For the past 18 months, we’ve been briefed by thousands of small businesses owners about how they define — and why they value — the “rule of law.” They tend to make one or more of three points. First, America’s reputation for reliable contracts, clear rules, and fair and efficient courts contributes to our reputation as a “safe haven” for investment, which drives up the value of U.S. assets and gives U.S. businesses a strong competitive advantage. Second, courts protect small businesses from big ones, leveling the playing field. And, third, when they see corruption in one part of an administration, they know to look for it elsewhere: Corruption starts with leadership and percolates down. For these business leaders, threats to the rule of law impose tangible costs on our economy.
We began covering rule of law in response to three high profile cases of White House intervention in major business deals. In 2017, the Department of Justice challenged the AT&T-Time Warner merger after President Trump complained about CNN’s coverage of him and reportedly asked for the merger to be stopped. (The delay harmed stockholders and employees of both companies.) In 2019, Trump delayed and then sought to influence the Pentagon’s decision to award Amazon a $10 billion cloud computing contract because of critical coverage from The Washington Post, owned by Amazon’s CEO, Jeff Bezos. (The contract remains on hold, leaving the Pentagon without the required cloud computing capability and security.) That same year, Trump tweeted his disapproval of an arrangement between California and four automakers on vehicle emissions standards. Shortly after, the antitrust division of the DoJ launched an investigation into the four automakers. (Those companies face the cost of the investigation, while Americans in those states will breathe dirtier air than they should.)
This past Wednesday, the House Judiciary Committee heard testimony from assistant U.S. attorney Aaron Zelinsky and Justice Department career employee and antitrust official, John Elias. Referring to the case of the automobile emissions standards investigation, Elias testified, “the investigation’s initiating paperwork… does not include a staff ‘recommendation’ but instead states that ‘[t]he Antitrust Division would like to open an investigation.’” The decision to investigate potential antitrust violations should not be solely based on our president’s angry tweets.
In another case later that year, Attorney General Barr disregarded both the analysis of career staff and existing guidelines when he directed the antitrust division to launch nine full-blown investigations into marijuana mergers. These nine cases accounted for 29% of all investigations that year across all industries. In his testimony, Elias stated that “the rationale for doing so centered not on an antitrust analysis, but because [Barr] did not like the nature of their underlying business.” The investigation concluded there were no market concerns, but not without a cost; the DoJ subpoenaed 1.3 million documents, imposing major financial burdens on the marijuana companies responding to their requests.
When DOJ lawyers are set upon the President’s enemies, or an industry the AG doesn’t like, they are kept from their real jobs (often, to protect the little guy from the big guy). When the President or AG harms companies for personal reasons, they undermine America’s value as a safe haven, hurting asset prices. And when our leaders hear about what’s happening to companies in the news, they wonder what else might be going on out of public view.