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Chapter II Enforcement Institutions and Processes

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Chapter II Enforcement Institutions and Processes REPORT AND RECOMMENDATIONS 127 Chapter II Enforcement Institutions and Processes In the United States, in addition to the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC), fifty states and the District of Columbia are authorized to enforce federal antitrust laws as parens patriae, including in instances where the federal enforcers might have chosen not to challenge a transaction or conduct. Each state also has its own antitrust laws, which generally parallel federal law. In addition, numerous international competition authorities have begun to pursue enforcement much more aggressively, sometimes at odds with U.S. enforcement policies. Principles of federalism and sovereignty support the authority of these many enforcers. Their existence is not without costs, however. Multiple enforcers may investigate the same conduct or transaction, increasing the burdens on companies and, ultimately, costs to con- sumers. In addition, different authorities may have divergent views as to how antitrust law should apply to certain types of conduct or mergers. These differences potentially subject companies to a range of different legal obligations, thus either imposing substantial com- pliance costs or compelling companies to follow the rules of the most restrictive jurisdic- tion. Multiple enforcers also may seek different remedies with respect to the same conduct or transaction, whether because they view the merits of the conduct or merger differently, or because the applicable law compels a different outcome. All of these differences across antitrust authorities have the potential to impose costs and inefficiencies on companies that may be passed on to consumers. Of course, antitrust compliance and enforcement will always impose some costs on companies, regardless of the number of enforcers. It is important, however, to ensure that those costs do not overwhelm the benefits of antitrust enforcement or undermine consen- sus about the value of a strong antitrust enforcement regime. Enforcers should strive to avoid the imposition of unreasonable costs—for example, costs not reasonably justified by legitimate needs to gather further evidence or that could be avoided by coordination with, or deference to, other antitrust enforcers. The Commission was urged to examine the need for multiple enforcers and the costs that multiple enforcers impose. In particular, it was suggested that the Commission consider whether it is necessary to maintain two federal enforcement agencies—the DOJ and the FTC—to enforce the antitrust laws and whether it is necessary, or even appropriate, for states to enforce federal antitrust law as parens patriae. In addition, many commenters expressed concern about international enforcement, including the potential that other juris- 128 ANTITRUST MODERNIZATION COMMISSION dictions might apply their competition laws to discriminate against U.S.-based companies, that international trade might be adversely affected by the policies of other jurisdictions that may be more restrictive than those of the United States, or that other regimes might be more hostile to intellectual property rights. These important and interrelated questions focus attention directly on the procedural mechanisms used to enforce the antitrust laws. Accordingly, the Commission undertook to study a range of issues relevant to enforcement institutions and processes. The recom- mendations set forth in this Chapter address: (A) the consequences and costs of having two principal federal antitrust enforcers; (B) the costs of the merger review process used by the FTC and the DOJ pursuant to the Hart-Scott-Rodino Act; (C) the authority of the states inde- pendently to enforce federal antitrust laws; and (D) the implementation of mechanisms to enhance international cooperation in antitrust matters and appropriate convergence toward similar procedural and substantive approaches under each nation’s antitrust laws. REPORT AND RECOMMENDATIONS 129 Chapter II.A Dual Federal Enforcement 1. INTRODUCTION The Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have shared responsibility for government enforcement of the federal antitrust laws for decades. The position of Assistant Attorney General for Antitrust was created in 1903, and the Antitrust Division became a separate operating unit within the Department of Justice thirty years later.1 Congress separately created the FTC in 1914, in part specifical- ly to supplement the DOJ’s enforcement of the antitrust laws.2 Congress also believed that an administrative agency—conducting administrative adjudication of antitrust cases, and vested with broad information-gathering powers—would be a better vehicle for developing more flexible standards of antitrust law than were the courts.3 The antitrust enforcement authority of the DOJ and the FTC are similar. The DOJ enforces the Sherman Act and the Clayton Act through civil actions, and may also criminally prose- cute certain “hard core” offenses under the Sherman Act. The FTC enforces the antitrust laws through Section 5 of the FTC Act, which prohibits “[u]nfair methods of competition,” a term that is generally coextensive with the prohibitions of the Sherman and Clayton Acts.4 In addition to actions in federal court, the FTC may enforce Section 5 through internal admin- istrative litigation (known as Part III proceedings) before an administrative law judge, with review by the five FTC Commissioners and then a federal court of appeals.5 This system of “dual enforcement” has been the subject of periodic debate. Critics con- tend that having two agencies enforce the federal antitrust laws entails unnecessary dupli- cation and can result in inconsistent antitrust policies, additional burdens on businesses, or other obstacles to efficient and fair federal antitrust enforcement. Some have suggest- ed eliminating the FTC’s antitrust authority; others propose reallocating nearly all antitrust enforcement authority to the FTC, with the DOJ prosecuting only criminal violations of the Sherman Act. The Commission recommends no comprehensive change to the existing system in which both the FTC and the DOJ enforce the antitrust laws.* There appears to have been little, if any, duplication of effort between the two agencies, and they typically have worked togeth- er to develop similar, if not identical, approaches to substantive antitrust policy.6 Although concentrating enforcement authority in a single agency generally would be a superior insti- tutional structure,7 the significant costs and disruption of moving to a single-agency system * Commissioners Kempf, Litvack, and Shenefield would recommend eliminating the FTC’s antitrust enforce- ment authority and vesting responsibility for all antitrust enforcement with the DOJ. 130 ANTITRUST MODERNIZATION COMMISSION at this point in time would likely exceed the benefits.8 Furthermore, there is no consensus as to which agency would preferably retain antitrust enforcement authority. Because the Commission concluded that consolidation or reallocation of authority is not worth the costs (and any such efforts would likely be politically very difficult), the Commission focused its study and recommendations on the areas in which dual enforcement appears to have the most significant negative consequences. In particular, concerns regarding effi- ciency and fairness remain in the area of merger enforcement, where both agencies are responsible for enforcing the Clayton Act through the Hart-Scott-Rodino Act (HSR Act) pre- merger notification system. The Commission studied two particular ways in which having two agencies creates inefficiencies or unfairness to merging parties in certain situations. First, the Commission reviewed the process through which the DOJ and the FTC decide which agency will investigate a proposed merger (known as the “clearance process”). In some instances—most frequently high-profile mergers between large companies—the agen- cies take a lengthy time, sometimes exceeding thirty days, to decide which agency will con- duct the investigation of the merger. These delays impose significant burdens on companies with time-sensitive transactions that potentially provide great value to consumers and shareholders alike. The agencies attempted to address these concerns in 2002 by enter- ing into an agreement regarding the clearance process that sought to ensure a decision would be made within ten days. However, the agencies abandoned this agreement after con- gressional opposition to its provisions allocating mergers based on industry area. The delays the agreement appeared to alleviate remain. Second, the FTC and the DOJ take different approaches when seeking an injunction from a court to block a merger, in part because of the different statutes governing their author- ity in such instances. The DOJ generally seeks a permanent injunction (along with a pre- liminary injunction) against mergers it believes are anticompetitive, resolving the question fully and completely in a single proceeding before a judge. If the DOJ fails to obtain the per- manent injunction it seeks, the parties can consummate the merger without further antitrust litigation (assuming the DOJ does not appeal). In contrast, the FTC seeks only preliminary injunctions—not permanent injunctions—in federal district court when challenging mergers it believes are anticompetitive. The FTC’s approach permits it to seek permanent relief in administrative Part III proceedings if it fails to obtain a preliminary
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