FTC changes course on pre-approval of new merger attempts
Federal Trade Commission is taking action on merger review policies following President Joe Biden’s executive order calling for a better understanding of potentially problematic mergers and acquisitions.
At a public meeting on Wednesday, the FTC voted to rescind a 1995 policy statement on pre-approval and notice provisions that FTC President Lina Khan said would help “better protect the public against illegal mergers and acquisitions “. The 1995 policy statement limited the use of the pre-approval and notice provisions to situations where there was a credible risk of merging parties by re-attempting anti-competitive agreements, whereas previously the provisions were more systematically required for mergers that the FTC had previously ruled illegal.
If a pre-approval provision is imposed, a company will need approval before attempting to repeat a merger or acquisition previously deemed illegal by the FTC. The notice provisions mean that the FTC should be notified of mergers or acquisitions that fall below the pre-merger notification threshold, as set out in Section 7A of the Clayton Act, also known as the Hart-Scott Act. Rodino (HSR).
Khan said that without the pre-approval provision, the FTC must open new and time-consuming investigations into new merger attempts or similar merger deals, even if the FTC has already found the deal to be illegal. The pre-approval provision requires that companies seeking to merge demonstrate why their new merger attempt would not hurt competition or create the same risks the FTC has previously warned about, Khan said.
“Without the pre-approval provision, the FTC could spend months reviewing documents, interviewing parties and fully investigating a merger that the agency has deemed illegal,” Khan said. “Although the Hard-Scott-Rodino Act of 1974 requires advance notice for certain transactions, it did not exempt the FTC from having to redo its work, even in cases where the agency had previously investigated and determined that a merger was illegal and transactions below the HSR threshold would not be reported HSR, therefore, was a supplement, not a substitute, for a pre-approval and notice policy.
Khan did not receive full support from FTC commissioners to overturn the policy, winning approval in a 3-2 vote.
Commissioner Noah Phillips opposed the rescinding of the policy statement. He said “things change in the market” meaning that a merger may have been illegal at some point, factors may change, which means that a new merger attempt may not be illegal. Failure to fully reassess attempted mergers or the like “will hamper normal market operations,” he said.
“The point is, you actually have to study the market,” Philips said. “Yes, investigating costs money, but understanding the businesses that lie ahead, understanding the markets is our job. When things change, even though the merger is the same, we have to take new facts, understand the realities of the market, and take all of that into account. “
Khan said FTC staff and commissioners will develop processes and procedures by which the commission will implement the pre-approval and notice provisions.
Also this week:
- President Joe Biden has appointed Jonathan Kanter, a top tech critic, to fill the role of deputy attorney general in the Department of Justice’s antitrust division. Kanter spent 20 years as an antitrust lawyer promoting a strict policy of antitrust and competition law enforcement. Among many former roles, Kanter previously served as an attorney for the FTC’s Competition Bureau. His appointment follows the appointment of Khan, another top tech critic, to head the FTC.
- Epic Games has filed an amended complaint in its antitrust case against Google, further describing Google’s alleged anti-competitive behavior with respect to the way it operates its app store, the Google Play Store. Epic sued Google last year for removing its popular Fortnite game from the Play Store, and a hearing is slated for October. The lawsuit has been linked to a similar antitrust lawsuit filed by 37 state attorneys general earlier this month against the Google Play Store. Epic has also sued Apple for removing the game from its App Store and is awaiting a verdict after the case goes to trial earlier this year.
- The UK Competition and Markets Authority has reported to Oliver Dowden, Secretary of State for Digital, Culture, Media and Sport, on its investigation into Nvidia’s acquisition of Arm Ltd. , a prominent UK based chip designer. Arm supplies chip designs to major companies around the world, including Apple. Earlier this year, Dowden expressed concerns that the acquisition could affect national security if the deal goes through.
- Salesforce has completed the acquisition of the communications platform Slack Technologies Inc. Salesforce CEO Marc Benioff said in a press release that the two companies “will define the future of enterprise software, creating the digital headquarters that enables every organization to ensure the success of its customers and employees from anywhere. “
Makenzie Holland is a news writer covering major tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education journalist at Wabash Plain Merchant.