The Federal Trade Commission's Democratic majority, led by newly-installed Chair Lina Khan, already has made several modifications to the process by which the agency reviews transactions. These changes worry its Republican Commissioners.
The most recent example is a August 3, 2020, Press Release announcing that, unable to conclude its review of proposed deals within the statutory periods established by the Hart Scott Rodino (HSR) Act, the FTC has started sending letters warning those companies that proceed to closing that they "are doing so at their own risk."
On previous occasions, Republican Commissioners Noah Phillips and Christine Wilson have voiced their concerns publicly regarding this troublesome trend. For example, and as I noted in a July 23, 2021, Free State Foundation blog post, Commissioners Phillips and Wilson both issued statements objecting to the partisan decision to rescind the 1995 Policy Statement Concerning Prior Approval and Prior Notice Provisions in Merger Cases.
And in her July 28, 2021, Oral Statement to the House Committee on Energy & Commerce's Subcommittee on Consumer Protection and Commerce, Commissioner Wilson expressed alarm regarding "the agency's abrupt departure from regular order." A July 29, 2021, post to the FSF Blog reporting on her testimony recounted her conviction that "traditions and norms have been jettisoned."
In response to this latest action, Commissioner Wilson once again has made the decision to speak her mind.
In a statement released on August 9, 2021, Regarding the Announcement of Pre-Consummation Warning Letters, Commissioner Wilson declares that she is "gravely concerned that the carefully crafted HSR framework is suffering death by a thousand cuts." Grounding the August 3, 2021, Press Release in the broader context of other recent agency decisions, she argues that "these actions raise the costs of doing mergers and threaten to chill harmful and beneficial deals alike."
Before 1976, transactions were reviewed after the fact. As Commissioner Wilson recounts, this was less than ideal for all concerned: the government, businesses, and consumers. Congress, in passing the HSR Act, addressed this uncertainty by requiring that the parties to certain deals provide pre-merger notifications to the FTC and Department of Justice.
According to Commissioner Wilson, the announcement that the agency is sending warning letters, rather than completing its investigations within the time allotted by statute (or negotiating extensions thereof), suggests a return to the pre-HSR era. As the Press Release notes, the form letters make clear that the "investigation remains open" and "the agency may subsequently determine that the deal was unlawful." In the Commissioner's words, we once again find ourselves in an uncertain regulatory environment where, ex post, the FTC may attempt to "unscramble the eggs."
Questioning the stated justification for this change – an increase in the number of filings and a lack of agency resources – and referencing the fact that "[w]e know the Biden Administration has called for a review of the existing merger guidelines" that could result in the government catching a higher percentage of transactions in its net, Commissioner Wilson speculates that perhaps "something else is afoot."
In conclusion, Commissioner Wilson argues that such a fundamental change "defies the will of Congress" – and therefore should be undertaken only by Congress.
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