Companies hoping to get their proposed acquisition through regulatory approval will sometimes approach the Federal Trade Commission with a social justice commitment, like a promise to advance environmental, social and governance values, but non-statutory approaches like that will always be rejected, FTC Chair Lina Khan said in remarks to the Federalist Society November 10.
“Sometimes we get companies coming before us [that say] we know the merger is problematic from a competition perspective, but let us make certain ESG commitments to you all to waive that through,” Khan said in a fireside chat with Todd Zywicki, a law professor at George Mason University. “We firmly reject that and any other social justice type commitment. You can never rescue an illegal merger [that way]. We’ve tried to make clear that firms should not come to us with those types of non-statutory commitments because we’re bound by the text of the law.”
The FTC has attracted criticism for its efforts in the last two years to broaden the lens through which it views competition beyond consumer harm to factor in other criteria, like labor market and data concentration impacts. It has also increased the weight it puts on the idea of unfair competition that’s found in the FTC Act, which is a standard that’s harder to pin down than something like consumer harm through higher prices.
But looking at deals through the lens of unfair competition can help when the agency is trying to walk the fine line between promoting competition without promoting competitors.
“A lot of common law is designed to distinguish between permissible and impermissible forms of competition,” she said. “It’s impermissible to compete by colluding with your rival to compete with one of the other big guys in the market, [but] it’s permissible to compete by having greater operational efficiencies. The language of competition [by itself] doesn’t really serve us well. This is where the FTC Act on unfair methods of competition creates a better anchor for … distinguishing between methods of competition.”
Khan said the agency went back and examined all cases where FTC decisions were litigated as part of its recent proposed rewriting of its merger guidelines this year. The goal was to see where the guidelines strayed from the language in the laws the agency enforces, including the Sherman Act, the Clayton Act and the FTC Act, and in case law. They found that the guidelines in the past occasionally strayed, but she believes the proposed rewrite they released over the summer adheres strictly to statute and case law.
“Prior iterations of the guidelines in some instances had departed from the case law on the books,” she said.
The agency received thousands of comments on its proposed guidelines and is working through those prior to publishing a final version.
Khan praised bold antitrust actions federal agencies took in the past, like breaking up AT&T and requiring the unbundling of services by IBM in the 1970s, despite objections by the Department of Defense on national security grounds, because the actions led to the robust acceleration of new industries.
“They actually positioned the U.S. to get ahead,” she said. “They really sowed the seeds for the Silicon Valley revolution, the microchips …. If you do a comparative advantage [analysis] against Japan, or parts of Europe that actually doubled down on their national champions [like ATT and IBM were to the U.S. at the time] the U.S. ended up coming out ahead, because those national champions weren’t able to innovate in the same way.”