The Politics of the New Trust-Busting

A competition-protecting agenda could work for Joe Biden.

by PAUL ALEXANDER

(Photo by Drew Angerer/Getty Images)


During his first year in office, President Joe Biden watched as two signature legislative victories—the COVID relief package followed by the bipartisan infrastructure bill—were overshadowed by dual debacles. His inability to advance Build Back Better and the defeat of voting rights legislation resulted not merely from Republican opposition but, most embarrassingly, dissent within the Democratic party. The constant drumbeat of negative press coverage of his disunified party is one reason why Biden suffers from approval ratings hovering in the mid-to-low forties.


If Biden is seeking an issue to help revitalize his administration and restore his popularity, one could argue he should take a page from the playbook of Theodore Roosevelt, the populist president who used the Sherman Act to break up, among others, the railroad trusts. Often called a “trust buster,” Roosevelt said he was trying to deliver for ordinary Americans a “square deal.” Perhaps Biden, instead of instituting a new Great Society, as progressives had hoped, should aspire to create a new square deal.


In fact, Biden signaled his belief in competition last summer when he signed an executive order championing competition and denigrating monopolistic business practices. “The American promise of a broad and sustained prosperity depends on an open and competitive economy,” begins the 13-page order, which covers several sectors of the economy—agriculture, communications, defense, and more.


As it turned out, Biden meant what he said. Consider the proposed acquisition of Aerojet Rocketdyne Holdings, long the preeminent U.S. manufacturer of rocket engines, by Lockheed Martin, the nation’s number-one defense contractor by sales. The deal, worth $4.4 billion, was announced by Lockheed on December 20, 2020, in the final days of the Trump administration, which had taken a laissez-faire approach to mergers and acquisitions. But by July 2021, around the time Biden signed his executive order affirming competition, the Lockheed-Aerojet merger was anything but a done deal.


Critics of the deal, such as Senator Elizabeth Warren, argued that it would further reduce competition in the defense industry, which has contracted over the last 30 years due to a spree of mergers, and jeopardize national security. Lina M. Khan, chair of the Federal Trade Commission, the agency tasked with reviewing corporate mergers and enforcing civil antitrust laws, made her feelings known in an August 6, 2021 letter to Warren, who had relayed concern about the deal. In cases of major vertical mergers, such as the Lockheed-Aerojet deal, Khan wrote, there is a higher risk of “a reduction of competition post-merger.”


The fate of the merger remained uncertain primarily because it was unclear how all the FTC commissioners would vote on the matter. Khan and one other commissioner appointed by Biden were clearly in favor of using regulation to promote competition, but two other commissioners were named by Donald Trump. (A fifth FTC seat remains unoccupied because Biden’s nominee has not been approved by the Senate.) As a result, Lockheed announced last fall that the merger was delayed, with CEO Jim Taiclet reassuring investors the deal “continues moving through the regulatory approval process.”


But any hope of the deal being approved ended last week when the FTC voted 4-0 to file a complaint in federal court seeking a preliminary injunction to block the merger. Apparently, Khan convinced both Trump-appointed commissioners to join the Biden-appointed commissioners to kill the deal. (How ironic that two Democratic senators are blocking Biden’s legislative aspirations while two Trump-appointed FTC commissioners are allowing Biden to advance his pro-competition agenda.) The FTC challenge was so rare that, should the case end up being litigated, it would mark the first time a defense merger has been contested in decades....

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