Creative Discussion Podcast: Joe Sims on HSR at 50, Dealmaking, and the Future of the FTC

Joseph V. Coniglio hosts retired Jones Day partner and former DOJ Antitrust Division leader Joe Sims, who recounts how he discovered antitrust in law school, explains the origins and impact of the Hart-Scott-Rodino Act, and forecasts diminished FTC antitrust authority.

Cases Mentioned

Humphrey's Executor v. United States, 295 U.S. 602 (1935)

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Joseph V. Coniglio: All right, thank you for joining us. My name is Joseph Coniglio and I'm senior counsel and director of antitrust and innovation policy and the Schumpeter Project on Competition Policy here at ITIF, the Information Technology and Innovation Foundation. And I'm proud to announce the release of our seventh episode for our antitrust speaker series, Creative Discussion. We're channeling Schumpeter's idea of creative destruction. We'll be having wide-ranging and in-depth discussions with antitrust's greatest luminaries to discuss hot topics in antitrust, tech, economics, and beyond, as well as get to know a little more about some of the people that have been really influential in the antitrust community.

I think we've done our task with this month's guest in that regard. I'm very proud to announce we have Joe Sims, retired partner at the law firm Jones Day, really one of the top law firms for antitrust and many other things in the country. Joe has had a frankly really storied career in antitrust law. It's hard to really compare it. Started as an attorney at the DOJ in 1970 and then became deputy assistant attorney general for four years, where, among other things, he was influential in helping to craft the very important Hart-Scott-Rodino Act, which I know we'll be discussing and has actually turned 50.

So, it's a great time to reflect and see where we are with that. And then after government service, Joe moved to Jones Day, where he spent the rest of his career, nearly 40 years, as a top antitrust lawyer in the United States. And I think really practiced in all areas, but I think probably most known, and rightfully to be one of really antitrust's trailblazing dealmakers, having been the first antitrust lawyer ever to be recognized by American Lawyer as a top dealmaker in 2000 for his work on the AOL Time Warner deal, which was the largest corporate merger at the time, and then later on in 2009 for his work on SiriusXM. Again, the first, I think, ever to be recognized as a top dealmaker, as an antitrust lawyer, and I think the only person to have the distinction of winning it twice. Really says a lot about Joe. And Joe's also been throughout his time in private practice, a leading intellectual commentator among the antitrust bar having written about the HSR Act, Section 2, FTC, and really much more.

And is still very active on Twitter, I should say, for those who want to follow him on antitrust and other topics frankly. Joe, thanks so much for taking the time to be here and welcome to the Schumpeter Podcast.

Joe Sims: Glad to be here.

Joseph V. Coniglio: Great. So why don't we get started? As I said, you've had really an amazing career in antitrust law.

Let's step back, though. How did you first get interested in antitrust? Where did your journey begin?

Joe Sims: I went to law school at Arizona State. I was in its first class ever, brand new law school. Almost accidental. Seemed like a good thing to do at the time, but I'd never really thought about it until I actually did it. The first year we had five very senior professors to start the new school with only one class.

The second year, they brought in six new professors, one of whom was a guy named Jonathan Rose, who had spent his time after getting out of law school at the Antitrust Division, in the evaluation section of the Antitrust Division. And I'm quite sure I had never heard of antitrust before I took John Rose's antitrust course in my second year.

And turned out I liked it, and he thought I had some potential, so he encouraged me to do more. I took another couple of courses from him. And then went to the Antitrust Division at Justice when I graduated, mostly because it seemed like an interesting way to spend a couple of years before I came down back to Arizona and started being a real lawyer.

Joseph V. Coniglio: So, we talked about your time at DOJ already and I want to just maybe stop a little bit there. It really was a very important time for antitrust in the 1970s. You're really seeing a change from the old antitrust, the structure conduct performance paradigm, the more 'big is bad' approach, the more political approach, to what we call now the modern consumer welfare economic consensus.

Can you take us back as a young antitrust lawyer? What was it like being on the cutting edge of those changes?

Joe Sims: It was an interesting time, as you said, because it was actually pretty obvious to those of us in the front office part of the Antitrust Division that things were changing and should be changing. You recall the first antitrust merger guidelines that came out under Don Turner just a few years earlier. They would've allowed an attack on transactions involving an acquisition of 5% of the market. The old Harvard structural school was certainly the impetus for those guidelines.

When I got there, Dick McLaren was the head of the Antitrust Division. He was not an antitrust intellectual. He was a practicing lawyer from Chicago, but he had brought in a number of significant intellectuals. The most important to me was a guy named Don Baker, who was eventually an acting head of the Antitrust Division at the very end of the Ford administration.

But when I got there, he was the head of the evaluation section, which was the think tank part of the Antitrust Division, and that's where I got assigned. Probably because John Rose had been in that section. In any event, I worked closely with Baker. He taught me a hell of a lot about antitrust and it was then, the break in the Antitrust Division approach came when Tom Kauper succeeded McLaren in the second Nixon administration. And Tom Kauper, while he wasn't a Bill Baxter outspoken type person, he was definitely a Chicago School person.

He believed in that approach, and so we started enforcing antitrust law pursuant to that approach without really talking about it all that much. It just was the approach that made sense to those of us who were there. You know, by the time when he came in, I became his special assistant. A year or so later, I became a deputy. And Baker by this time had gone off to Cornell. And so Kauper and myself and two or three other people in the leadership there were trying to drive what we thought was a sensible approach to antitrust, which turned out later to be known as the Chicago School, the consumer welfare standard, et cetera.

Bill Baxter gets all the credit for the creation of the public kind of perception of that approach. But Tom Kauper is the guy who started it, at the Antitrust Division.

Joseph V. Coniglio: Yeah, it's so true because I think it's often underappreciated. A lot of people think of the Chicago School, they think it was something that came in with the Reagan administration. But the fact is, even before that, in Carter, whether it's deregulation or antitrust, there were a lot of people that had already seen the problems with the prior antitrust and political economy view that had existed from the progressives and others.

That's really helpful. But before we go to your Jones Day and private practice, I want to talk about one thing that happened while you were deputy assistant attorney general. I know you were working on a lot, but the HSR Act, I already mentioned, we have America 250, so 50 is not as big a deal, but for antitrust the HSR being at 50 is a big deal.

And I know you worked a lot on that when you were in the front office and helping to guide that and provide advice to Congress on that. So, can you talk a little bit about, what is HSR? Why is it so important? And how did it come about?

Joe Sims: HSR stands for Hart-Scott-Rodino. Phil Hart was the head of the Antitrust Subcommittee of the Judiciary Committee in the Senate. Peter Rodino was the head of the Judiciary Committee and the Antitrust Subcommittee in the House. And Scott was a Republican senator that Phil Hart roped in to try to make it appear like it was a bipartisan effort. But in fact, this was Phil Hart, a very decent man, by the way. When he died, I went to his funeral services, which, he's the only politician I've ever done that for, and I have a hard time imagining I would do it again.

But he was a very decent guy, I had a lot of respect for. He was a very liberal Democrat. He believed in no-fault monopoly and all sorts of wacky kinds of theories. And he wanted as his sort of legacy, he was suffering from cancer, he knew that this was probably going to be his last term. And he wanted to create a antitrust legacy.

His big push was pre-merger notification and parens patriae- right of state attorney generals to bring cases enforcing the antitrust laws. From the Department of Justice's point of view, we weren't very interested in either one of those things, but we were very interested in getting civil investigative authority, what's now known as the CID.

Because believe it or not, at that time, the DOJ had no compulsory process it could use in a civil investigation. It had criminal process that it could use, but in a civil antitrust investigation, there was no compulsory process. And that obviously was a hindrance to trying to do investigations. So, we were very interested in getting the CID authority, and we held our nose and went along with the other parts of the statute.

Hart had a very strong staff led by a guy named Buck O'Leary and then a fellow named Bernie Nash, and they really drove the adoption of the specific language. I had the lead for Justice on that and so I did, I spent a goodly part of a year working with Nash and O'Leary trying to make the statute as not bad as I could make it and trying to get as much authority through the civil investigative demand part of the statute as we could.

It was passed right at the end of Ford's term. He was running for re-election. There was a lot of opposition to the statute in the administration, including privately, although DOJ publicly supported it, the Attorney General Ed Levi wrote, famously wrote Ford a note in which he urged him to veto the statute.

But Ford decided that politically that was an unwise thing to do right before an election. And so I think it was literally at the end of October within days of the election that the statute was ultimately passed and signed. And it's had an enormous impact.

The Sherman Act is obviously the core statute of antitrust. The Clayton Act and Section 7 of the Clayton Act is a critically important statute. But beyond those two, Hart-Scott, I would say, is the most important antitrust statute ever passed.

Joseph V. Coniglio: No doubt about it. And let's talk about HSR a little bit because, obviously you have this amazing merger filing notification regime that, those of us who are newer to antitrust, we are obviously born into, right? It's like fish in water. But it wasn't always that way, and you wrote an article 20 years after the HSR Act sort of reflecting on the pros and also some of the cons, right?

About how this really could be taking the form sometimes of regulation. Is this really what we intended with this? So, I guess I would ask you now, as I say, 50 years out, what would you say the overall pros and cons of the HSR Act have been? And where can there still be opportunities for reform?

Joe Sims: Parens patriae hasn't turned out to be all that important, so I'm going to skip that. The CID authority has been very significant for DOJ and its ability to investigate all sorts of the full range of antitrust issues, including mergers in some cases, but particularly non-merger work.

But the pre-merger notification piece, which was specifically and literally according to its authors, intended to apply to maybe the 150 largest transactions in any given year has obviously become dramatically more than that. It created an entire regulatory regime between the FTC and the DOJ.

It created a whole new class of lawyers, regulatory antitrust lawyers. Before that time, antitrust lawyers were litigators mostly. But Hart-Scott made them into regulatory lawyers. It set the stage for what happened in Europe with its merger regulations and now, of course, around the world.

It was an exceedingly important statute, which was either a statute which was passed with everybody lying about what it was going to do, or much more likely, a perfect example of the unforeseen consequences of passing a statute which had fairly broad language in it and leaving it up to the people who are going to enjoy the regulatory power to decide how much power they wanted to enjoy.

And, we have a fair amount of experience with bureaucratic regulation. Bureaucrats, given a little regulation, would like to have more regulation, and given a little power, they'd like to have more power, and that's the story of pre-merger notification, which is now something which neither Hart nor Scott nor Rodino would recognize in its present form.

Joseph V. Coniglio: In 'its present form' is obviously a loaded phrase, right? Because we had this new HSR regulation passed by the Biden administration, which, put on all these new requirements about the information that companies need to provide, which of course, was recently struck down by a court in Texas.

And now we're back to the old HSR form. So, we'll obviously have to see what develops there, but there's no doubt it's been hugely influential.

But okay, I want to get back to deals because there's a lot more we're going to talk about with deals. But let's follow sort of your career trajectory.

So, after DOJ, you go to Jones Day and again, Jones Day, top, top law firm, amazing antitrust practice. But this is the Schumpeter podcast. We do a lot of tech at ITIF and Jones Day, I think, maybe it's not as much appreciated as it should be, but was very much involved in the antitrust and tech world and continues to be.

And I know you've done a lot of work in antitrust and tech over the years as well. So, could you talk about some of the stuff you were doing on the tech space both merger and non-merger related?

Joe Sims: It's funny. When I first came to Jones Day and for the first, I'm going to say, 15 years I was there, I would say Jones Day had very little tech. It was a firm that had grown up out of Cleveland. It represented industrial organizations and had very little presence in California.

And so it just didn't have the client base opportunities to be a big tech player. And interestingly enough, we really started focusing, Jones Day started focusing on that in 1995. 1995, now this is almost 20 years after I got there, when the managing partner of Jones Day created what was called the Future Markets Task Force.

And he asked me to chair that, and our job was to try to figure out what legal demand would look like 10 or 20 years in the future and how well positioned Jones Day was to meet that legal demand. Because there was a growing sense and a lot of loud voices, including mine, in the firm that said, "Ah, we're not really very well positioned for what's coming down the pike."

And so we did that study. You won't be surprised to know that we decided there's going to be a lot more technology-oriented work coming down the pike, and we're not very well positioned for that. And what do we need to do? We need a hell of a lot more IP. We need more technology-oriented lawyers, including particularly antitrust lawyers, and we need to strongly expand our California position.

So those were our basic recommendations. We started down that road, and as it happened, I got my first AOL assignment in 1998 when they bought Netscape, which was at that time a significant browser competitor to the Microsoft browser. The general counsel of AOL was a guy named George Vradenburg. He had been the general counsel of CBS. I had done work for him when he was at CBS. So, when he had these issues at AOL, he asked me to get involved. And then of course not too long after that came the Time Warner transaction, which was, as you said, an enormous transaction.

But it was a very good deal for the AOL people and a very bad deal, as you know, for the Time Warner folks. So, any event, that's how I got into technology, and you know, there wasn't all that much going on that was visible in that area.

It's amazing because, practicing antitrust when you did, you have the big technological changes going on, all these new companies at Silicon Valley and around the country, that need antitrust work and that are growing and transforming the economy. But you also have, as you already alluded to, the merger waves of the '90s, of the 2000s, and I want to get back to that a little bit because I called you, and maybe some would say this is presumptuous, but I thought about it and I think it's right, antitrust's trailblazing dealmaker, and I think that really does fit. You were the first antitrust lawyer to get Dealmaker of the Year for AOL Time Warner, and then again for SiriusXM. And I guess I would just ask you, was this the time when antitrust lawyers really came into their own in the boardroom when you're doing the deals?

Joseph V. Coniglio: What was it like, just for the practice of antitrust law at that time? Was that a change from what it had been like in decades past?

Joe Sims: It was. Clearly, antitrust had mostly been a support practice in most law firms. Jones Day was a little bit different because the managing partner who recruited me was an antitrust lawyer. Guy named Allen Holmes. Had been head of the antitrust section of the ABA.

His successor was an antitrust lawyer. Dick Poe also became head of the antitrust section of the ABA. So antitrust was more of a core practice in Jones Day and had been for many years. So, when I came there, my task that Holmes gave me when he recruited me was build a world-class antitrust practice in Washington because he thought, correctly, that would be the locus of antitrust practice going forward, not places like Cleveland.

And so I had a lot of opportunity to do things that made sense to accomplish that mission. I had a lot of support. And it was, as time went on, it became clear that antitrust had the potential to be a gating element in a deal.

There are several gating elements. You gotta have a decent price. You gotta solve what they call the social issues. Who gets to be the CEO of the combined company, et cetera. But antitrust became another one of those gating issues. If you didn't get past the antitrust barrier, you couldn't do the deal. And so, it did introduce a new level of focus and it's amusing. I just read an article in one of the American Lawyer publications about how firms are trying to dramatically expand their antitrust presence and personnel. In the early days when I was starting to do this, most firms didn't have a lot of antitrust for more than 50% of the deals that I worked on for the better part of my career were deals where Jones Day was not doing the deal work, but they brought me in to do the antitrust work.

And that was because the firm that was doing the deal work did not have somebody they were confident in to do the antitrust work. And this included firms like Cravath, for God's sake. Terrific firms, but they did not have what were perceived as really strong antitrust capabilities. So today, my successors heading the antitrust practice at Jones Day have a much tougher job because every deal firm of any significance has antitrust lawyers, and most of them have prominent or at least recognized antitrust lawyers.

And so, they're not getting those kinds of opportunities that I had. But in the old days, that was the case and it took probably 15 or 20 years. I had, I don't know, I must have had eight or 10 deals where Cravath was the deal lawyer, and I was the antitrust lawyer, and I'm quite sure that that's not happening today.

Joseph V. Coniglio: So vertical integration from some of the old deal firms creating competition. I guess we have to say that's a good thing, right?

Joe Sims: Absolutely. Absolutely. It's a good thing for everybody except the oligopolists that they're competing with.

Joseph V. Coniglio: The antitrust boutiques. No, fair enough. So, it's been 10 years since you retired from Jones Day. You had an amazing career there, almost 40 years at that firm, but you've still been active. You've been writing about antitrust. Your Twitter account is a great follow.

You have a lot of great commentary on antitrust and other things. And I did want to talk about one of your recent articles because it's also very relevant given current events. You had a piece on Humphrey's executor and the FTC and the power of the president to fire commissioners and obviously we just got a big decision on that from the Supreme Court saying that you can do that.

And I think obviously there are a lot of implications there for antitrust and the FTC at an institutional level, and would just love to get your thoughts on that, Joe. Where could we be going after that decision?

Joe Sims: I think I heard Donald Trump say some time after the Humphrey's decision came out that was, he thought, one of the most important decisions during his tenure as president, and I think he's probably right. This sort of fourth branch of government that grew up, from the Woodrow Wilson days till now, a century of growth was a result of Congress being more than happy to pass broad generality legislation and let somebody else worry about it.

Joseph V. Coniglio: Like the HSR Act.

Joe Sims: Like the HSR Act.

And it was a great thing from Congress's perspective, because they could get the credit for passing the legislation, and then they would be free to criticize any particular implementation of that legislation if they didn't like it, because they weren't doing it. And the executive branch, the presidents of the last century, conveniently also found it nice to have some of this offloaded onto some third parties that they could influence but they wouldn't have to be blamed by, for what their decisions were. I have always been of the view that was an unfortunate development over the years. It didn't result in what Brandeis and Wilson hoped that it would result in, which was people with expertise making nonpartisan fact- and science-based decisions, because the agencies were funded by Congress, so influenced by Congress. The people who ran them were appointed by the president, so influenced by the president. They were never nonpartisan expert agencies. They were some hybrid of those things. So as a result, you got some very good results from some agencies that happened to be run at a particular time by very good people who tried and were sometimes able to do a nonpartisan expert-based job.

And you got some very bad results from people who were less competent or less careful about not letting their partisan interests carry the day. I think today and going forward I don't think this is going to change. Trump obviously likes to have the power to remove people.

Whoever the next president is, whether he's Republican or Democrat, is not giving that power up. And so I think you're going to see the gradual erosion of that fourth branch of government. some of the agencies will disappear, some will be absorbed in the executive branch. Some will stay as separate agencies, but they will, there will be very few, if any, that have multi-member heads, because that's a very inefficient way to run any organization. And I anticipate that'll go away. In the antitrust world, that raises the question, what happens to the FTC, obviously.

There really has never been a very good argument for having two antitrust enforcement agencies. Certainly not a good argument for having two merger enforcement agencies who frequently approach mergers in very different ways during the same time period. So that made no sense at all. My guess is the antitrust authority there will either formally or de facto move entirely into the executive branch at the Antitrust Division.

The FTC may remain as a consumer protection agency. We don't need that and the Consumer Product Safety Commission and the various other consumer protection agencies, so maybe they all be mushed together. But something like that will happen. I don't see the FTC being an antitrust enforcement agency for very long in the future.

Joseph V. Coniglio: That's quite a perspective. But let me ask about the future since we're looking forward here.

One of the things that you've done, again, since leaving Jones Day and in your retirement, and I think it's really great and amazing example. So, you, along with Dave Gelfand, another well-known antitrust lawyer too obviously those who probably listen to our podcast you both established a chair, an antitrust chair at the Sandra Day O'Connor Law School at Arizona State University, as you said, your alma mater.

You don't hear that every day, but I think it's really just an amazing thing. And I guess I would just ask you, thinking about the future and the future people that are going to be in government. Obviously, we saw what happened with Lina Khan and the neo-Brandeisians, a lot of where the momentum is.

How important is it to win the battle of the academy and the battle of ideas when we think about what the future of antitrust is going to be? And what was your purpose behind creating this chair at ASU?

Joe Sims: I view this as critically important. Bill Baxter is the poster child for this. He was, through his academic work and through his work in the Antitrust Division, able to get people to understand why the consumer welfare standard was a much more rational way to do antitrust analysis than any of the other options that had been utilized over the years.

But today, I would unfortunately say, there are no counterparts to Bill Baxter in academia, and very few even giving full credit to you and your colleagues, very few in adjacent areas like your organization. So, what I tried to do, I made more money than I needed during my legal career, and so I created an endowment that created this chair at ASU.

And the idea, frankly, was to create a place where, what I call common sense antitrust, which doesn't really recognize the extremes of either the left or the right side of the antitrust debate, would be a focus. And after looking for a long time I finally persuaded Dave Gelfand to come and occupy that chair.

He was a great person to have in there. Unfortunately, Dave decided over time that he really didn't want to stop practicing. And he's now stepped back from that and is back to essentially full-time practice with Cleary. And I'm in the process of trying to find a substitute for Dave, which is a challenge, because those positions are not the highest paid positions in the world. And lawyers today make ungodly amounts of money if they're highly successful. So, trying to find the right person with the right mental approach to antitrust is a challenge, but we're working on it. I still think it's very important. There's been similar stuff done by Kovacic and people at Georgetown, a little less extensive than what they did at George Mason. My idea was to try to build a center like the George Mason Center, but not really confined to just the conservative side of antitrust, but again, what I think of as the antitrust side of antitrust.

That's a bigger challenge, as one of my reporter friends told me when I was telling him about this when we first did it. He says, " There's not much of a market for being in the middle." And I think that's a fair point. It's hard to get people excited about being in the middle. When, to go back to where we started, when we did Hart-Scott the people on the other side of the political aisle had very different ideas than those of us where I was coming from, but we didn't have any problem really working together to find an acceptable middle ground.

And I guarantee you we don't have time to go into it, but I guarantee you that the Hart-Scott-Rodino legislation was clearly not as extreme as it would've been, but for us finding that middle ground. Today that's seems very hard to do. And I'm going to keep trying to build a demand for what, again, what I think of as common sense antitrust, and we'll see whether I can get it done or not but I'm going to keep trying.

Joseph V. Coniglio: We're happy to plug that opportunity here on the Schumpeter podcast. Joe, to all the academics and similar-minded people who are watching. Sounds like a great opportunity. And definitely I would say something we need more of both at ASU and everywhere because as you point out, the battle really does begin and sometimes maybe even ends in the academy, right?

The battle of ideas matters so much. We've got a lot of the deep stuff, the analytical stuff, maybe just on a lighter note. I was calculating this before our discussion. So, I think you've probably been before the agencies in the hundreds of times on deals. You've probably advised on deals in the thousands. What's your favorite one?

Joe Sims: I don't really have a favorite one because they're like children, right? They're all unique. The ones that I got the most satisfaction out of were the ones where I had the most difficulty persuading the agencies to do what I wanted them to do. And the top of the list of that probably would be SiriusXM.

Where the view at the agencies and generally around the world was that this was a combination of the only two satellite radio companies in the world, and thus it was a merger to monopoly. And we were able to finally persuade them that was not likely to be the practical effect of the transaction.

And of course, time has proven that was absolutely right. And then the other one is a weird one in some ways, and it's P&G's acquisition of Clairol. Because that produced a company with about almost 50% of the shampoo business and two of the three biggest names in that business.

And that was a matter that we never did persuade the staff on, but we were able to persuade the commission even though the staff recommended strongly that that the deal be challenged.

When you know the decision maker is highly inclined to take a staff recommendation, those are very satisfying outcomes.

Joseph V. Coniglio: Joe, this has been an excellent discussion. Thank you so much for coming on. I think we'll have to probably wrap it there. I want to thank everybody who listened to another great episode of our Schumpeter podcast. Please stay tuned for more coming up. And again, just want to thank our guest, Joe Sims, antitrust dealmaker, Thank you so much.

Joe Sims: Been great fun, Joe. Thank you.