DealLawyers.com Blog

Following the chaotic election season, the country now knows that President George W. Bush will serve an additional four years as President of the United States. We have a good idea what that means for the big ticket items—tax policy, foreign policy, the War on Terror, and education—but what exactly does it mean for antitrust?

Four years ago when Tim Muris took over from Bob Pitofsky the position of Chairman of the Federal Trade Commission, and Charles James took over from Joel Klein as the chief antitrust enforcer at the Department of Justice, many predicted significant changes in antitrust enforcement goals. To a large degree, those predictions were incorrect. In particular the FTC continued aggressively to enforce the antitrust laws, with changes only at the margins from the previous administration.

Today, we’ll look very briefly at what the FTC has accomplished over the last four years, and what we should expect from a new administration. For those of you who do not pay as close attention to the machinations of the FTC as some of us do, Chairman Muris recently stepped down from his post at the FTC, and Deborah Majoras was named interim Chair of the FTC (she was a recess appointment by the President, who did not win confirmation from the Senate for a full appointment). Now that President Bush has won reelection, we should expect that Majoras’ appointment will be made permanent, and that she can now move forward to place her imprimatur on the policies of the FTC.

When he took over as Chair of the FTC, Tim Muris promised “continuity” in antitrust enforcement, and made that a recurring theme of the early speeches and papers put forth during his administration. It also was a theme in his enforcement agenda—from merger policy, to enforcement guidelines, to other areas of non-merger civil antitrust enforcement.

The FTC continued aggressively to investigate mergers in all industries—obtaining antitrust relief involving mergers in everything from super premium ice cream, to software, and from pickles and canned tuna to hospitals.

Chairman Muris also made it clear that it would be a goal of the FTC to stop what he saw was rampant abuse of the patent process by pharmaceutical companies, which he believes harm competition by excluding generic alternatives from the market. During his tenure, the FTC successfully sued companies for improperly listing patents in the Orange Book in attempt to extend the life of pioneer drugs, and thwarted efforts of drug companies to use the provisions of the Hatch-Waxman Act to bottleneck generics from entry into the market through abuses in the patent settlement process.

The FTC, under Tim Muris, also made it a point to bring actions against companies which sought to extend or maintain their monopolies through the abuse of the government or quasi-government process. For example, we saw the FTC bring action against several companies for interfering with the standard-setting process. In addition, the FTC continued to bring actions against physician groups for illegally colluding to bargain for better rates.

Chairman Muris also strived to make the decision-making process at the FTC more transparent. Under his watch, the FTC issued numerous guidelines and retrospectives, including a paper that provided insight into the FTC’s thinking of the State Action doctrine, how to improve competition in drug, health care and petroleum markets, as well as a seven-year retrospective of FTC merger challenges, that provided statistical information as to when the FTC would most likely challenge mergers.

And unlike past administrations, the FTC under Chairman Muris provided a great deal of insight into why the agency decided not to challenge mergers—for example, the FTC issued extensive decisions explaining the decision not to challenge the Cruise Line merger, the RJR Reynolds/Brown & Williamson merger, and the merger of two drug companies, Genzyme and Novazyme.

Chairwoman Majoras has not yet set forth a broad vision for change or continuity at the FTC, nor has she provided an indication that there will be significant changes in antitrust policy (quite likely because her appointment would only have been temporary had President Bush not secured reelection). Nevertheless, as we all have the tendency to do, we still can make several modest observations about what we should expect during the next several years from the FTC:

* Chairwoman Majoras was formerly at the Department of Justice, and primarily was responsible for the Department’s Microsoft case and settlement. To some, the DOJ’s settlement of the Microsoft case without seeking more extensive relief from the company for its antitrust transgressions (some argued that Microsoft should have been split into two or more separate companies) failed to fulfill its enforcement responsibilities. Whether the Microsoft settlement represents Majoras’ belief that the government should take a laissez faire approach to antitrust enforcement—or instead simply represented the best relief that the DOJ could achieve in that particular case—remains to be seen.

* We know that Majoras already has a good working relationship with the Justice Department (she is the first person to hold both the Chair position at the FTC and a senior position at the DOJ), and likely will make it a priority to work closely with the DOJ to ensure enforcement continuity between the two agencies. One notable shortcoming of antitrust agencies over the last four years was the continuing in-fighting between the agencies over which should have jurisdiction to review matters (the agencies have concurrent jurisdiction to review antitrust matters). With her DOJ past and good-working relationship with the Justice Department, Majoras should be able to smooth over the rough patches, resulting in a more efficient antitrust enforcement.

* The merger wave of the 1990s is not expected to return with the same vigor, but surely there will be more activity than there has been in the past four years. Chairwoman Majoras likely will be faced with a greater number of decisions on whether to challenge mergers than Chairman Muris. Because we likely will see a new wave of consolidation in the high-tech, retail and health care markets, it will be interesting to see whether the FTC closely scrutinizes the new wave of consolidation, or holds back on enforcement even in consolidating industries. During Muris’ administration the FTC continued aggressively to pursue merger enforcement in markets that were significantly consolidated, with a few notable exceptions that may have been challenged in an even more enforcement-friendly administration (for example, in the Cruise Lines and Tobacco mergers).

* Under Chairman Muris’ watch, the FTC was criticized by some for failing to pursue certain types of aggressive private-market abuse cases. During the last four years, the FTC brought very few actions alleging that private conduct, rather than abuse of the government process cases, violated the antitrust laws. In fact, in speeches and in briefs to the appellate courts, many suggested that the FTC presented a more “business-friendly” approach to antitrust, curbing the enthusiasm, for example, to require owners of “essential facilities” to share their assets with competitors, and to challenge aggressive bundled pricing strategies. Notably, the FTC did not bring a single action involving “vertical” restraints during the Muris administration (i.e., restraints involving relationships between different levels of the distribution chain). It remains to be seen whether the FTC, under Majoras, will continue to eschew enforcement in that area.

For antitrust practitioners, it will be interesting to see where Majoras takes the FTC. Those who predicted a lax enforcement regime under a Republican administration learned quickly that under Chairman Muris, the FTC still remained active in antitrust enforcement. Before we conclude otherwise over the next few years, we should take a wait-and-see approach with Majoras as well.