Federal Trade Commission Chair Lina Khan recently defended her progressive stance on antitrust enforcement during an event, countering the barrage of criticism that the agency has faced from the business community. Khan emphasized that the FTC’s role is not to impose personal philosophical beliefs but rather to adhere to the statutes governing antitrust regulations. She highlighted that Congress, while enacting the antitrust statutes, expressed a preference for competition over monopoly. However, Khan clarified that the statutes do not prohibit the existence of a monopoly but rather the use of illegal tactics to obtain a monopoly. The FTC, therefore, scrutinizes monopolistic practices to ensure compliance with the law.
Khan further explained that the FTC assesses mergers from a competition perspective. However, she acknowledged that there are circumstances where large firms are necessary to deliver essential services and achieve the required scale. This nuanced approach recognizes the potential benefits of big firms while still prioritizing competition.
Broader Application of Antitrust Laws in New Guidelines
In the wake of recent developments, both the FTC and the Department of Justice Antitrust Division have unveiled new guidelines for mergers, signaling a more comprehensive application of antitrust laws. The draft guidelines, which are subject to public comment, introduce the consideration of labor competition and the potential negative impact of a series of mergers on overall competition. This broadened approach has faced backlash from the business community. The U.S. Chamber of Commerce’s executive vice president, Neil Bradley, criticized the guidelines, arguing that they aim to stifle merger activity, restricting smaller companies from accessing the capital and expertise necessary for growth and creating a disadvantage for U.S. businesses competing globally.
Khan responded to the criticism, highlighting that the FTC rarely intervenes in the majority of merger cases. Out of the 1,500 to 3,000 merger filings received annually, approximately 98% proceed without any further inquiries from the agency. Only around 2% of deals result in a “second request,” which initiates a deeper investigation. Ultimately, only a fraction of these cases face legal challenges. Khan acknowledged that issues arise when certain deals on the margins retrospectively reveal reduced competition, prompting corrective actions.
FTC’s Merger Enforcement Program and Court Record
Khan defended the FTC’s record in court regarding merger cases, stating that out of the 13 to 20 cases brought by the agency, it has lost two in federal court. She emphasized that these losses are acceptable within the larger context of the merger enforcement program. The agency selectively pursues cases with a high likelihood of success and uses unsuccessful outcomes as opportunities for improvement. Khan also highlighted the silver linings in losses, such as gaining additional clarity on case law. For instance, in the failed attempt to block Meta’s acquisition of Within Unlimited, the judge rejected some of Meta’s arguments concerning the applicability of the law.
Addressing concerns about outdated case citations in the new merger guidelines, Khan explained that even cases from the 1960s and ’70s continue to be relevant and influential in modern merger decisions. This is primarily due to the Supreme Court’s decreased involvement in merger cases in recent decades. Consequently, older legal precedents still hold weight in current proceedings.
Khan clarified that updates to the merger filing form aim to expedite the FTC’s review process rather than burden companies with additional requirements. These updates minimize the need for the agency to repeatedly request further information from the parties involved.
Considering Commercial Necessity and Morale at the FTC
Khan acknowledged the challenges faced by businesses in pursuing initial public offerings (IPOs) and recognized the arguments regarding the commercial necessity of acquisitions. However, she emphasized that each case’s circumstances dictate the agency’s approach. In instances involving early-stage pharmaceutical acquisitions versus those involving well-established drugs, the FTC’s evaluation and decisions differ accordingly.
Finally, Khan addressed the issue of low morale within the agency since her appointment as the youngest chair, at the age of 32. She acknowledged initial skepticism and tensions arising from her prior career focused on critiquing previous administrations and FTC decisions. Khan expressed regret for any misunderstanding and clarified that her critiques were never intended to question the talent and integrity of the agency’s career staff.
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