of this department that the people ought to indulge all their jealousy and exhaust all their precautions.” Acting on this belief, the Founders wrote a Constitution in which the first article (establishing Congress) is much more finely wrought than, and is more than double the length of, the second article (establishing the executive). The Founders viewed the legislative branch—with the power to make policy and thus restrict liberty—as the foremost danger among equals, and thus much more carefully cabined that branch through structural protections (or “precautions” as Madison called them in both Federalist 48 and 51).
But we twenty-first century Americans, for better or worse, live in the age of the administrative state, where most substantive rules that are binding on the People are created by Executive Branch agencies exercising rulemaking powers delegated by Congress. That means that the threat from the “enterprising ambition” that Madison feared now comes more often from the administrators than from the legislators. Accordingly, we also need procedural protections—“precautions,” as Madison called them—to cabin those ambitions.
We have some such protections in the form of the Administrative Procedure Act. When Congress delegates to an executive agency the authority to regulate—that is, to create binding rights and obligations for the public—the APA normally requires that such authority be exercised through notice-and-comment rulemaking. These rulemaking processes require a lot of input and serious deliberation; there are many steps, and they sometimes proceed slowly or not at all. They are designed this way, just like the Constitution is designed to require many steps for the enactment of statutes. Process protects liberty.
But regulators like to regulate, and everyone likes a shortcut. So it has come to pass that, with increasing frequency, administrative agencies, including the Department of Justice, issue so-called guidance documents that effectively bind the public. The guidance documents do not go through the notice-and-comment process required by the APA; indeed, they do not go through any transparent or regularized process at all. They just spring forth fully formed, and the public is expected to comply. Some commentators have begun to call such guidance, perhaps fairly, “regulatory dark matter.” The threat such a regime poses to our constitutional structure, and the liberty it protects, is manifest.
Accordingly, with this in mind, in November 2017, Attorney General Sessions signed a memorandum prohibiting the Department of Justice from issuing guidance documents that “impose new requirements on entities outside the Executive Branch.” The memorandum lays out five principles that must govern any future guidance, including that the document should disclaim any force or effect of law and “should not be used for the purpose of coercing persons or entities” to take or refrain from taking any actions beyond what is already required under the law.
A few months later, in January 2018, we took the next step to reign in inappropriate use of subregulatory guidance. The Associate Attorney General issued a new policy that prohibits the use of agency guidance documents in affirmative civil litigation in a manner that would convert such guidance into binding rules of conduct. This ensures that DOJ will not do with another agency’s guidance what it cannot do with its own under the Sessions Memo. As the memorandum explains: “That a party fails to comply with agency guidance expanding upon statutory or regulatory requirements does not mean that the party violated those underlying legal requirements; agency guidance documents cannot create any additional legal obligations.”
Now, I realize that I am at an antitrust, and not an administrative law, conference. So what does all of this mean for the Antitrust Division? Well, the Division, often in conjunction with the Federal Trade Commission, has issued numerous guidance documents, including, for example, intellectual property guidelines and, of course, the horizontal merger guidelines. Under our view, none of these guidelines create binding rights or rules that have the force of law. The guidelines can be useful in ensuring transparency by explaining how the Antitrust Division uses its prosecutorial discretion. But the Antitrust Division will not treat a violation of the guidelines as presumptively or conclusively establishing a violation of the underlying legal requirements. The Division must bring cases in court if it seeks to assert that a violation of the law has occurred, and it must prove such a violation by reference to statutory law and judicial precedent.
With that, let me turn from the dark matter of guidance documents to another particle in the regulatory cosmos, but one that is even less visible: the consent decree.
A consent decree is a binding court judgment, and it can serve an important function in a range of cases and enforcement areas. But some consent decree are voluminous in their requirements and have virtually perpetual life. They are, in effect, a set of regulations for a single party, overseen by the Department of Justice, a federal judge, and, quite often, a private-party monitor appointed by the court. In practice, consent decrees can result in one or all of these entities directing the day-to-day operations of a business or local government agency for years on end. As should be obvious from the description, such a regime can be as intrusive as—if not more intrusive than—a regulation.
Thirty years ago, Assistant Attorney General Rick Rule, whom many of you know, gave a speech about telecommunications policy to the Brookings Institution. He noted that the Reagan Administration’s best known accomplishment in antitrust law was the breakup of AT&T. The ongoing monitoring required under the AT&T consent decree, however, created, in his words, a “mixed legacy” because of the institutional harms flowing from requiring the Antitrust Division and a federal court to be, in effect, telecommunications regulators. Federal courts and the Antitrust Division, Rule said, “inherently lack many of the resources crucial to successful regulation.” He explained that effective regulation requires technical expertise, regulatory experience, and administrative processes that federal courts and federal prosecutors simply lack.
That is one problem, but it is not the only problem. Some consent decrees stray not only beyond the practical resources and expertise of the enforcers, but also beyond the legal authority of what the government could do by other means. Imposing conditions that could not be obtained through litigation to judgment is similar to creating regulations beyond the bounds of law. And just because a court imposes such a decree does not make it appropriate or wise. Courts, like executive branch agencies, can exceed their powers and distort constitutional norms. As with our commitment to abstaining from regulation through guidance, the Department of Justice must take care to avoid going beyond our lawful authority through the entry of consent decrees.
Accordingly, while consent decrees can be necessary and appropriate in certain circumstances, we are requiring Department litigators in all components to proceed with due caution and care before entering into new cosent decrees. Effective consent decree management is a key part of our regulatory reform and good government efforts.
And, as with our other efforts, the Antitrust Division has been doing its part. For example, last year, at this every forum, Assistant Attorney General Delrahim gave a speech on antitrust and deregulation. He made the case that a behavioral consent decree substitutes regulation for competition. He also announced that the Antitrust Division would disfavor behavioral consent decrees, calling them “the wolf of regulation dressed in . . . sheep’s clothing.” Indeed. The notion that the Department of Justice can fine-tune the operations of large businesses, for years on end, to prevent competitive harm is simply untenable from a first principles standpoint and unwarranted from a pro-competitive and pro-liberty standpoint.
Avoiding behavioral consent decrees is not the only step that the Antitrust Division is taking in this area. Earlier this year, the Division launched its Judgment Termination Initiative, through which the Division is identifying and terminating legacy consent decrees that no longer protect competition. To understand why this is important, it is helpful to turn again to something Administrator Rao explained earlier this year. She described the problem of “cumulative regulations.” When the government is always adding regulations but never repealing old ones, regulatory accretion occurs—the regulatory text expands and expands, with some regulations serving no purpose and others affirmatively harming economic growth and American competitiveness.
Consent decrees can suffer from the same infirmity. Indeed, from the first cases brought under the Sherman Act until 1979, antitrust consent decrees were perpetual. In that year, the Division changed its policy such that future settlements would have “sunset” provisions that would automatically terminate a decree on a date certain, usually after ten years. But while the Division recognized forty years ago that perpetual decrees were not in the public interest, there has been no effort to address the perpetual decrees that were entered prior to that date.
Until now. Assistant Attorney General Delrahim and his team deserve great credit for tackling this issue. And there is a lot of work to do. There are nearly 1,300 legacy judgments still on the books, including some decrees that are more than one hundred years old. There is, for example, a decree from 1914 concerning rubber hoof pads for horseshoes. Another one from 1921 relates to music rolls for player pianos. And yet another, my personal favorite, controls the market for horse-buggy whips. This state of affairs, my friends, is not good government. This is not prudent and careful regulatory action. This is ancient, cosmic junk unnecessarily floating around the regulatory atmosphere.
These outdated decrees pose a particular problem given the common-law nature of the antitrust laws, the construction of which evolve through judicial decisionmaking closely informed by economic analysis. Under the Sherman Act, only unreasonable—which is to say anticompetitive—restraints of trade are condemned. Courts look to economic analysis to understand what is unreasonable. And as economic analysis has matured and been refined over decades, courts have recognized that certain practices, once condemned, are not only not harmful to competition, but can even be procompetitive.
The Supreme Court’s 2007 decision in the Leegin case provides one example of such a change. In that case, the Court overturned a nearly century-old per se prohibition on resale price maintenance. It recognized that resale price maintenance can help stimulate interbrand competition. The antitrust laws are designed to protect just such competition because it is output enhancing. By contrast, intrabrand competition, such as when independent retailers engage in a price war to undersell a product from the same manufacturer, is not output enhancing.
Yet a perpetual consent decree related to resale price maintenance entered any year between 1911 and 1979 would have frozen the old prohibition in place. Such an ongoing, indefinite prohibition against lawful behavior does not serve to protect competition or to advance the rule of law. Indeed, it affirmatively undermines both.
Perpetual consent decrees rarely continue to protect competition, and those that are more than ten years old should be terminated absent compelling circumstances. To expedite the termination of outdated consent decrees, the Antitrust Division has engaged in a comprehensive effort to review all of its legacy judgments. Each judgment was assigned to a Division attorney, who examined court papers, internal case files, and publicly available information to determine whether the judgment continued to serve competition. Judgments for which termination is recommended are then posted, by judicial district, to the Division’s website for a thirty-day public comment period.
The judgments in sixty of seventy-nine judicial districts have been posted to the Division’s website for public comment. Once the thirty-day public comment period closes for a particular judicial district, the Division will review any comments received and, if appropriate, prepare a motion to terminate the judgments.
Already, in July, the Division moved to terminate nineteen legacy judgments in the District Court here in the District of Columbia. And the court granted that motion on August 15. The Division is actively working to prepare other motions in other districts.
The Division will move to terminate such decrees where the essential terms of the judgment have been satisfied, where most defendants no longer exist, where the judgment largely prohibits that which the antitrust laws already prohibit, or where market conditions likely have changed. Of course, as with the Leegin example, the Division will also seek to terminate decrees for which the relevant antitrust jurisprudence has changed and the conduct prohibited might actually be procompetitive.
I know that the Judgment Termination Initiative is a top priority for AAG Delrahim and the Division. I applaud the hard work that has gone into this effort already and the commitment of the Division to see it through.
With that, let me close by saying thank you, again, for the opportunity to be here. We are hard at work at the Department of Justice, including at the Antitrust Division, in our efforts to enforce the law and fairly administer justice. As I have stated, that includes applying the limits of the law to ourselves, or, as Madison put it, to controlling ourselves. We will continue to advance this cause, and we hope it makes a difference in helping the American people and economy flourish. Thank you very much.