Trump’s Reckless Attack on Automakers Could Backfire

Donald Trump speaks in Washington on Monday.
Donald Trump speaks in Washington on Monday. Win McNamee/Getty Images

On Monday, Democrats on the House Judiciary Committee announced a probe into the Trump administration’s latest apparent abuse of power: The Department of Justice’s antitrust investigation into four automakers that agreed to adhere to California’s emissions standards. The committee’s pledge to hold hearings into the issue as part of a widening impeachment inquiry is urgently welcome news. The Trump administration must be made to answer for this wild, reckless, and seemingly lawless decision.

Friday’s announcement of the DOJ’s antitrust inquiry came amid reports that the Trump administration would be taking imminent action to rescind California’s long-standing permission from the Environmental Protection Agency to set its own strict emissions standards.

It’s important to know how we got to a place where the federal government is investigating automakers for trying to make cleaner cars and threatening to punish California for protecting the state’s air quality. California has been a national leader in recognizing and regulating the harmful effects of automobile emissions for over a half-century. The Clean Air Act actually came out of California’s pioneering regulations, and federal law recognizes California’s leadership on this issue by allowing the state to adopt stricter emissions standards if it receives a waiver from the EPA. Today, 13 states and Washington, D.C., have since adopted strict California’s emission standards. The stricter standards have been at least partly responsible for driving environmentally friendly innovation in the industry, like Ford’s switch to an aluminum frame for the popular F-150 pick-up truck, along with hybrid and electric car technology.

After the Trump administration promised to roll back stricter emissions standards that had been set by the Barack Obama–era EPA, California went into action. The state’s waiver has actually been a political football before—it was denied by the George W. Bush–era EPA, but was later granted when Obama was in office—and the state’s regulators were aware it could be targeted again. So California struck a deal with Ford, Honda, Volkswagen, and BMW to provide these automakers with regulatory certainty, and deferred enforcement, in exchange for adhering to a set of fleet emissions standards that were more stringent than the Trump rollback, but more relaxed than the Obama-era rules. The deal was announced as a one-page framework for future agreements between the state and the automakers.

There is simply no plausible theory under which this framework violates federal antitrust laws. First, state action designed to protect the health and safety of its residents is generally exempt from liability under the antitrust laws. California has been protecting air quality by limiting emissions for more than 50 years now. That the state is now limiting emissions by voluntary agreements instead of through an EPA waiver does not make this enterprise nefarious and almost certainly extends the protection of the state’s antitrust immunity to the automakers. Second, while antitrust law prohibits agreements between competitors to fix prices or restrict output, there’s no hint that’s occurring here. There’s no evidence of any pact among the automakers outside of their agreement with the state. It would be absurd for the automakers to have done otherwise.

The automakers’ purpose in entering an agreement here is to obtain regulatory certainty. If the state isn’t a party to some additional hypothetical agreement, then there would be no meaningful benefit to the automakers. Third, everyone has a First Amendment right to petition government entities. The automakers’ right to communicate with California regulators and seek an agreement concerning compliance with emissions standards would be protected from antitrust scrutiny, even if the agreement sought were anticompetitive, which it isn’t. Finally, together, the four automakers account for only about 30 percent of the U.S. auto market. Even if they agreed to fix prices or restrict output—and there’s no evidence that they have or would—their competitors would be only too happy to take those lost sales.

This isn’t the first time the Trump administration has used the threat of antitrust enforcement as a tool of political retribution against commercial enterprises the president views as antagonists. Trump has threatened antitrust enforcement against Amazon because the company is owned by Jeff Bezos, who also owns the Washington Post—a constant thorn in Trump’s side. He’s also suggested antitrust enforcement as a means of either extorting money or more favorable media treatment from Google, one of the platforms Trump contends “discriminates against me.” Although DOJ’s unsuccessful challenge to AT&T’s merger with Time Warner had a firm grounding in antitrust law, Trump’s repeatedly linking of the enforcement action to his personal animus towards CNN undermined the integrity of the prosecution.

Whether antitrust enforcement is appropriate against Google, Amazon, or AT&T are valid questions. But antitrust investigations are huge and expensive undertakings for both the regulators and the targets and so legitimate enforcement decisions should be based on careful consideration of complex issues and detailed analyses by experienced competition economists and lawyers. Trump, by contrast, seems to view antitrust enforcement merely as a political bludgeon to be wielded against his personal enemies. Trump’s tantrums hinder DOJ’s ability to bring legitimate cases by giving a flavor of impermissible motive to every prosecution, continuing the erosion of DOJ’s credibility in the courts.

As usual, though, the Trump administration has likely been too clever by half. California and the group of states adhering to its emissions standards, as well as coalitions of environmental groups and clean-tech companies, have already challenged the legality of the April 2018 decision by former EPA administrator Scott Pruitt that kicked off the initial process of rolling back Obama-era emissions standards. That case was argued last week before a panel of the D.C. Circuit and it did not go well for the administration. A loss in that case would add fuel to the dumpster fire that is consuming the administration’s rollback efforts and could ultimately leave in place for the foreseeable future the Obama-era standards, which are even stricter than the California agreements.

Ultimately, the administration’s larger rollback effort is premised on the theory that consumers won’t buy new cleaner, safer cars because of arguably higher sticker prices. If that’s true—and it’s not based on any plausible evidence—then the premise of the new antitrust investigation is that the four automakers may be conspiring to restrict production of cars that consumers want to buy in favor of building more cars that consumers don’t want to buy. If you find it difficult to understand why four automakers would enter a commercial suicide pact and how such an effort might then violate antitrust law, you’re not alone.

On the other hand, if the automakers are entering agreements with California because consumers do want cleaner, more fuel-efficient cars and the automakers want to be stronger competitors, then the broader Trump rollbacks make no economic or environmental sense. The agreement also might be problematic if other automakers were prohibited from entering into deals with California, but they’re not. In fact, California’s chief regulator invited them all to do so. Furthermore, all of the big U.S. automakers opposed the administration’s withdrawal from the Paris climate accord and declared their intention to meet the commitments in the international compact.

That more automakers haven’t signed onto California’s new standards may be more a sign that they’re afraid of incurring Trump’s petulance and expensive investigations than actual opposition to the stricter emission standards. Whatever the House Judiciary Committee might be able to uncover about Trump’s true motives here, hopefully these automakers understand that following California’s lead and committing to clean technology is a better course for their consumers, shareholders, and the planet than cowering before a corrupt and incompetent administration whose only goal is appeasing the president’s fragile ego