The American Bar Association’s 65th Antitrust Law Spring Meeting held at the end of March included a number of sessions with representatives from federal and state antitrust enforcement agencies. In this first of a three-part series detailing the meeting’s discussions, we offer some key takeaways from those sessions, including leadership changes, past activities and expected priorities under the new administration.
With the confirmation of Jeff Sessions, the new administration has turned to filling leadership positions in the Antitrust Division of the U.S. Department of Justice, nominating Makan Delrahim for assistant attorney general. Delrahim previously served as a deputy assistant attorney general in the division under President George W. Bush. Maureen Ohlhausen has been serving as acting chairman of the Federal Trade Commission, but it is unclear whether she will remain in that role.
Recent Activity and Future Priorities for the Antitrust Division, FTC and State Attorneys General
The Antitrust Division. A panel of career directors represented the DOJ’s Antitrust Division as that agency awaits legislative action on the recent nomination of Delrahim and the appointment of new deputy assistant attorneys general to open positions. In the interim, the division will continue “business as usual,” with Director of Civil Enforcement Patricia Brink reminding that “mergers wait for no one.”
The directors focused their remarks on activity and achievements in the last year. The division took six cases to trial, including two significant merger cases (United States v. Aetna Inc. et al. and United States v. Anthem, Inc. et al.), with six additional trials calendared in 2017. Forty-two new attorneys joined the division, giving it a “deep trial bench” that is expected to carry it through the current hiring freeze. The division has continued to focus on improving coordination with other federal and state agencies and its international counterparts.
Civil enforcement efforts also included challenges to a number of mergers, including Halliburton/Baker Hughes, a deal in which investor Value Act was fined $11 million for violating the reporting and waiting requirements of the Hart-Scott-Rodino Act, serving as a cautionary tale for companies choosing to rely on the HSR filing exemptions. In addition, the division settled United States v. DirectTV and AT&T, where cable executives exchanged information about whether each would carry a regional sports network. When asked for guidance on information exchanges, the panel pointed to robust compliance and training programs for executives involved in critical decision-making and generally advised in favor of a “don’t do it” approach. The division secured an extension on its petition for certiorari in United States v. American Express, a case analyzing competitive effects in two-sided markets.
On the criminal side, the division has continued to prioritize holding individuals accountable for criminal violations, and that is not expected to change under the new administration. Marvin Price, director of criminal enforcement, reported that prison time for individuals remains the strongest deterrent to future criminal antitrust violations, highlighting that in 2016, the division charged 52 individuals and 19 companies, and recovered $399 million in civil penalties. These figures are down from 2015, in which the division imposed $3.6 billion in penalties and charged 20 companies and 66 individuals. In another session, Brent Snyder, acting assistant attorney general and deputy assistant attorney general of criminal enforcement, stated that the division’s new FAQs on leniency simply clarify existing law: a company is in a race with the government’s investigation and co-conspirators to obtain Type B leniency, and if the government’s investigation has progressed far enough to have a prosecutable case, then the government is unlikely to extend leniency to culpable employees.
Criminal investigations into alleged collusion among generic drug manufacturers, capacitors, packaged seafood, tour bus operators, and auto parts remain ongoing. More information on the division’s efforts, both criminal and civil, can be found here.
The FTC. Abbot B. Lipsky, Jr., acting director of the Bureau of Competition, Thomas B. Pahl, acting director of the Bureau of Consumer Protection, and Ginger Zhe Gin, director of the Bureau of Economics spoke about the FTC’s activities and priorities. Acting Chairman Maureen Ohlhausen discussed some of the FTC’s efforts and priorities at another session.
The directors explained that “regulatory humility” is the FTC’s approach to imposing standards with a firm recognition of the limits of what it knows, particularly in the context of consumer protection where markets are rapidly evolving. It does not mean inaction; rather, the FTC’s action is more likely to be “incremental” so that remedies do not impose undue costs or burdens.
The directors fielded questions about how the priorities of the FTC might change under the new administration. Asked whether the FTC would consider the president’s broader economic objectives (e.g., the creation of American jobs), Lipsky stated that economic growth would result when antitrust institutions were focused on maximizing productivity and innovation. Pahl stated that the FTC had become the premier privacy agency in the U.S. under President Obama and that privacy would remain a priority for the FTC. Pahl also posited that the FTC’s future case selection was likely to focus more on fraud and instances of clear consumer injury. With the future of the Consumer Financial Protection Bureau uncertain, Pahl stated that the FTC would not seek to retake authority transferred to that agency.
Ohlhausen identified professional licensing or “economic liberty” as a priority for the FTC. She noted that there has been a 25% increase in the number of professions requiring licenses since 1950, and that only 60 professions are regulated in all 50 states but 1,100 professions require licenses in at least one. She emphasized the need to work with states on this.
Ohlhausen also responded to questions about how the FTC would approach disgorgement in the future. She stated that the FTC’s broad enforcement power was meant to be tempered by the relatively few remedies available to it and emphasized the importance of properly calculating the harm to consumers before ordering disgorgement, noting in particular the difficulty of ascertaining the monetary value of harm where the deceptive act is not outright fraud.
Gin spoke about the FTC’s report on the effectiveness of its structural remedies. Remedies considered a “success” were those that maintained or returned competition to pre-merger levels within three years of the sale. “Qualified successes” fell into two categories: instances where the buyer replaced the lost competition but took longer than three years to do so, and instances where unforeseen market forces changed the market, allowing the buyer to achieve a strong market share but not fully replace the merged company. Ohlhausen noted the importance of looking at empirical data to maximize the effectiveness of structural remedies.
State Attorneys General. Attorneys general from several states presented at a session on state enforcement. Beau Buffier, chief of the Antitrust Bureau of the Office of the Attorney General of New York, sounded a warning bell for companies anticipating more relaxed antitrust enforcement at the federal level. In a presentation titled “Episode VII: The Force Awakens,” he said that states such as his own were ready to step in should the federal government not be vigilant. Victor Domen, chair of the Multi-state Antitrust Task Force of the National Association of Attorneys General, echoed this sentiment in another session. Domen also advised that many states have original criminal jurisdiction over antitrust matters.
Buffier explained that, after the election, his office discussed whether to divert resources from the Antitrust Bureau to other concerns, such as the preservation of clean air and water. But then, the then-president-elect proceeded to meet with the CEOs of companies that were under merger review. Buffier noted that this level of executive involvement had not been seen since Nixon, and that it supported his efforts to emphasize the need for increased—not decreased—state antitrust enforcement.
Buffier acknowledged that since 2000 states had taken a back seat to federal antitrust enforcers, explaining that due to “bipartisan reasonability” at the federal level there was a lack of return-on-investment for state antitrust enforcers who became involved in national matters. However, many states now expect that there will be major cutbacks at both the FTC and DOJ and perhaps a reduction in cooperation with international agencies, accompanied by an overall decrease in vigilance at the federal level. As a result, a coalition of state enforcers—including New York—do not believe they can wait to see whether their expectations are correct before gearing-up their own antitrust enforcement efforts.
While acknowledging that the states do not have access to the same tools as federal enforcers, such as automatically receiving merger notifications under the HSR Act, Buffier noted that state enforcers could still learn of proposed mergers through public filings and use their subpoena powers to gain access to materials that have been provided to the federal government. He also noted that his office was improving its internal tools by, for example, upgrading its e-discovery platform. Buffier said that states have the express power under the Clayton Act to independently sue to enjoin a merger, explaining that if anyone expected a merger with significant national effects to “sail through” as a result of the new administration, they should “think again.”
Expected Antitrust Priorities and Concerns Under the New Administration
In a session on the ABA Antitrust Section’s transition report to the new administration, four key issues were identified as raising concerns for the future: budget reductions, merger review, international outreach and antitrust issues raised by intellectual property.
Possible budget reductions would reduce staff at the already lean agencies and diminish the quality and scope of enforcement actions, with long-term effects. A smaller staff means decreased guidance from the agencies (which would pursue fewer matters and thus enter into fewer consent decrees or issue fewer closing statements) and will necessarily reduce policy formation efforts both here and abroad, which could also negatively impact international relations and efforts at building coherent and consistent policy. In a similar vein, Brent Snyder noted separately that having personnel who can win cases was important to the division’s credibility and its ability to accomplish its objectives.
Merger review should remain a focus for both agencies, but there is concern that the White House may be more involved in the review process. Likely, cases will continue to be decided on the merits by career professionals, and any change would be on the margins. At the margins, however, we could see a notably different approach to the competitive assessment of proposed mergers. Regarding the review process, although the average cost of complying with a second request is $4.3 million, the process is not likely to change in light of institutional incentives to strive for certainty and obtain as much information as possible. The Smarter Act (proposed legislation designed to modify FTC practices and bring it more in line with the division) is more likely to pass Congress under the new administration, though certain parts of the act may be rejected, such as proposals to remove the FTC’s ability to challenge mergers through its administrative process.
The expectation is that efforts at international outreach will continue as before. Delrahim has been described as an internationalist—naturally disposed to maintaining international efforts—and Ohlhausen is also deeply committed to this. Concerns about funding and effectiveness remain, however. As to the latter, the new administration’s populist agenda could undermine agency efforts at collaboration, as calls to put “America First” could impede foreign cooperation. At another session, Alejandra Palacio Prieto, president of the Comision Federal de Competencia Economica in Mexico, warned about the effects of protectionist revisions to NAFTA on markets in both the U.S. and Mexico.
Delrahim and Ohlhausen are generally skeptical about expanding competition law to manage intellectual property related issues. Although the agencies will likely continue to invest in IP research and policy development, we expect to see a somewhat less aggressive approach. The FTC is unlikely to withdraw the Qualcomm case due to institutional momentum and concern that the abandonment of commitments would indicate erratic decision-making. However, the approach taken by the FTC in its pursuit of the case could certainly change, with a slow retreat from some IP policy decisions over time.
This is the initial installment of a three-part series, published on consecutive days, covering the meeting’s key topics. In part two, we will look at the meeting’s discussions on mergers and acquisitions, and in part three, we will offer the meeting’s takeaways on consumer protection issues.
A version of this article was originally published by Law360 on April 3, 2017.