Supply chain disruption, rising inflation and a tight employment market have led to an uptick in antitrust scrutiny by both Republican and Democratic AGs. Working alone, in multistates, or in coordination with federal agencies, state AGs are increasingly investigating whether companies are engaged in illegal collusion to capture and maintain market dominance and taking enforcement action to punish this and other anticompetitive behaviors. In Episode 8 of State AG Pulse, Milton Marquis, Jerry Kilgore and Ann-Marie Luciano discuss practical steps companies can take to limit risk and address regulators’ concerns should they find themselves (or anticipate becoming) the target of an antitrust action.
PRODUCED IN COLLABORATION WITH:
Christopher Allen, Member, Executive Producer
Meghan Stoppel, Member, Executive Producer
Keturah Taylor, Associate
Suzette Bradbury, Director of Practice Group Marketing (State AG Group)
Elisabeth Hill Hodish, Policy Analyst
Meghan Stoppel (00:06):
Welcome to the second season of State AG Pulse. In this season, we will be releasing a new podcast episode every two weeks. In addition to providing a deep dive into those headlines that showcase the enormous power and broad authority of state attorneys general, we’ll be talking with new AGs about their transition into office and their priorities. Like last season, we’ll leverage our decades of experience to provide our listeners with insight and perspective to help business leaders better understand and successfully work with state AGs. Listen for new voices as co-chairs Bernie Nash and Lori Kalani share the host mic with other members of Cozen O’Connor’s State AG Group. So, now, let’s jump right in to this week’s episode.
Jerry Kilgore (00:47):
Well, welcome once again to the Cozen O’Connor State Attorneys General podcast. I’m Jerry Kilgore , a member here of the State Attorneys General Group, and I’m excited to kick off this podcast. And I’m joined today by some colleagues that are experts in the area we’re going to talk about. If you remember the last podcast, we interviewed Attorney General Ellison, and that was a great interview by my colleagues. And we are excited today to talk about a hot topic in the state attorney general world, the antitrust arena, which a lot of state attorneys general are using in different ways today, different than they used to use them. And we’re excited to have two of our experts on the state attorney general team with us today.
Milton Marquis is a member here of the State Attorneys General Group, and he brings great expertise to the table in antitrust law. He worked in a couple of state attorney general offices, worked at the Department of Justice, all on antitrust issues, and he’s handled many, many antitrust cases as an attorney at a couple of firms here in DC. And then, Ann-Marie Luciano is here with us, also a member of our state AG team. We’re excited to have her. She brings expertise in the antitrust area, having worked with Milton and others on antitrust cases in the past, and we’re going to talk about some of these past experiences today. But I want Milton, if you will, to introduce the topic and tell us why antitrust law is so important now in state attorney general world.
Milton Marquis (02:25):
Thank you, Jerry. I appreciate the opportunity. You’re very kind. So, I started my career in the Massachusetts attorney general’s office back in the mid to late eighties; 1980s, not 1880s. And then, I moved from Boston to Richmond where I was an assistant attorney general in the Virginia AG’s office and then I was at the Justice Department, as Jerry indicated. So, it’s important to note just a few things. Just a level set. State antitrust enforcement is nothing new. It’s become more prominent as attorneys general have devoted additional resources to antitrust. The first antitrust statute was actually in Kansas that predated the federal Sherman Antitrust Act. But prior to the 1970s, most state antitrust statutes were fairly dormant. That all changed with the enactment of the Hart-Scott-Rodino Antitrust Improvement Act.
We at Cozen and other places refer to that statute as the “Nash Act” after our co-leader of our group: Bernie Nash. So, Bernie was a principal staffer for Phil Hart, the late senator from Michigan who was chair of the Judiciary Committee in the Senate. So, Bernie was his staffer who drafted the Hart-Scott-Rodino Act and helped get it passed, as he will tell you, overcame a filibuster. In those days, you needed 67 votes to defeat a filibuster as opposed to the current 60-vote threshold. And that statute was signed by President Ford. So we all are very familiar with the Hart-Scott-Rodino Act clearance process, whereby transactions of a particular size have to be notified to the two federal agencies.
Ann-Marie Luciano (04:36):
Milton, if I may: I just think it was so interesting in my personal career. I became an antitrust lawyer because of Milton many, many years ago, almost 20 years ago now, when, at our prior firm, I started working with Milton. And I thought it was so fascinating when I started doing HSR reviews and joined the state AG practice that I got to hear from Bernie himself about his personal involvement, so it’s always been nice to have this practice and to work on these issues and to work on them with someone who was there at the time. Very, very interesting.
Milton Marquis (05:12):
So, the states have concurrent jurisdiction in antitrust. 49 states and the District of Columbia and territories have state antitrust laws that, to one degree or another, parallel, and some go beyond, federal law, whereby an attorney general can bring cases in state court under state antitrust statutes; and those statutes, to a large degree, parallel federal law, as I indicated earlier, but also provide attorney generals with the ability to receive civil penalties and also restitution and damages on behalf of natural people and in some states also on behalf of businesses. And so, because of the magnitude of large antitrust cases, the states often work together. States form the NAAG, National Association of Attorneys General, Antitrust Task Force, and that task force coordinates antitrust enforcement among the states.
Jerry Kilgore (06:26):
So, what should companies be worried about today? Ann-Marie, if you could talk about where antitrust investigations have headed and where they are heading going forward so we can dive into that during this podcast.
Ann-Marie Luciano (06:43):
Absolutely. Leading up from not only doing merger reviews, which has always, as Milton said, been a bipartisan effort, and AGs have been very active in reviewing mergers that have national impact and impact in their states, but also investigations into price fixing, no-poach agreements. The Washington attorney general, Ferguson, was very active in that area from 2018 to 2020. He brought enforcement actions against companies focusing in on no-poach agreements and his belief that they affected the labor market.
Jerry Kilgore (07:20):
It seems like the current administration, the Biden administration, also wants to apply that in a broader sense. They want more and more employees to not… That employers cannot subject you to non-competes going forward.
Ann-Marie Luciano (07:35):
Absolutely. The Biden administration has been very active in pursuing noncompete clauses. And I would say that one of the reasons why we’re seeing an increase in AG activity, both on the R and D side and the antitrust context, is because the supply chain issues, the inflation issues, when those issues occur and there’s an effect on consumers, one of the things AGs will do is see: “Is this based on typical market conduct? Is this because of a supply issue? Or is this something relating to collusion, price fixing, agreements to constrain supply?” We’ve seen some AG activity in that area.
Jerry Kilgore (08:15):
So, Milton, it’s not just about price fixing or stealing someone else’s employees, it can also be about trying to consolidate your market as well, right?
Milton Marquis (08:27):
Well, that’s right. And AGs have the same authority as the federal government. And so, there’s no preemption, so there could be situations where either the federal agencies decline to bring an action, whether it’s in a merger, and the state AGs bring an action; or, more often than not, the federal government and the state AGs work together. So, here in the northeast, you’ve got some airline mergers where the states are working hand-in-hand with the Justice Department to block mergers or other arrangements.
Jerry Kilgore (09:12):
And what would they look at? Would they look at small markets, large markets, for an airline merger, for example? Does the proposed merger negatively affect? I mean, do you have to have 51%, or no? That’s not the case, is it?
Milton Marquis (09:27):
Well, the reason why a state attorney general would be concerned about an airline merger is because of the local markets, right? So, in a merger here on the East Coast, you have Massachusetts, you have DC, you have Maryland that are all involved in those cases because of the impact on consumers who travel from airports located in those cities. And so, for many mergers, the geographic markets can be very narrow within a state, and so, Jerry, you as a former attorney general, you would care what happens out of Reagan National or out of Richmond or Norfolk. And so-
Jerry Kilgore (10:17):
Or even Roanoke, right?
Milton Marquis (10:18):
Oh, there you go. Your part of the state. I didn’t mean to disrespect the western part of Virginia. And so, an attorney general would care about that, because these mergers, a merger could impact those consumers. And so, when I was at the Justice Department, one of my jobs was to help coordinate federal and state antitrust enforcement, and the attorneys general bring to the table knowledge of local markets and local concerns. And many, many times, the remedies that a state attorney general would seek would be different than, or in addition to, the remedies that the federal government would seek to obtain.
Jerry Kilgore (11:03):
We’re seeing more and more where state AGs are maybe coming up with novel theories, novel antitrust theories, to apply those to the technology sector or the AI sector. What do we know about that? What should companies be aware of in the future? What practices should they avoid?
Milton Marquis (11:23):
Antitrust is not like the tax code. It has very broad principles about unreasonably restraining trade or monopolization. And the courts have applied those concepts to the economy as it is at that time. So I think that with new technology, antitrust has been able to adapt to those technologies. So, not so sure that the theories are so novel, but certainly antitrust enforcers are seeking to catch up to the economy.
Jerry Kilgore (12:01):
It seems like everyone, in a bipartisan manner, seems to be focused on the technology community.
Ann-Marie Luciano (12:08):
Big Tech has equal opportunity enforcers from the Republican and Democrat side. And on the Republican side, we see investigations focusing in on whether there is any collusion in Big Tech with respect to potentially viewpoint discrimination. They try to make a First Amendment tie with respect to whether or not Big Tech was also coordinating with federal state governments.
Jerry Kilgore (12:35):
Well, that seems like a harder case to make as opposed to your typical cost of a good.
Ann-Marie Luciano (12:42):
Yeah, so, I think there’s also a, as you know, Republican AG angle as to whether or not businesses engaged in ESG investing… Whether or not there’s any coordination that would be considered anticompetitive. We know that letters were sent to the heads of antitrust departments at the major law firms last year, warning them about advising clients of the antitrust risks involved in, for example, if you have companies that are considering reducing their carbon emissions or involved in consortiums with others to talk about carbon emissions, climate change issues That type of coordination that’s been existing in the past, there’s now new scrutiny about that and whether or not that invokes the antitrust laws because there may be some coordination among competitors with respect to ESG factors, climate change, and others.
And so, we do see that on the Republican side. Also with supply chain issues and consumers complaining about increased prices, we’ve seen Republicans and Democrats both look into that from an antitrust angle to see whether there’s any coordination to reduce supply or coordination to increase prices. We’ve seen that. There are some areas that seem to be partisan. Democrat AGs continue to be very active on labor and wage issues. So not only just the no-poach, non-compete issues, but also on wage issues and whether companies are trying to skirt the state wage and labor laws with the classification of employees or with coordinating on the amount of money that folks will receive. And so, there has been, and continues to be, Democratic AGs who’ve been very active in that area.
Jerry Kilgore (14:33):
How do you advise, Milton, business clients to take all this information and respond to it? What do you advise clients to do?
Milton Marquis (14:44):
Well, there’re a couple of takeaways. Number one: State attorneys general have independent authority, under the state and federal law, to launch investigations, bring lawsuits. And so, just as companies should be aware of the Federal Trade Commission and the DOJ, state AGs have independent authority. Number two: state AGs tend to be more concerned about potential anticompetitive conduct that directly impacts consumers. So consumer-facing companies should be aware that there is this kind of third agency that can bring national cases: state AGs. And as state AGs can bring cases individually, you have states that are very well resourced that don’t have to bring cases with other states.
And I guess the final thing that I would say is that companies should be aware of anticompetitive conduct or being accused of anticompetitive conduct if the conduct not only is consumer-facing, but it really impacts local markets.
Jerry Kilgore (16:33):
The first successful key for the government, let’s take the government side, is to define the market more narrow in this situation, right?
Milton Marquis (16:43):
Yeah, it depends. You want to define a market that makes sense for a particular product or service. So things like Big Tech, those are international markets. There are no local markets there for those services. But things like grocery stores, those are going to be localized markets, and that’s what AGs are going to really care about. “How does it impact consumers in my states? Are there particularized facts in my state that I should care about? That I should do something about?”
Jerry Kilgore (17:19):
Along the lines of grocery stores, we’ve also seen an increased look into the agriculture economy and what’s going on there with some mergers and acquisitions and things of that nature. Are states joining with the feds in doing that, or are these more state-run operations?
Milton Marquis (17:40):
Well, I think that there has been cooperation with the federal government on agriculture. The enforcers are not only the US DOJ, but USDA, the Department of Agriculture, has statues that it also enforces that address competition issues. So, yes, particularly in farm states. But every state has agriculture, whether it’s New York or Hawaii. California is a huge agriculture state. So that tends to be pretty bipartisan. And there are concerns raised by farmers and others about concentration issues, and so state attorneys general are often very receptive to those types of concerns.
Ann-Marie Luciano (18:29):
And not only with respect to consolidation and market concentration that impact on farmers, but also with respect to alleged price-fixing and collusion. We’ve seen AGs very active in that space as well.
Jerry Kilgore (18:46):
So, as a company, how do you find out if you’re being subjected to one of these investigations? Do you find out early on? Do you find out later on in the process? What’s been your all’s experience in when a company finds out?
Milton Marquis (19:03):
Well, from a defense standpoint, you want to find out sooner rather than later. One advantage to working with state AGs is that they’re much more, in my view, transparent than the federal agencies. You will find out earlier that there may be concerns, before subpoenas are issued, and companies have the ability to tell their story before there’s an issue. The ostrich strategy tends not to work. AGs know who you are. They know what your issues are.
Jerry Kilgore (19:41):
So, Ann-Marie, I bet right at the beginning, a client or two of yours have gotten a CID requesting the documents, because I know these can be document-intensive cases to try to prove to DOJ, or DOJ and the states trying to get information to show their side.
Ann-Marie Luciano (20:05):
Absolutely. The nature of antitrust investigations is such that it’s very document-intensive, because they want to, obviously, review communications to see if there’s any coordination or communications between the target and other competitors. It’s very hard to limit the scope of that, because the essence of it is a broad search to see what communications were there, if any, between the target and other competitors, or within a trade association situation. So, we see that with Section 1 investigations and also with respect to merger reviews. The states, as we’ve discussed today, also have the right to look at: “What is the local impact in our state?” And so, they will ask for additional documents to find data to show: “If this merger goes through, what is the impact in my state?” Which may be different in another state. It’s going to have to be detailed. It’s going to have to deal with the state-specific issues to show the market effects in that state, and the effect on consumer.
Jerry Kilgore (21:07):
So, Milton, if I’m a company coming to you, I say to you, “I want this over quickly. I want this investigation to get resolved,” what’s the likelihood of that? How long do these take?
Milton Marquis (21:20):
Well, it all depends on the office and what the issues are that are under investigation. We always try to manage expectations, but we’ve had a great deal of success in trying to work with states to limit, to the extent that we can, the amount of documentation. You can do that by limiting the number of custodians, the number of people, all without prejudice to the state asking for more. We do that by, obviously, getting on top of the facts, really understanding the facts, and coming in and meeting very early with the staff. And oftentimes, meeting with the front office as well.
Now, it’s also important to know the people in these offices. Now, we’re very fortunate that we have a nationwide practice. We know all of the antitrust chiefs, we know the chief deputies, and we know the attorneys general. Now, obviously, you always have to use good judgment in deciding when to elevate a matter to an attorney general. We’re always very conscious of the impact, cost, and distraction of an investigation on a client, and we know what will sell in a particular AGs office.
Ann-Marie Luciano (22:47):
And sometimes we’ve had success in AG offices being very receptive to deferring on requests for emails. They may want to get an answer to something. They think that their requests and their subpoena do that. And then, we educate them that, “Actually, what you probably could use that would answer these questions more efficiently is X, Y, and Z, and they’re very open to that.
Jerry Kilgore (23:11):
We’ve talked a lot about the non-compete clauses and price fixing, AI and tech, the AG community; but no industry should feel like they’re immune from state and federal antitrust responses.
Milton Marquis (23:27):
Well, that’s right. And, again, primarily from a state AG standpoint, it’s consumer-facing companies. And so we haven’t talked about healthcare, but that’s a huge area of concern with attorneys general, for obvious reasons. I mean, healthcare is like 16, 17, 18% of GDP in this country.
Jerry Kilgore (23:49):
You’ve seen lots of healthcare mergers, not only in hospitals, but in healthcare services.
Milton Marquis (23:56):
The federal government does not have a great record in terms of challenging hospital mergers. And so, states have decided, in some instances, to go it alone and maybe try to negotiate resolutions that would mitigate whatever kind of price increase or service reductions in their local markets, and I think that they’ve shown themselves to be a bit more flexible in those instances than their federal counterparts. Again, there’s no preemption of antitrust in the United States, so the federal government can decide on a course of action that may be different than the states. And the states are not shy about taking different positions.
Again, that leads to your question about, “What should companies do?” They should be very cognizant of that possibility. We have seen companies that are surprised. I saw this when I was at the Justice Department. They become surprised that the state attorneys general are taking a different approach to maybe a merger or to conduct than the federal government, and they’re not prepared, often, to deal with the state attorneys general and to address his or her concerns. So healthcare is another area that should be high on the radar screen of AG concerns.
Jerry Kilgore (26:21):
But isn’t it usually in federal court for the expertise for antitrust issues?
Milton Marquis (26:28):
Well, Jerry, when I was starting out in antitrust in the Stone Ages, we would always bring cases in federal court. And that was because the thinking then, and I’m speaking only for myself, not the then-attorney general of Massachusetts or Virginia, was that there’s more expertise in federal judiciary on antitrust issues. That is no longer the case. And the reason for that is that state courts have become more familiar with antitrust. But there’s also the benefit of being in your own state court trying to develop your own state law, while state antitrust statutes are generally patterned after federal law, but there are differences.
Jerry Kilgore (27:21):
And not that clients normally get to choose, but if you were choosing for your client, would you rather be in federal or state court? I assume the answer would be federal court.
Milton Marquis (27:32):
Well, from a defense standpoint-
Jerry Kilgore (27:32):
Milton Marquis (27:34):
… you want to be in federal court.
Jerry Kilgore (27:35):
Milton Marquis (27:36):
And the reason for that is, generally speaking, summary judgment standards are more pro-defense in federal court than in state court. And the motions to dismiss with Twombly… It’s, generally speaking, easier to get a case dismissed and federal court under Twombly,] Supreme Court decision, a motions to dismiss standard, than in state court.
Jerry Kilgore (28:06):
Well, as we say, time flies when you’re discussing antitrust law, and our time has flown by today because of your expertise, both of your expertise, on this important area; so I appreciate y’all joining the podcast, showing your expertise to our listeners out there. And I will say that we’re excited about next month’s guest. We will be interviewing the new attorney general of Iowa, Brenna Bird, on our podcast, and we invite everyone to tune in next month as well. Should drop around the middle of the month, around May 15th, and we’re excited about talking with her and hearing what’s going on in Iowa and the new cases she’s pursuing there. So, I appreciate everyone for joining today, bringing your expertise, and look forward to talking with General Bird next month. Thank you all.
Meghan Stoppel (29:08):
You have been listening to State AG Pulse, brought to you by Cozen O’Connor State AG Group. Research for this podcast was provided by our associates, Ryan Bottegal, Hannah Cornett, Keturah Taylor, and Emily Yu, as well as our policy analyst, Elisabeth Hill Hodish. If you enjoyed this week’s episode, please leave us a five-star rating and review. This will help our visibility and will allow other listeners to learn about the podcast. And of course, please tune in again in two weeks for our next episode.