Divestiture: Doctrinal Development and Modern Application

Published date01 March 2022
Date01 March 2022
DOI10.1177/0003603X211067122
https://doi.org/10.1177/0003603X211067122
The Antitrust Bulletin
2022, Vol. 67(1) 146 –181
© The Author(s) 2022
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DOI: 10.1177/0003603X211067122
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Article
Divestiture: Doctrinal Development
and Modern Application
Daniel Lumer*
Abstract
In the last several years, policymakers have increasingly pursued legislative reforms that would expand
antitrust enforcement while advocating more generally for the break-up of tech companies with
leading digital platforms. At least a half-dozen antitrust reforms were introduced in Congress in 2021,
while federal enforcers in the Department of Justice and Federal Trade Commission have taken an
aggressive approach to enforcement under the Biden administration. These recent events have invited
an assessment of the scope and limitations of divestiture, as policymakers and regulators consider the
remedy’s viability under existing and prospective federal antitrust laws. To that end, this paper aims
to provide a comprehensive account of the development of the doctrinal principles and application
of divestiture, beginning with its origins as an equitable remedy and subsequent developments in
response to legislative reforms. The paper then discusses divestiture’s primary use in the current
regulatory landscape to redress violations under § 7 of the Clayton Act, followed by an examination
of its historically limited application as a remedy to unilateral conduct. In its final substantive section,
the paper then assesses the ongoing debate as to divestiture’s applicability to acquisitions of nascent
competitors. Finally, the conclusion provides a summary of divestiture’s doctrinal principles and
application, and the implications for how divestiture may be applied in the future.
Keywords
divestiture, dissolution, remedy, merger control
I. Introduction
With digitalization’s emergence as a pillar of the modern economy, the pervasive and seemingly
unstoppable growth of the Big Four technology companies—namely, Google, Amazon, Facebook, and
Apple—has prompted calls for tougher antitrust enforcement and legislature reforms. In March 2019,
one month into her presidential campaign, Senator Elizabeth Warren (D-MA) authored the article
Here’s how we can break up Big Tech, in which she outlined how her administration would “break up
monopolies and promote competitive markets,” and specifically identified Amazon, Google, and
Facebook as targets.1 Over the following two years, elected officials on both sides of the aisle declared
*Columbia Law School, New York, NY, USA
Corresponding Author:
Daniel Lumer, Columbia Law School, New York, NY 10027, USA.
Email: dt2659@columbia.edu
1067122ABXXXX10.1177/0003603X211067122The Antitrust BulletinLumer
research-article2022
1. Elizabeth Warren, Here’s How We Can Break up Big Tech, MediuM (Mar. 8, 2019), https://medium.com/@teamwarren/
heres-how-we-can-break-up-big-tech-9ad9e0da324c.
Lumer 147
a need to rein in major technology corporations with digital platforms that had become “too powerful,”2
by breaking them up one way or another.3 During the same time period, federal enforcers filed separate
complaints alleging that Google had monopolized the search engine market4 and that Facebook had
monopolized the social networking services market,5 with each action presenting the possibility of
structural relief in the event of liability.
The break-up of companies championed by Senator Warren and other policymakers is a call for the
pointed application of divestiture, an equitable antitrust remedy defined by more than a century of
caselaw. In its simplest terms, divestiture is the process by which a company is compelled to sell off
certain assets, such as specific product lines or subsidiaries, to establish a new competitor or strengthen
an existing one. Divestiture may be imposed by court order or entered into voluntarily via settlement,
and is utilized to restore market competition that has been restrained by the party’s alleged violation(s)
of antitrust law. The enactment of reforms that modify antitrust liability or affect enforcement practices
could impact divestiture’s applicability, particularly if such reforms do not offer guidance on when and
how divestiture should be imposed.
Other recent developments further suggest the possibility of a more prominent role for divestiture
on the horizon. For example, policymakers have asserted that even without legislative reform, leading
digital platforms can be divested by challenging consummated mergers under existing antitrust laws,6
an enforcement tactic exemplified by the Federal Trade Commission’s (“FTC”) ongoing action against
2. See, e.g., Hawley Warns Big Tech ‘Too Powerful’, Calls for Breakup to Spark Competition, Fox Business (May 4,
2021), https://www.foxbusiness.com/technology/hawley-big-tech-powerful-breakup-competition (Senator Josh Hawley
(R-MO) stated in a television interview with FOX Business, “We’ve got a long history in this country of trust-busting.
When we see monopoly corporations amass so much power that they’re stifling competition, that they are stifling innova-
tion and they’re trying to exert political power. This happened a century ago during the Gilded Age with the railroads and
other corporations. We broke them up and that’s exactly what we ought to do to these Big Tech companies today. They’re
too powerful.”).
3. Brian Fung, House Lawmakers Introduce Big Tech Bills That Could Break up Amazon, Google and Others, Cnn
Business (June 11, 2021), https://www.cnn.com/2021/06/11/tech/house-tech-antitrust-bills/index.html (Rep. Ken
Buck (R-CO), in advocating for proposed legislation to reform antitrust laws, stated, “These companies have
maintained monopoly power in the online marketplace by using a variety of anticompetitive behaviors to sti-
fle competition. This legislation breaks up Big Tech’s monopoly power to control what Americans see and say
online, and fosters an online market that encourages innovation and provides American small businesses with a
fair playing field.”); Nilay Patel, Amy Klobuchar Is Coming for the App Store Tax, Verge (Apr. 27, 2021), https://
www.theverge.com/2021/4/27/22404493/amy-klobuchar-interview-antitrust-book-hearings-big-tech (Senator Amy
Klobuchar discussing the potential need for a break-up of major companies, stating “I don’t mean break it into
little pieces so it doesn’t exist. I mean, just as we did with the A&T breakup.”); Elizabeth Culliford, Where U.S.
Presidential Candidates Stand on Break up Big Tech, reuters (Jan. 24, 2020), https://www.reuters.com/article/
us-usa-election-tech-factbox/where-u-s-presidential-candidates-stand-on-breaking-up-big-tech-idUSKBN1ZN16C
(Then-candidate for president Joe Biden stated that breaking up major tech corporations was “something we should
take a really hard look at.”).
4. See, e.g. Diane Bartz & David Shepardson, U.S. Says Google Breakup May Be Needed to End Violations of Antitrust
Law, reuters (Oct. 20, 2020), https://www.reuters.com/article/tech-antitrust-google-idUSKBN2751PB; Brent
Kendall, Google, U.S. Government Each Face Challenges in Court Fight, Wall st. J. (Oct. 21, 2020), https://www.
wsj.com/articles/google-u-s-government-each-face-challenges-in-court-fight-11603324647; Nico Grant, U.S. Asks
Google for Detailed Search Data in Antitrust Case, BlooMBerg (Mar. 1, 2021), https://www.bloomberg.com/news/
articles/2021-03-01/u-s-asks-google-for-detailed-search-data-in-antitrust-case.
5. See infra note 7.
6. See, e.g. Trust-Busting for the Twenty-First Century Act, S. 1074, 117th Cong. (2021); American Choice and Innovation
Online Act, H.R. 3816, 117th Cong. (2021); The Platform Competition and Opportunity Act, H.R. 3826, 117th Cong.
(2021); Ending Platform Monopolies Act, H.R. 3825, 117th Cong. (2021); Augmenting Compatibility and Competition
by Enabling Service Switching, H.R. 3849, 117th Cong. (2021); State Antitrust Enforcement Venue Act, H.R. 3460,
117th Cong. (2021); Merger Filing Fee Modernization Act, H.R. 3843, 117th Cong. (2021).
148 The Antitrust Bulletin 67(1)
Facebook.7 Beyond the regulation of digital platforms, the Biden administration has also embraced an
aggressive approach to merger control generally, which could produce a heightened incidence of
divestitures resulting from premerger settlements and post-consummation challenges.8 It appears that
divestiture may also now be available in actions brought by private claimants, as was recently affirmed
for the first time by a federal Circuit Court.9
In light of potential legislative reforms and evolving enforcement tactics that implicate an increased
focus on divestiture, this paper aims to provide a comprehensive historical account of divestiture to the
present day. Section II discusses its doctrinal foundations and development, and explains the impact of
the Celler-Kefauver Antimerger Act of 1950 and the Hart-Scott-Rodino Act of 1976 on divesture’s role
in antitrust regulation. Section III focuses on divestiture’s primary function as a remedy in prophylactic
and post-consummation merger challenges, while Section IV delineates how courts have approached
divestiture as a remedy to unilateral conduct. Section V assesses divestiture’s role in the context of
nascent competitor acquisitions, including a discussion of the FTC’s action against Facebook, and the
ongoing debate as to the most suitable approach for unwinding such acquisitions. In conclusion, the
paper summarizes the key takeaways regarding divestiture’s utility and application in the current anti-
trust landscape.
II. Doctrinal Development
A. Origins and Early Application: 1911–1950
From its first application in 1911 until the Clayton Act was amended in 1950, divestiture was primarily
administered in cases brought under the Sherman Act.10 As a data point, the Supreme Court heard
twenty cases between 1911 and 1950 that contemplated divestiture, sixteen of which were brought
under the Sherman Act alone compared to two grounded solely on Clayton Act violations.11 More spe-
cifically, most divesture orders were issued against defendants found liable under § 2 of the Sherman
7. See infra Section V for further discussion of the FTC action against Facebook. The FTC filed a complaint against
Facebook on December 9, 2020. Complaint, FTC v. Facebook, Case No.: 1:20-cv-03590 (Dec. 9, 2020). In the initial
complaint, the FTC alleged that Facebook had violated § 2 of the Sherman Act in acquiring Instagram in 2012 and
WhatsApp in 2014, as well as by denying interoperability to competing applications. Complaint, at 50–51. On June 28,
2021, the District of Columbia District Court dismissed the complaint without prejudice. FTC v. Facebook, 2021 WL
2643627 (D.D.C. June 28, 2021). The court indicated that the FTC did not have an avenue toward reviving the interoper-
ability claim since the relevant conduct had occurred entirely in 2013, stating that “the FTC lacks statutory authority to
seek an injunction based on such long-past conduct.” Facebook, 2021 WL 2643627, at *2. Although the court dismissed
the claims regarding the Instagram and WhatsApp acquisitions because the allegations concerning Facebook’s market
power were not adequately pled, the court provided the FTC with the opportunity to address the deficiency in an amended
complaint. On August 19, 2021, the FTC filed an amended complaint, in which it again alleged that Facebook violated
§ 2 in its acquisitions and continued ownership of Instagram and WhatsApp. First Amended Complaint at 76, FTC v.
Facebook, Case No.: 1:20-cv-03590 (Aug. 19, 2021). The complaint also asserted that the acquisitions were part of a
broader course of conduct in violation of § 2 that also included the formation and enforcement of conditional dealing
agreements in restraint of trade. First Amended Complaint, at 77–78. The case remains ongoing as of February 2022.
8. See, e.g., Jim Tankerslay & Cecilia Kang, Biden’s Antitrust Team Signals a Big Swing at Corporate Titans, n.Y. tiMes
(July 25, 2021), https://www.nytimes.com/2021/07/24/business/biden-antitrust-amazon-google.html; David French &
Sierra Jackson, Analysis: Dealmakers See M&A Rush, Then Chills, in Biden’s Antitrust Crackdown, reuters (July 12,
2021), https://www.reuters.com/business/dealmakers-see-ma-rush-then-chills-bidens-antitrust-crackdown-2021-07-12/;
Kevin Breuninger & Lauren Feiner, Biden Signs Order to Crack Down on Big Tech, Boost Competition ‘Across the
Board’, CNBC (July 9, 2021), https://www.cnbc.com/2021/07/09/biden-to-sign-executive-order-aimed-at-cracking-
down-on-big-tech-business-practices.html.
9. Steves & Sons, Inc. v. JELD-WEN, Inc., 988 F.3d 690 (4th Cir. 2021); Mike Leonard, Divestiture OK’d in Private
Antitrust Case in Novel Ruling. BlooM Berg laW (Feb. 18, 2021). https://news.bloomberglaw.com/antitrust/
jeld-wen-must-unwind-merger-after-losing-novel-antitrust-appeal.
10. E. Thomas Sullivan, The Jurisprudence of Antitrust Divestiture: The Road Less Traveled, 86 Minn. l. reV. 565 (2002).
11. Id. at 614–23. Each of the final two cases included alleged violations of both the Sherman Act and Clayton Act.

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