Khan: Not the FTC’s Job to Remedy Illegal Transactions

It’s not the FTC’s job to remedy illegal transactions if parties propose “facially anticompetitive deals,” Chair Lina Khan said Monday during an enforcers’ summit with DOJ’s Antitrust Division. Some transactions are illegal on the face, and enforcers need the tools and confidence to block, she said. The FTC’s Republican commissioners didn’t appear at the summit.

Khan said she’s looking forward to the commission returning to full strength with confirmation of nominee Alvaro Bedoya in “short order.” Bedoya is awaiting a final vote, after the Senate discharged his nomination from the Senate Commerce Committee, which recorded a tied vote on advancing (see 2203300069). “We’ve unfortunately been a commissioner short,” she said, noting the agency feels responsible to take advantage of this “window of opportunity” in which there’s a heavy need for change.

Commissioner Rebecca Kelly Slaughter and former Commissioner Rohit Chopra, now director of the Consumer Financial Protection Bureau, backed Khan’s arguments about standing up to illegal deals. This goes back to the basics, said Chopra: Under U.S. law, proposing an anticompetitive merger is a crime. When companies do that, they need to be prosecuted and there needs to be appropriate relief, he said.

Enforcers have overlooked Clayton Act tools, namely Section 7, said Slaughter. The focus is often on transactions that are “likely to substantially lessen competition,” while the second prong of the section, which applies to deals that “tend to create a monopoly,” has been underutilized, she said. Agencies should think about circumstances in which a specific transaction “may not in and of itself substantially lessen competition but might contribute to a market condition that is significantly more concentrated,” she said.

The question is whether dominant incumbents have been “too easily committed” to buying rivals in ways that “lessen competition” or in pursuit of creating a monopoly, said Khan. The guidelines need to reflect the dynamics of the modern economy and Congress’ statutory mandates for agencies, she said. She noted the focus of Monday’s summit was merger reform and interagency collaboration.

The relationship between the FTC and DOJ “has never been better,” said DOJ Antitrust Division Chief Jonathan Kanter. He said he will work to ensure the division isn’t constrained by litigation costs. He cited the president’s fiscal 2023 budget request for the division, which has an increase of more than $80 million: “We intend to put that money to good use.”

DOJ is “more committed than ever to litigating when we believe a violation has taken place,” said Kanter. He noted his designation of two deputy assistant attorneys general to oversee litigation, a first for the division, which normally designates one. DOJ “must be prepared to try cases to a verdict when we think a violation has taken place,” he said. The division needs the scale to litigate “multiples of our current docket.”

Khan agreed with U.K. Competition and Markets Authority Chief Executive Andrea Coscelli about the need to close the gap between how antitrust enforcers view and assess transactions versus how analysts and investors view them. She credited CMA’s success to hiring additional technologists and financial analysts. Coscelli agreed on the importance of broadening an agency’s skillset but said enforcers need to ensure economists and lawyers remain the agency's “core and engine.”

The FTC needs to use its full set of tools granted by Congress, said Khan. The agency hasn’t really used substantive rulemaking authority on antitrust law, she said: It’s an area the agency is “closely examining” to see if marketwide competition rules could be “beneficial to the public.” On the enforcement front, the FTC is focused on “dominant firms” and unlawful conduct harming a large number of people, she said: The agency is thinking about how the law can be shifted to address new circumstances in digital markets.

The FTC and DOJ need to consider labor market impacts when reviewing the merger guidelines, the Communications Workers of America said in comments Monday. Enforcers need to examine how deals increase dominance over workers, CWA said. Wage suppression, restrictive contracts, nondisclosure agreements, union-busting and mandatory arbitration agreements are a few examples, CWA said.