On October 6, Jonathan Kanter, who is expected to succeed Makan Delrahim as the Assistant Attorney General (AAG) for Antitrust at the Department of Justice (DOJ), testified before the Judiciary Committee of the U.S. Senate. Not surprisingly, Kanter expressed his support for vigorous enforcement of the federal antitrust laws with respect to mergers as well as other anticompetitive conduct and agreements. His testimony, however, suggests that the DOJ Antitrust Division under his direction may not always agree with the Federal Trade Commission (FTC), now led by Chair Lina Khan, as to the details of antitrust enforcement. This Update will highlight some of those potential differences.
ONE: FTC WILL LIKELY INVOKE ITS SEPARATE AUTHORITY TO CHALLENGE “UNFAIR” BUSINESS PRACTICES.
Although the FTC and DOJ both have authority to enforce the antitrust laws, only the FTC has the right to investigate and challenge “unfair methods of competition” under Section 5 of the Federal Trade Commission Act. As noted in a prior Competition Update, the FTC on July 1 rescinded its 2015 Statement of Enforcement Principles regarding Section 5. That action opens the door for the Commission to issue new guidance or rules designed to prohibit certain business practices as violative of the FTC Act, even if those practices do not clearly or uniformly violate the Sherman Act or the other antitrust laws co-enforced by the DOJ. As one example, it has been argued that non-compete agreements which restrict job mobility by low-income workers should be broadly condemned rather than assessed on a case-by-case basis.
TWO: FTC’S MERGER REVIEW PROCESS MAY BE MORE EXPANSIVE AND BURDENSOME THAN DOJ’S.
The Hart-Scott-Rodino (HSR) Act provides that parties to certain proposed mergers or acquisitions must file a premerger notification with both the FTC and DOJ; and may not close their deal until the HSR waiting period has passed or been terminated. Under a procedure known as the “clearance process,” FTC and DOJ Staff consult and decide which agency will be responsible for investigating the proposed transaction. The reviewing agency may then require the parties to comply with a “Second Request” for business documents and data, while at the same time conducting interviews of company personnel.
2021 so far has been marked by a record number of reported mergers, and an increased number of actual or threatened challenges to those mergers by the FTC and DOJ. Interestingly, while the FTC — especially since the ascension of Lina Khan to Commissioner and then Chair — has been loudly banging the drum of antitrust enforcement, it has been the DOJ which has arguably been the more active agency. As reported in the Wall Street Journal, DOJ “career staffers” have — instead of waiting for the confirmation of a new AAG for Antitrust — taken the initiative by challenging deals such as the planned partnership of American Airlines and Jet Blue; and “advancing investigations of business practices” by Apple, Google, and Visa. (Justice Dept. Makes Quite Push on Antitrust Enforcement, Oct. 9, 2021).
So, are the FTC and DOJ singing the same song as to mergers? Perhaps, but they may not be singing in the same key, and they may not agree on each of the verses. One issue which has emerged is whether merger review should include Environmental, Social and Governance (ESG) factors. Recently, the FTC has suggested it may in some instances expand its Second Requests to “factor in additional facets of market competition,” such as “how a proposed merger will affect labor markets.” (FTC Blog Statement (9/28/21) by Holly Vedova (Director, Bureau of Competition) on www.ftc.gov). There have also been reports that in several recent merger investigations FTC Staff have sought information about how the deals will affect unionization, franchising and other ESG issues.
In contrast, when Jonathan Kanter, at his recent nomination hearing before the Senate Judiciary Committee, was asked by Sen. Mike Lee (R-Utah) whether, if confirmed, he planned to include request information about ESG issues in DOJ merger investigations, Kanter gave the following measured response: “I don’t see situations where ESG policies that are unrelated to competitive issues are relevant to antitrust enforcement.” While Kanter’s response leaves room in merger investigations for the DOJ to ask questions about ESG issues that are, in the agency’s view, related to competitive issues, it does appear that the FTC and its Staff are taking a more wide-sweeping approach.
Thus, antitrust lawyers and their corporate clients may be facing a new reality in which an FTC merger investigation may in some instances be more time-consuming and burdensome than a comparable DOJ investigation. Such divergence in agency approach might even affect the outcome. For example, there have been reports that FTC Staff recently conditioned approval of a proposed deal on the merged firm’s agreement to repudiate long-standing non-compete agreements – without a formal determination that the agreements were anti-competitive under applicable antitrust law. It’s unclear whether the DOJ would have imposed a similar condition.
None of this means that the DOJ will be anything close to a pushover on merger or conduct investigations. As noted above, DOJ’s Staff are trained and tenacious; and Jonathan Kanter is widely expected to lead a highly aggressive Antitrust Division, especially (though not exclusively) against “Big Tech” companies.
Bridgeline Solutions helps law firms and their corporate clients deal with the burden and expense of complex document productions, such as Second Requests, by providing access to our deep team of contract attorneys, including many with BigLaw and antitrust experience. Bridgeline and its sister division Cadence Counsel also provide former BigLaw attorneys for more sophisticated assignments related to all practice areas, including antitrust. David S. Copeland, the author of this Update, is a former Kaye Scholer Partner with over 30 years of experience in antitrust litigation and counseling.
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