Posted by The Legal Intelligencer
Is Judge Kavanaugh a Fan of Antitrust Laws? Let’s Take a Look
By Carl W. Hittinger and Tyson Y. Herrold
We know Judge Brett Kavanaugh is a fan of the Washington Nationals. But is he also a fan of the antitrust laws? On July 9, 2018, President Donald Trump nominated Kavanaugh, who currently sits on the U.S. Court of Appeals for the District of Columbia Circuit, to replace retiring justice and long-time swing voter Anthony Kennedy. Judge Kavanaugh is sure to be the subject of exacting congressional scrutiny on any number of topics. But the Senate Judiciary Committee should not overlook Kavanuagh’s antitrust jurisprudence. As of this writing, Kavanaugh’s Senate Judiciary Committee hearing is scheduled to begin on Sept. 4.
Unlike Justice Neil Gorsuch, who practiced antitrust law in the private sector and authored three unanimous antitrust opinions while on the U.S. Court of Appeals for the Tenth Circuit, Judge Kavanaugh has no private antitrust experience. Kavanaugh has authored two antitrust dissents while on the D.C. Circuit, both of which drew sharp criticism from fellow judicial panel members. Despite his limited antitrust experience, these dissents shed some light on Kavanaugh’s antitrust and economic persuasion and provide fertile ground for congressional examination.
‘FTC v. Whole Foods Market’
In the 2008 case of FTC v. Whole Foods, the FTC filed a motion for preliminary injunction challenging Whole Foods’ merger with Wild Oats, which the district court denied. The ensuing appeal to the D.C. Circuit turned on the appropriate definition of the relevant product market. The FTC defined the market as “premium, natural, and organic supermarkets,” called “PNOS” for short. According to the FTC, these stores “focus on high-quality perishables,” “generally have high levels of customer services,” “target affluent and well educated customers,” and “emphasi[ze] … social and environmental responsibility.”
D.C. Circuit Judge Janice Brown, with Judge David Tatel concurring in the judgement, agreed with the FTC’s narrow PNOS market definition and rejected Whole Foods’ proposed alternative market, which included so-called “conventional” supermarkets. In support, Judge Brown pointed to evidence of lower profits on “high-quality perishables” where Whole Foods and Wild Oats competed, compared to where they did not. Further economic data from the FTC showed that, although PNOSs competed with conventional supermarkets for “dry grocery” goods, conventional supermarkets had little to no effect on margins for the “high-quality perishables” sold by PNOSs. Judge Brown also relied on Whole Foods’ proprietary “internal projections” that a majority of Wild Oats’ consumers would switch to Whole Foods if the former chain closed, as well as “pseudonymous blog postings” by Whole Foods’ CEO that conventional supermarkets were “unable to compete” with PNOSs.
Dissenting, Kavanaugh branded the FTC’s case “weak” and, by extension, the court’s decision to preliminarily enjoin the merger (according to him), “a relic of a bygone era when antitrust law was divorced from basic economic principles.”
First, Kavanaugh criticized the court for “diluting the standard for preliminary injunction relief.” He argued that its purportedly lenient application of that standard allowed the “FTC to just snap its fingers and temporarily block a merger.” Citing Robert Bork’s famous (or infamous) book “The Antitrust Paradox,” Kavanaugh explained, “the FTC’s position … calls to mind the bad old days when mergers were viewed with suspicion regardless of their economic benefits.”
In turn, in his concurrence, Judge Tatel called Kavanaugh’s criticism “baffling” and noted that the court “scrupulously followed … the likelihood of success standard.” He rebuked Kavanaugh for his “zeal to reach the merits and preempt the FTC” and reminded him that the preliminary injunction standard was designed by Congress to maintain the status quo pending the FTC’s administrative review of mergers within its jurisdiction.
Second, throwing binding case authority to the winds (not to mention stare decisis), Kavanaugh criticized the court for relying too heavily on the Supreme Court’s Brown Shoe v. United States decision, which framed “practical indicia,” or factors, used to identify discrete product submarkets in merger cases. He called that binding decision “free-wheeling,” and commented that it “has not stood the test of time.” Kavanaugh again approvingly quoted a passage from Bork’s “Antitrust Paradox,” contending that, while it would be “overhasty to say that the Brown Shoe opinion is the worst antitrust essay ever written, … [it] has considerable claim to the title.”
Third, Kavanaugh rejected the court’s PNOS product market, citing Whole Foods’ economic expert. Kavanaugh applauded that expert for relying on “all-but-dispositive price evidence” that prices were uniform across Whole Foods’ stores, regardless of whether there was a competing PNOS like Wild Oats in the area. This observation drew further sharp criticism from Judge Tatel who, calling Kavanaugh’s “all-but-dispositive” price evidence “all-but-meaningless,” pointed out that Whole Foods’ expert testimony only showed pricing on a single day and only after “Whole Foods announced its intent to acquire Wild Oats.” This made the data susceptible, according to Judge Tatel, to “manipulation” and “gave Whole Foods every incentive to eliminate any price differences that may have previously existed between its stores … not only to avoid antitrust liability, but also because the company was no longer competing with Wild Oats.”
