In the past 12 months, leadership in the two federal agencies tasked with enforcing our nation’s antitrust laws has drastically changed. At the Antitrust Division of the Department of Justice, the top antitrust enforcer — the assistant attorney general for the Antitrust Division — has turned over several times with three different people serving in that role in an "acting" capacity and finally a fourth, William Baer, taking the role on a nonacting basis in late December 2012. Likewise, at the Federal Trade Commission (FTC), where five commissioners share top enforcement responsibility, two new commissioners have been sworn in since April 2012, a third seat sits empty, and a new chair has been appointed. With this turnover, many are wondering whether the agencies’ willingness to litigate during President Obama’s first term will continue. The simple answer is yes — with the more open question being whether there will be any change at the FTC.
During the past several years, the Antitrust Division significantly bolstered its litigation capabilities and then began to flex its litigation muscles by bringing more cases and demonstrating a willingness and ability to take those cases to trial and win. Most prominently, in August 2011, the division sued to block AT&T Inc.’s proposed acquisition of T-Mobile USA Inc., leading the companies to abandon the deal four months later. The division also sued to block H&R Block Inc.’s proposed acquisition of TaxACT and ultimately secured an injunction prohibiting the merger after several weeks of trial.
That aggressiveness has been on display on the criminal side as well, with more than $2 billion in criminal fines and 88,000 days of jail time since President Obama took office. Moreover, the division recently secured guilty jury verdicts in New York and Puerto Rico and won a $500 million fine following a criminal verdict in a jury trial against AU Optronics Corp.
Under the leadership of Baer, we expect a continued, if not increased, level of enforcement litigation. First, DOJ’s bolstered litigation apparatus is still in place, meaning that it has experienced litigators ready, willing and able to try cases. Second, Baer, who previously served as the director of the FTC’s Bureau of Comp­etition from 1995 to 1999, has extensive experience on both civil and criminal antitrust matters, giving him a unique perspective in determining whether the division can prevail in merger, cartel and other enforcement cases and, in turn, deciding whether to bring those cases.
Moreover, Baer’s tenure at the FTC was marked by aggressive challenges to both mergers and nonmerger conduct, including a successful challenge of Toys "R" Us Inc.’s anti-competitive conduct and a successful case blocking the proposed merger of Staples Inc. and Office Depot Inc. Both of those cases received much criticism when brought and were not considered easy cases for the FTC. Baer played key roles in pursuing them and, at least in the merger challenge, in rejecting a settlement offer that would have been an easy way to avoid risky litigation. Assuming Baer brings the same tough-minded analysis to the Antitrust Division, we anticipate seeing the division bring even more cases.
Indeed, the division has already been active during Baer’s first few months. On January 31, less than a month after Baer was confirmed, the division sued to block the proposed merger of Anheuser-Busch InBev S.A./N.V. and Grupo Modelo SAB de C.V. As Renata Hesse, Baer’s deputy assistant attorney general, commented, the case is a "good example" of what it means for the division to be "litigation ready." The case is currently stayed while settlement is pursued. Even if it is settled, it exemplifies the division’s continued aggressive litigation stance: Rather than spend time negotiating settlement and threatening potential suit, the division chose to bring suit, confident that its litigation capabilities would give it enough leverage to drive a satisfactory settlement or to try the case if necessary.
The division also continues to pursue several ongoing cases, including suits against Apple Inc. and American Express Co. Furthermore, the division has initiated at least three other cases in 2013, including a civil complaint against the Oklahoma State Chiropractic Independent Physicians Association and criminal actions against two international banks, one of which entered a guilty plea and paid a $50 million fine.
FEDERAL TRADE COMMISSION
Like the Antitrust Division, the FTC actively brought cases during Obama’s first term. For instance, in the merger arena, the FTC challenged proposed health care mergers around the country, including between Rockford Memorial Hospital and St. Anthony Medical Center (Illinois); Phoebe Putney Memorial Hospital and Palmyra Medical Centers — which the FTC recently won in the U.S. Supreme Court (Georgia); ProMedica Health Sys­tem and St. Luke’s Hospital (Ohio); and Laboratory Corp. of America and Westcliff Medical Laboratories (California). The FTC was also active in nonmerger litigation, particularly in its continued efforts to prevent so-called "pay-for-delay" or "reverse payment" settlements between brand-name drug companies and generic competitors, an issue that is now pending before the Supreme Court, and its campaign against allegedly anti-competitive conduct by companies with dominant market positions, including a suit against Intel Corp. that led to a settlement that mirrored the relief requested in the complaint.
Nonetheless, with the recent, very public decisions not to litigate the merger between Express Scripts Inc. and Medco Health Solutions Inc., two of the three largest pharmacy benefit managers, and the decision not to pursue a case against Google Inc., some have speculated that the days of aggressive litigation by the FTC are over. Compounding that speculation are public comments by the newest commissioners, Maureen Ohlhausen and Joshua Wright, that the FTC needs to be more precise in its enforcement decisions. For instance, Ohlhausen has said FTC cases should be "anchored to competitive and ultimately consumer harm"; otherwise, "they are completely adrift." Similarly, Wright recently said "one of [his] highest priorities as an FTC Commissioner is to support the use of evidence-based antitrust at the agency" such that "enforcement decisions [are] based upon sound economic and empirical foundations."
However, speculation that the FTC might shy away from litigation in the coming years is premature. The current four commissioners have already demonstrated their willingness to pursue litigation — announcing, for example, on March 12 that the FTC, in conjunction with the Idaho attorney general, would file a complaint to block St. Luke’s Health System Ltd.’s acquisition of Saltzer Medical Group.
Moreover, the five commissioners must be from different political parties such that three are from one party and two from the other, with the president’s party typically determining which way the balance swings. Traditionally, Demo­crat commissioners have been viewed as more aggressive in pursuing enforcement cases, whereas Republican commissioners have been considered to be more selective in the cases they vote to bring.
With that in mind, Ohlhausen’s and Wright’s comments — as the two Republi­can commissioners — are not surprising. Moreover, the two Democratic commissioners — Julie Brill and Chairwoman Edith Ramirez — have already voted out several complaints, with Brill indicating that she would have pursued even more cases and theories. For instance, she publicly disagreed with the FTC’s decision not to sue to block the Express Scripts/Medco merger and supported broader use of the FTC Act than most of her fellow commissioners in pursuing Google.
Thus, the new commissioner, once nominated and approved by the Senate, is likely to significantly influence how aggressive the FTC is in voting to bring suit because he or she will be the deciding vote on many issues. Given Obama’s public encouragement of greater antitrust enforcement, we anticipate that whomever he nominates will likely be an aggressive enforcer who pushes for more litigation.
The nomination and approval process could take several more months. In the meantime, the test case for how the five commissioners will vote could be the recently announced proposed merger of two office-supply superstores, Office Depot and OfficeMax Inc. If the FTC decides to investigate, the investigation will take several months such that if the commissioners are asked to vote to block the merger, all five will likely be in place. As discussed above, the FTC sued to block a similar proposed merger between Staples and Office Depot in 1997 and won. How the FTC handles this proposed transaction 15 years later might foretell the litigation direction of the FTC during the next several years.
J. Robert Robertson and Corey Roush are partners in Hogan Lovells’ Washington office, and Robertson is the former chief trial counsel for the Bureau of Competition of the Federal Trade Commission. They and others at the firm are/were involved in varying capacities in many of the matters mentioned in this article, including Laboratory Corp.’s acquisition of Westcliff; H&R Block’s attempted acquisition of TaxACT; the Express Scripts/Medco merger; Rockford’s attempted acquisition of St. Anthony; the FTC’s suit against Intel; the FTC’s investigation of Google; the pay-for-delay cases; and the AU Optronics matter. Janet McDavid, past chair of the American Bar Association Section of Antitrust Law and co-chairwoman of Hogan Lovells’ antitrust practice, and Will Rawson, an antitrust associate at the firm, provided assistance with the article.