Merger Withdrawal Could Create Gaps With DOJ

If the FTC withdraws from its joint vertical merger guidelines with DOJ, it could cause friction between the two agencies and fuel legal arguments for opponents, former commission officials said in interviews last week. Commissioners are expected to withdraw from the agency's June 2020 joint guidelines with DOJ at a commission meeting Wednesday (see 2109080060). The guidelines would remain in effect for DOJ unless the department also acts.

Many recent FTC votes have been divided on party lines. Commissioner Noah Phillips plans to make a statement about the guidelines at Wednesday’s meeting, his office said. Commissioner Christine Wilson’s office didn’t comment. DOJ, which is awaiting confirmation of its Antitrust Division chief (see 2107230062), didn’t comment. The FTC declined comment.

The agencies had separate operating guidance in the past, but the FTC’s expected withdrawal is still a concern if two agencies are using different standards when reviewing transactions, said Bruce Hoffman, now at Cleary Gottlieb. “That could create some real problems in terms of unpredictable or chaotic law enforcement.” He noted the potential for the agencies applying different standards. Hoffman noted the pending lawsuit against Axon, which is arguing that two agencies using different standards is a due process issue.

“There’s no suggestion in the agenda” that DOJ “is on board with doing this,” said Stephen Calkins, now a Wayne State University law professor. Without a confirmed assistant attorney general, it would be surprising for the department to withdraw its consent, he said. There’s a good chance “it will make very little difference because there’s so few vertical merger challenges, but it has the potential to make a substantial difference if we happen to end up litigating a vertical merger case before there are new guidelines,” he said. Revising the guidelines would take the agencies months, he said. This could “complicate the process of review and potential litigation of proposed mergers by both agencies,” said George Washington University law professor Richard Pierce.

Without guidelines, courts would turn to case law, which is generally more favorable to parties than the government, said Hogan Lovells’ Chuck Loughlin. “The case law is not as clear about the problems with vertical mergers as it is with horizontal mergers,” he said. “Current case law is a little bit tough for the agency to block a vertical merger.” If DOJ brings a case and points to the guidelines, it might be “a little more awkward for them” because parties could note the FTC's rescinding its consent, he said. Presumably when the DOJ antitrust chief is confirmed, there will be efforts to implement new guidelines, he said. President Joe Biden’s competition executive order recommended the agencies revisit the guidelines.

Democrats “have the votes to implement their new vision for the agency,” said University of Michigan law professor Daniel Crane. “But they will have to get buy-in from the courts to get where they want to go. That will be a much heavier lift than overcoming” any internal agency friction with Republicans, he said.

FTC Chair Lina Khan and Attorney General Merrick Garland met Friday with the White House Competition Council to discuss plans for boosting competition and lowering consumer prices. DOJ and the FTC provided briefings about agency activities, the White House said. National Economic Council Director Brian Deese urged agencies to “identify new ways to promote competition beyond those outlined” in Biden's EO.

The House Commerce Committee’s proposed portion of the Build Back Better Act budget reconciliation package would establish an FTC privacy-focused bureau, as expected (see 2109090067). The bureau, which would receive $1 billion through FY 2031, would focus on “unfair or deceptive acts or practices relating to privacy, data security, identity theft, data abuses, and related matters,” the legislation said. House Commerce Republicans are beginning to question whether the proposal signals panel Democrats have abandoned efforts to advance privacy legislation in this Congress, legislative aides and industry lobbyists told us. The committee said it will begin marking up the bill at 11 a.m. EDT Monday in 2123 Rayburn.