On April 7 and 8, 2022, the American Bar Association’s Antitrust Law Section wrapped up its annual Spring Meeting. The event featured updates and remarks from several antitrust enforcers, including FTC Chair Lina Khan and US Assistant Attorney General for the Antitrust Division Jonathan Kanter. In this post, we share key takeaways from the final two days of the Spring Meeting.
FTC and DOJ Will Stay Focused on Litigation: Top officials at both US antitrust agencies highlighted the agencies’ full dockets and noted that litigation to enforce the antitrust laws will remain a top priority.
- Three Directors from the Federal Trade Commission (FTC)—Holly Vedova, the Director of the Bureau of Competition; Samuel A.A. Levine, Director of Bureau of Consumer Protection; and Elizabeth Wilkins, Director of Office of Policy Planning—all emphasized that the FTC will work as one team and will not hesitate to initiate litigation.
- Vedova noted the FTC’s recent success in several transactions being abandoned after the FTC initiated litigation. She expressed that the Bureau of Competition’s main focus will be litigation, where she believes her bureau will be most effective. Khan echoed these sentiments while speaking on a separate panel, emphasizing that two recently abandoned transactions were in the context of challenges to vertical transactions and that such challenges will continue to be a priority at the FTC.
- Likewise, Kanter noted that the Department of Justice (DOJ) is not afraid to take on big cases or big companies and will not be afraid to litigate. He said the DOJ is just getting started and reiterated that the DOJ has more active cases than it has had in recent years.
Agencies Will Closely Scrutinize Potential Remedies in M&A: Both FTC and DOJ officials emphasized they will continue to examine the effectiveness of remedies and will only pursue strong remedies.
- Kanter said that divestiture remedies will be the rare exception and will no longer be the norm. He further cautioned merging parties to avoid engaging in “regulatory arbitrage” and trying to leverage investigation outcomes in one jurisdiction against another because global cooperation among antitrust enforcers is high.
- Vedova also indicated that the Bureau of Competition has no appetite for weak or uncertain settlements, especially those involving behavioral remedies, which have proven ineffective. The FTC will require meaningful structural relief to resolve competition concerns regarding a transaction.
- Parties should also not expect the FTC to engage in long settlement discussions due to the unprecedented volume of merger reviews. Vedova noted that staff’s time is valuable and is much better spent preparing for litigation rather than negotiating remedies. She further indicated that the FTC will not engage in remedy discussions unless the Hart-Scott-Rodino (HSR) clock is stopped and timing agreements are tolled.
- State attorneys general will similarly evaluate remedies and, if necessary, pursue additional remedies than those sought by federal antitrust enforcers. For example, in a recent dialysis acquisition, the state of Utah sought divestiture of a fourth clinic above the three divestitures required to settle the transaction with the FTC.
Agencies Are Considering Changes on HSR Filings: Khan and Vedova stressed that the FTC is considering changes to the HSR pre-merger notification form to provide more relevant information upfront to better inform staff’s review of transactions.
- Khan and Commissioner Rebecca Slaughter reiterated the views of other FTC and DOJ officials that the goal of enforcement is to seek deterrence of potentially unlawful transactions. Slaughter said the agencies should be more concerned with “Type 2 errors” (i.e., failing to block deals that end up harming competition) than “Type 1 errors” (i.e., blocking deals that would not have ended up harming competition).
- Khan also stated a desire to lengthen the current 30-day window in which US agencies are required to review a transaction notified under the HSR Act, as well as a desire to increase filing fees.
- The Chair highlighted the number and complexity of transactions, which strain agency resources and make it difficult to fully investigate potentially unlawful mergers under the current structure. In 2021, there were over 4,000 HSR filings.
Continued Skepticism of Efficiencies in M&A: Commissioner Slaughter said she would like to see less emphasis on efficiencies in the revised merger guidelines, especially concerning vertical mergers. Gwendolyn Cooley, the representative from the National Association of Attorneys General, said that state enforcers are evaluating whether job loss as the result of a transaction should be considered an efficiency rather than a harm and noted that state attorneys general were likely to submit comments to the merger guidelines on this issue.
More FTC Section 5 Cases May Be on the Horizon: FTC officials believe case law and precedent for Section 5 of the FTC Act, which prohibits unfair and deceptive acts or practices, is strong, and the FTC will consider bringing more actions under Section 5.
FTC Will Aggressively Pursue Conduct Cases and Re-Evaluate Standards: The FTC also has an active docket of conduct cases.
- Khan highlighted the FTC’s litigation against “Pharma Bro” Martin Shkreli, in which a district court judge recently found Shkreli individually liable for antitrust claims and imposed precedent-setting relief in banning Shkreli from participating in the pharmaceutical industry for life. Khan stressed the FTC will continue to push for individual liability and industry bans where appropriate.
- Khan also noted the agency is reviewing standards for other conduct issues, such as tying, predatory pricing, and attempted monopolization. She said case law reflects standards that are no longer relevant given how businesses operate today and the antitrust enforcers need to push the law to reflect underlying market realities, particularly in digital markets.
Consumer Welfare Standard Being Questioned More by Both Sides of the Aisle: Numerous panelists commented that theories of harm are not being thoroughly captured through the lens of higher prices and reduced quality. Kanter stated that he does not believe the consumer welfare standard should be a consideration given wide disagreement as to how it applies. In particular, the US antitrust agencies will assess the harm that can occur through dominant firm conduct.
FTC Seeks Power to Obtain Equitable Relief: Khan and Levine emphasized that it is imperative that Congress restores the FTC’s power under Section 13(b) of the FTC Act to recover money for harmed consumers through equitable relief such as restitution or disgorgement.
- But even without that power, Levine said the Bureau of Consumer Protection will use every tool available to help protect consumers, including initiating rulemaking and more Part 3 filings.
- State enforcers also stressed the importance of pursuing independent actions to obtain equitable relief given the current limitations on the FTC’s enforcement power.
States Will Aggressively Enforce Antitrust Laws: State enforcers emphasized they will evaluate whether to pursue independent actions to protect state interests or to obtain equitable relief.
- States attorneys general have a strong relationship with the DOJ and the FTC and are closely cooperating with federal enforcers on investigations and litigations. Several state officials commented that their level of cooperation with the DOJ has increased in recent years.
- State antitrust enforcers emphasized that for mergers, it is important that parties notify affected states of a proposed transaction and that it is counterproductive to make side deals or settlements with the states without the involvement of federal antitrust enforcers, which can lead to divergent remedies.
- There is an increasing trend for states to require pre-merger notifications—particularly in the healthcare industry—in addition to federal pre-merger notifications under the HSR Act. Washington, Oregon, and Nevada all have pre-merger notification laws, and New York is considering similar legislation.