Antitrust Lawyer Blog Commentary on Current Developments

Is the Selective Enforcement Defense Applicable To Antitrust Cases?

On February 21, 2018, Judge Leon ruled against AT&T Inc.’s (“AT&T”) ability to discover evidence that would support its selective enforcement defense.

Background

On November 21, 2017, the U.S. Department of Justice’s (“DOJ”) Antitrust Division filed a complaint in federal court block AT&T’s acquisition of Time Warner Inc. (“Time Warner”).

On February 16, 2018, the DOJ and AT&T faced off at a hearing in front of Judge Leon regarding AT&T’s discovery requests related to internal communications between the White House and the DOJ and its identification of Makan Delrahim, the Assistant Attorney General (“AAG”) of the DOJ’s Antitrust Division, on its witness list for trial. AT&T’s discovery requests were in line with one of the company’s affirmative defenses in its Answer to the Complaint, namely that: “Plaintiff’s claim reflects improper selective enforcement of the antitrust laws.”

In front of Judge Leon, AT&T simply asked for a privilege log of communications between the DOJ and the White House, if any exist. The DOJ could have ended the discovery dispute by simply answering that no communications exist. But, the DOJ claimed that the discovery requests were actually broader and made a legal argument that the discovery is barred.

AT&T’s selective enforcement defense asserts that the DOJ singled out its deal.  First, the DOJ hasn’t litigated a vertical merger in 40 years. Second, in 2011, the DOJ approved Comcast’s JV with NBCUniversal, a vertical deal that raised largely the same concerns at issue in AT&T/Time Warner. Of course, that deal was resolved through behavioral remedies, which happens to be a pet peeve of Delrahim. The DOJ is not interested in resolving the current deal without a structural remedy.

The DOJ raised the issue of filing a motion to strike the selective enforcement defense, objecting to the discovery demands and objecting to Delrahim being put on the witness list. The DOJ argued that under the law, it is a high hurdle to obtain such discovery. First, AT&T has not been singled out. Despite not litigating a vertical merger case in 40 years, the antitrust agencies have challenged numerous vertical mergers over the years and have forcing parties to abandon their deals or enter into settlement agreements resolving the antitrust concerns.  Moreover, AT&T compares its case to Comcast/NBCU, which the DOJ actually challenged.

Judge Leon’s Ruling:

Judge Leon did not rule on the DOJ’s motion to strike the selective enforcement defense.  However, he might as well have.  He denied AT&T’s motion to compel the DOJ to provide privilege logs of communications between the White House and the DOJ and quashed AT&T’s discovery requests for those same communications.

Judge Leon focused on the Supreme Court’s decision in United States v. Armstrong to determine if the defendants should be able to obtain discovery related to the selective enforcement defense. Judge Leon said the D.C. Circuit has recognized that “prosecutors have broad discretion to enforce the law, and their decisions are presumed proper absent clear evidence to the contrary.” United States v. Slatten, 865 F.3d 767, 799 (D.C. Cir. 2017)(citing Armstrong). Order at 3. Judge Leon noted that it is a rigorous standard that defendants must meet to obtain discovery.  Under the standard, defendants must put forward evidence of discriminatory effect and intent. Order at 4.

Judge Leon stated that defendants “fall far short” of the necessary demonstration of selective enforcement. He went further to say that “it is difficult even to conceptualize how a selective enforcement claim applies in the antitrust context,” because of the uniqueness of each merger enforcement action. Order at 5. He noted that comparing Comcast/NBCU to A&T/Time Warner was unavailing given that the DOJ actually filed an enforcement action against Comcast and while there was a remedy for that deal, the FCC was involved to monitor it. Order at 5. He then hammered the defendants for trying to claim that the DOJ’s action against a vertical merger was somehow discriminatory when it is clear that this is not the first time the government has brought a vertical case. “While it may, indeed be a rare breed of horse, “it is not exactly a unicorn.” Order p. 6.

Observations:

According to Judge Leon, the selective enforcement defense may not be applicable in antitrust enforcement cases.  Undoubtedly, all antitrust defendants feel like they are being singled out as they point to past deals within the same industry that were approved by the antitrust agencies. But, the antitrust agencies have made it clear that each merger raises its own unique set of facts.

In raising the selective enforcement defense, AT&T was questioning the DOJ’s prosecutorial discretion. It had little, if anything, to do with the substantive claims that are being brought against the company. Antitrust is about law enforcement. The case is brought in front of a federal judge, and the court will decide whether the deal is anticompetitive.

The DOJ does not typically need to explain why it brings an enforcement action other than the deal raises competitive concerns that may substantially lessen competition. It can choose to challenge one merger but not another even when they raise similar issues. Further, it is entirely permissible for a new administration to change its merger enforcement priorities as well as how it remedies problematic mergers. The decision to sue-to-block rather than adopt conduct remedies is up to the DOJ’s own discretion even though that decision may have the appearance of being essentially ideological or political.

Judge Leon understands that every merger is unique to its own facts, not all mergers within the same industry should be treated similarly, and remedies used in one merger may not be appropriate in the next merger. Moreover, he was not about to compare AT&T to Comcast when he has not had the opportunity to study the facts related to the merger at hand. Based on the law, he made the right decision to keep everyone focused on the substantive antitrust issues.  Judge Leon is going to decide this case based on the economic realities of the video distribution and content markets and not on President Trump’s public battle with CNN.  While Trump’s political campaign promises may cast a shadow over the DOJ’s motivation for bringing the case, it should not influence the court’s decision on whether the acquisition is illegal or not.  Judge Leon will make the ultimate decision on whether the deal is anticompetitive and is unlikely to be distracted by the political noise.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com