Mergers and acquisitions, or M&A, have helped to establish, accelerate, and prolong U.S. innovation and economic success. Without them, our economic primacy is in jeopardy.
Unfortunately, leadership at the Federal Trade Commission has demonstrated extreme hostility to most corporate combinations. It has strayed from its core responsibilities as it pursues novel ways to place obstacles in the path of some of the nation’s most successful companies.
Now, the FTC must explain to Congress why it should receive $590 million to operate next year, including an increase of $160 million beyond the current allocation, at a time when employees say the agency has never been in worse condition, with many reports of declining morale and significant “brain drain” with the unexpected departure of experienced staff.
As Congress begins this review, here are some fundamental questions my former colleagues should consider posing:
Has the FTC adopted an M&A review process that finds any transaction presumptively bad?
Central to efficient markets are the forces that drive resources to where they can realize their highest potential. M&A is critical to this process, efficiently putting resources to work to advance innovation and consumer choice.
The FTC’s current M&A process suggests a fundamental misunderstanding of the role of M&A in an innovative economy. The process slows reviews to a crawl while increasing their costs, even when there is no competitive issue. One could conclude that the goal is to deter future mergers regardless of their value to workers, consumers, and the economy.
Why hasn’t the FTC been operating under a clear M&A standard for the last 18 months?
Not long after Lina Khan became FTC chair, the agency scuttled the consumer welfare standard, which for four decades has been a core underpinning of antitrust enforcement. The standard used leading consumer-focused measures such as price, output, product quality and innovation.
Yet more than 18 months after jettisoning its traditional vertical merger review guidelines on a party-line vote, the FTC has failed to put forward revised guidance. In the absence of clear standards linked to existing law, the FTC has assumed license to go beyond recognized legal authority and pursue instead a policy agenda that has dramatically chilled the overall M&A environment.
Why has the FTC opted for changes in M&A review policies that pose unnecessary delays and further burdens on the agency’s budget?
The FTC’s current review process is taxing its own limited financial and human resources because of a dramatically changed review process. For example:
• Last year, the FTC ended the practice of early review terminations, which was designed to clear combinations that are not likely to harm competition, forcing FTC staff and merging parties to undertake 30-day reviews even if there is no basis for the proposed combination to be found unlawful.
• The time it takes to review transactions under the FTC’s Second Request process is now almost a year, well beyond the congressionally authorized time limit. There have also been reports that the FTC has issued extensive, burdensome “second requests” in cases where the antitrust issues are more limited.
• The FTC has increasingly used its administrative litigation process, even though this process takes longer and is costlier than trying matters in U.S. District Courts, which is where the Justice Department’s Antitrust Division tries its cases. Even more perplexing is that in several key cases, the FTC ignored its own administrative judge’s factual findings.
• The FTC has indicated a willingness to litigate cases that are likely to lose. Is that a wise use of taxpayer resources?
At the end of the day, the FTC is a law enforcement body. The FTC has stated, however, that it is prepared to force merging parties to court even when the law and facts are not on its side. It did just that when it sought to block Meta from acquiring Within, a virtual reality developer. In that case, a federal judge denied the FTC’s request to block the acquisition, saying that the facts did not support the anti-competitive harm being alleged.
The FTC has effectively upended competitive M&A activity — opting for an agenda that presumes any proposed transaction is harmful and wasting resources on a fruitless process to stop M&A, severely crimping U.S. innovation and economic leadership. The FTC’s conduct raises important questions for Congress, starting with why taxpayer funds should be devoted to pursuing an agenda unsupported by law rather than principled enforcement.
• Rick Boucher is a former 14-term Democratic member of the House of Representatives and its committees with antitrust jurisdiction.
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