Biden Administration Executive Order Would Expand Regulatory Intervention in Markets Across the Economy

Jones Day

In Short

The Situation: President Biden recently signed an Executive Order on Promoting Competition in the American Economy (the "Order") outlining 72 initiatives by more than a dozen federal agencies to combat "excessive" corporate consolidation and increase competition across the U.S. economy, using a mix of regulation, deregulation, and aggressive antitrust enforcement. The Order focuses particular scrutiny on labor markets, as well as the agricultural, healthcare, and tech industries.

Why it Matters: The Order prioritizes an Administration-wide goal of "vigorous" antitrust enforcement and broadens that effort beyond traditional antitrust enforcers, mobilizing other federal agencies to address competition policy goals—in some cases increasing regulatory intervention in markets.

Looking Ahead: The Order departs from the largely consensus approach to competition policy developed over the last 40 years that limited regulatory intervention in markets and focused antitrust enforcement authority in the Department of Justice ("DOJ") and Federal Trade Commission ("FTC"). The Order directs or encourages numerous federal agencies to adopt rules redressing perceived deficiencies in competition across the economy. However, the long-term impact on particular sectors will vary according to each agency's degree of effort, competing priorities, political resistance, and the outcome of litigation challenging its implementation.

On July 9, 2021, President Biden signed a voluminous "Executive Order on Promoting Competition in the American Economy." The Order is built on the premise that corporate consolidation over the past several decades has weakened competition and widened inequality in the U.S., a premise disputed by a number of economists and business leaders. Billed as an effort to "reverse these dangerous trends," the Order (accompanied by a Fact Sheet) outlines 72 discrete initiatives across the federal government coordinated by a new White House Competition Council.

The Order expands on an executive order issued in the waning days of the Obama Administration. The "Steps to Increase Competition and Better Inform Consumers and Workers to Support Continued Growth of the American Economy" (the "Obama Order") broadly encouraged all federal agencies to independently identify actions they could take to detect anticompetitive behavior and promote competition via rulemaking and regulation under the terms of their respective authorizing statutes. The Trump Administration reversed course; its agency appointees quickly nixed their respective agencies' efforts to implement the Obama Order, including proposed rules related to airline baggage and change fees, meatpacking, and cable and satellite set-top boxes.

The Biden Order takes a granular and regulatory approach, setting forth specific proposals by industry and agency. It encourages greater DOJ and FTC enforcement and harnesses industry-specific statutes and regulatory tools across more than a dozen agencies to achieve its goals—the most comprehensive "whole-of-government" approach to competition policy since the 1970s. Business leaders were quick to criticize the Order as a "'Government knows best'" "solution[] in search of a problem," challenging the Order's presumption that the economy is over-concentrated and that additional regulation is the solution.

The Order calls on the DOJ and the FTC to "vigorously" enforce traditional antitrust law, particularly in labor markets, as well as the agricultural, healthcare (pharmaceutical, hospital, insurance), and tech industries. It encourages revision of the horizontal and vertical merger guidelines and embraces renewed use of FTC rulemaking to achieve specific goals, including bans or limits on employee non-compete agreements, "unnecessary" occupational licensing restrictions, and prohibitions on pharmaceutical reverse payment patent settlements. Within hours of the Order's publication, DOJ and FTC leadership issued a press release stating that the existing merger guidelines "deserve a hard look to determine whether they are overly permissive." As detailed in our July 2020 Commentary, the agencies released the first vertical merger guidelines in more than 35 years over objections of the FTC's two Democratic commissioners who are now in the majority.

The Order argues, however, that the DOJ and the FTC alone cannot address "overconcentration, monopolization, and unfair competition in the American economy." It therefore includes competition-related directives for more than a dozen additional federal agencies. Several of those initiatives arguably replace competition on the merits with regulation, others eliminate existing government regulation, and others seem designed to support outcomes that might have been the result of more competition in the past. For example, the Order directs the Department of Health and Human Services ("HHS") to "standardize" benefit options in the national Health Insurance Marketplace to better enable consumers to compare insurance plan costs, eliminating competition on the types or quality of benefits offered to consumers. Likewise, the Order encourages the FTC to ban reverse payment patent settlements through rulemaking, a practice the Supreme Court itself has acknowledged could have pro-competitive benefits.

Other key initiatives include:

  • Directing the Food and Drug Administration to work with states and tribes to import prescription drugs from Canada;
  • Directing HHS to issue rules allowing hearing aids to be sold over-the-counter;
  • Directing the Department of Transportation to consider rules requiring the disclosure of airline fees and refunds of relevant fees for sub-par service;
  • Encouraging the Surface Transportation Board to require railroad track owners to provide rights of way to passenger rail carriers; and
  • Encouraging the Consumer Financial Protection Bureau to (i) issue a new rule to facilitate the portability of consumer financial transaction data so consumers can more easily change financial institutions, and (ii) enforce the Dodd-Frank Act’s prohibition on Unfair, Deceptive and Abusive Acts and Practices;
  • Encouraging the U.S. Attorney General, in consultation with the Chairman of the Federal Reserve Board, the Chairperson of the Federal Deposit Insurance Corporation, and the Comptroller of the Currency, to review current bank merger practices and adopt a plan, not later than 180 days after the date of publication of the Order, for revitalization of oversight of bank mergers under federal banking laws.

If implemented as drafted, the Order would significantly expand federal intervention across numerous sectors of the economy. Because the Order imposes no new requirements on businesses directly, however, its impact will depend on the affected agencies' response—in speed and scope—and on the inevitable litigation to follow. In an apparent attempt to head off challenges to Presidential authority, the Order "encourages" rather than "directs" independent agencies like the FTC and the Federal Communications Commission to implement certain initiatives. Coming in the early days of the Biden Administration and coinciding with the appointment of new agency heads, however, such encouragement is likely to find a receptive audience.

Three Key Takeaways

  1. The Biden Administration's new Executive Order on competition takes aim at a perceived lack of competition in the American economy and issues a call-to-arms for both traditional antitrust enforcers and unrelated regulatory agencies to rigorously pursue the Administration's competition policy goals via increased enforcement, new regulation, and some deregulation.
  2. The Order directs or encourages agencies to undertake 72 separate initiatives and particularly targets labor markets, as well as the agricultural, healthcare, and technology sectors.
  3. If implemented as drafted, the Order would represent a significant expansion of federal regulatory intervention into markets across a number of sectors of the economy. However, court precedent, political opposition, and the limited tenure of agency leaders may slow some of the more dramatic changes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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