Four weeks ago, the boundary between public enforcement and private dispute resolution became more blurred. On September 4, the Justice Department announced that it had agreed to binding arbitration on the key issue in a current merger case—the market definition.
The enforcement action is garden variety. It challenges Novelis Inc.’s proposed acquisition of Aleris Corporation. According to the DOJ, the transaction would combine two of only four North American producers of aluminum auto body sheet, which automakers use to produce aluminum parts for automobiles.
But the use of arbitration by the DOJ constitutes a novel use of the Antitrust Division’s authority under the Administrative Dispute Resolution Act of 1996, 5 U.S.C. § 571 et seq. Although the option has theoretically existed for 23 years, the DOJ has never used it before.
DOJ Antitrust Chief Makan Delrahim suggested, during a speech at George Washington University Law School’s annual Antitrust Salon, that this case “could prove to be a model for future enforcement actions, where appropriate, to bring greater certainty for merging parties and to preserve taxpayer resources while staying true to our enforcement mission.”
He went on to justify the experiment on both efficiency and accuracy grounds. He noted that antitrust enforcers must be “more attuned to ensuring an efficient process for resolving merger and conduct investigations and, when necessary, litigations.” He cautioned, however, that “efficiency should not come at the expense of achieving the right result. Rather, we always should be open to process improvements that can result in economically sound outcomes that are achieved in a more efficient manner.”
If you’re a regular reader of the blog, you know of my abiding belief in the many virtues of arbitration. Even in the tricky context of adhesive contracts with consumers, employees, and patients, I’m not persuaded that arbitration always poses the grave concerns that some suggest. But this decision by the DOJ puts even me on high alert.
I’ll refrain from too much commentary, but suffice it to say that arbitration’s virtues extend to resolution of particular disputes. Arbitration can get the job done at a low cost and in an effective way. Arbitration, however, does little (and maybe nothing) to promote social policy objectives outside of dispute resolution. Regulatory enforcement actions, while civil in nature, seem to me to be intended to serve additional public purposes beyond mere resolution of a particular dispute.
This isn’t a simple issue, and I appreciate the DOJ’s desire to streamline a part of antitrust enforcement actions that has proven daunting to generalist judges and lay juries. Still, the idea that a critical component of enforcement actions could be shuffled off for resolution in private or, at least, outside of the standard public system, gives me pause.