Successfully navigating antitrust agency investigations requires a familiarity with Department of Justice and Federal Trade Commission processes, as well as insight into those agencies and their leaderships' current priorities for enforcement and competition policy. This newsletter will provide periodic updates on both, offering an analytical look at how the antitrust agencies are approaching important competition issues and what current investigations may mean for potential future enforcement. We hope our experience-both inside and outside these agencies-will provide insights that help you make more informed decisions for your business.
Letter from the Editors
FTC's 2-2 Split: Impact and Outlook
The Biden Administration has made clear its intentions to reinvigorate antitrust enforcement at the federal level (see here, here and here). Nowhere is this more evident than at the Federal Trade Commission (FTC), where Chair Lina Khan has staked out an aggressive agenda to reorient the agency's enforcement efforts to shape the "distribution of power and opportunity across" the US economy (see here and here). However, since October 8, 2021, when former Commissioner Rohit Chopra left the agency to take over as Director of the Bureau of Consumer Financial Protection, the FTC has been split 2-2 between Republican and Democratic Commissioners. President Biden has nominated Alvaro Bedoya, a Georgetown law professor with expertise in privacy and technology, to fill the open seat but the nomination has since stalled in the Senate. Despite some recent procedural moves to advance his nomination out of committee, the timing of Professor Bedoya's confirmation remains uncertain.
Despite the lack of a majority of sitting commissioners, FTC leadership took the somewhat controversial step of relying on votes cast by the former commissioner on his last day at the FTC. On October 25, 2021, the FTC approved a policy statement by a 3 to 2 vote (including a vote from former Commissioner Chopra on October 8th) that articulated the FTC's "practice of routinely requiring merging parties subject to a Commission order to obtain prior approval from the FTC before closing any future transaction affecting each relevant market for which a violation was alleged." Although the FTC has defended the practice, which allows a former Commissioner's vote to remain valid for up to 60 days after departure, a group of Republican Senators has introduced legislation to prevent such "zombie" votes use in the future.
More recently, although the 2-2 split has not stopped the FTC from pursuing a number of enforcement actions (including its December 2021 challenge of Nvidia's proposed acquisition of Arm, its January 2022 challenge to Lockheed Martin's acquisition of Aerojet Rocketdyne, and its February 2022 challenge to the merger of Lifespan and Care New England Health Systems), it appears that the deadlock may be stymying more aggressive actions. For example, it was reported that Chair Khan declined to call a vote on whether to challenge Amazon's acquisition of MGM because she did not have the votes to challenge it. Similarly, after initial fanfare, the FTC's competition rulemaking efforts have been quiet since fall 2021.
In arguably the most public display of the challenges associated with a split Commission, the FTC failed to approve a study of Pharmacy Benefit Managers' (PBMs) relationships with affiliated and independent pharmacies under Section 6(b) of the FTC Act during a February 17th open meeting. Despite bipartisan support for an investigation into conduct by PBMs (including supporting statements from two Republican Congressmen during the open meeting), the motion to issue the 6(b) orders failed on a 2-2 vote. Both Democratic and Republican Commissioners expressed concern about PBMs' conduct, including ignoring "high list prices in favor of generous rebates, discounts, and fees or repackage drugs as a method to increase prices," steering "patients to vertically integrated pharmacies and mandate the use of mail order pharmacy services against patient wishes," and lessening "competition through mergers." However, the Republican Commissioners voiced concerns with how last minute changes in the study proposal limited their ability to consult with FTC staff and stakeholders about its scope. As Commissioner Christine Wilson stated, "the FTC must develop a 6(b) study with an objective design and credible guarantees that an expertdriven process will produce a data-driven report."
The composition of the FTC thus bears watching. It is clear that bipartisan support will continue for challenges to transactions that may violate the antitrust laws-even in instances where the Democratic and Republican Commissioners disagree on the exact theory of harm. However, for the time being, the Chair may face continued resistance to her pursuit of a more aggressive agenda. It is possible the Commission could attempt to delay decisions on key matters until Professor Bedoya is confirmed, but parties in merger cases have the ability to close their transaction after they have complied with any second requests and abided by any timing agreement with the staff, and it appears companies are doing so. During this time, it will be especially important to pay attention to speeches and other comments by the Democratic Commissioners as they will likely provide an indication of the FTC's priorities and actions once the Democrats regain a majority on the Commission.
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