[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


 
                   STANDARD MERGER AND ACQUISITION REVIEWS 
                        THROUGH EQUAL RULES ACT OF 2015

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                           REGULATORY REFORM,
                      COMMERCIAL AND ANTITRUST LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                                   ON

                               H.R. 2745

                               __________

                             JUNE 16, 2015

                               __________

                           Serial No. 114-32

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
LAMAR S. SMITH, Texas                ZOE LOFGREN, California
STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia                SCOTT PETERS, California
RON DeSANTIS, Florida
MIMI WALTERS, California
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
DAVE TROTT, Michigan
MIKE BISHOP, Michigan

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                   TOM MARINO, Pennsylvania, Chairman

                 BLAKE FARENTHOLD, Texas, Vice-Chairman

DARRELL E. ISSA, California          HENRY C. ``HANK'' JOHNSON, Jr.,
DOUG COLLINS, Georgia                  Georgia
MIMI WALTERS, California             SUZAN DelBENE, Washington
JOHN RATCLIFFE, Texas                HAKEEM JEFFRIES, New York
DAVE TROTT, Michigan                 DAVID N. CICILLINE, Rhode Island
MIKE BISHOP, Michigan                SCOTT PETERS, California

                      Daniel Flores, Chief Counsel
                            
                            C O N T E N T S

                              ----------                              

                             JUNE 16, 2015

                                                                   Page

                                THE BILL

H.R. 2745, the ``Standard Merger and Acquisition Reviews Through 
  Equal Rules Act of 2015''......................................     3

                           OPENING STATEMENTS

The Honorable Tom Marino, a Representative in Congress from the 
  State of Pennsylvania, and Chairman, Subcommittee on Regulatory 
  Reform, Commercial and Antitrust Law...........................     1
The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in 
  Congress from the State of Georgia, and Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust Law     9
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary    10
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................    11

                               WITNESSES

Deborah A. Garza Esq., Partner, Covington & Burling LLP
  Oral Testimony.................................................    14
  Prepared Statement.............................................    16
David A. Clanton, Esq., Senior Counsel, Baker & McKenzie LLP
  Oral Testimony.................................................    26
  Prepared Statement.............................................    28
Abbott B. Lipsky, Jr., Esq., Partner, Latham & Watkins LLP
  Oral Testimony.................................................    35
  Prepared Statement.............................................    37
Albert A. Foer, Esq., Senior Fellow, American Antitrust Institute
  Oral Testimony.................................................    47
  Prepared Statement.............................................    49

                                APPENDIX
               Material Submitted for the Hearing Record

Response to Questions for the Record from David A. Clanton, Esq., 
  Senior Counsel, Baker & McKenzie LLP...........................    66
Response to Questions for the Record from Albert A. Foer, Esq., 
  Senior Fellow, American Antitrust Institute....................    68
Letter from Rick Pollack, Executive Vice President, the American 
  Hospital Association...........................................    73
Letter of Support for H.R. 2745, the ``Standard Merger and 
  Acquisition Reviews Through Equal Rules Act of 2015''..........    74
Letter from George P. Slover, Senior Policy Counsel, Consumers 
  Union..........................................................    77


STANDARD MERGER AND ACQUISITION REVIEWS THROUGH EQUAL RULES ACT OF 2015

                              ----------                              


                         TUESDAY, JUNE 16, 2015

                       House of Representatives,

                  Subcommittee on Regulatory Reform, 
                      Commercial and Antitrust Law

                      Committee on the Judiciary,

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 2:09 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Tom 
Marino (Chairman of the Subcommittee) presiding.
    Present: Representatives Marino, Goodlatte, Farenthold, 
Collins, Bishop, Johnson, Conyers, DelBene, and Peters.
    Also Present: (Majority) Anthony Grossi, Counsel; Andrea 
Lindsey, Clerk; and (Minority) Slade Bond, Counsel.
    Mr. Marino. The Subcommittee on Regulatory Reform, 
Commercial and Antitrust Law will come to order. Without 
objection, the Chair is authorized to declare recesses of the 
Committee at any time.
    We welcome everyone to today's hearing on H.R. 2745, the 
``Standard Merger and Acquisition Reviews Through Equal Rules 
Act of 2015.'' I will recognize myself for an opening 
statement.
    Today's hearing is on the ``Standard Merger and Acquisition 
Reviews Through Equal Rules Act of 2015,'' known as the 
``SMARTER Act.'' This legislation enacts an Antitrust 
Modernization Commission recommendation that the standards and 
processes applied in the merger review process should be 
identical between our two antitrust enforcement agencies.
    Since 1914, two Federal agencies have enforced our Nation's 
antitrust laws, the Department of Justice and the Federal Trade 
Commission. When a company wishes to merge with or purchase 
another company, it notifies both antitrust enforcement 
agencies of the proposed transaction. Ultimately, only one 
agency reviews the transaction to determine whether it violates 
the antitrust laws, and there is no fixed rule to determine 
which agency will conduct this review.
    When the reviewing antitrust enforcement agency concludes 
that the proposed transaction violates the antitrust laws, it 
then seeks to prevent the parties from consummating the deal. 
It is at this stage of the merger review process that the AMC 
identified a problem.
    The AMC noted that there are different standards applied 
and processes available to the FTC and DOJ when each agency 
seeks to block a proposed transaction. Each agency is subject 
to a different preliminary injunction standard.
    Additionally, the FTC has the option to unwind or prevent 
the closing of the transaction through administrative 
litigation, DOJ on the other hand cannot.
    The AMC concluded that, although certain of the differences 
between the FTC and DOJ may have some benefits, the disparities 
between the dual merger review processes result in unfairness 
and uncertainty. In light of this finding, the AMC recommended 
that Congress harmonize the merger review processes and 
standards between the two antitrust enforcement agencies.
    The SMARTER Act effectuates this recommendation. This 
legislation was carefully drafted to reform only the merger 
review process. The SMARTER Act does not prevent the FTC from 
pursuing administrative litigation in conduct cases, against 
consummated transactions, or in any other context outside of 
the merger review. This narrow construction is consistent with 
the AMC's recommendations.
    Our witnesses today come with experience in the FTC, the 
DOJ, the AMC, and in private practice. I look forward to 
hearing their testimony on the important reforms contained in 
the SMARTER Act.
    [The bill, H.R. 2745, follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]    
       
                               __________
                               
    Mr. Marino. And I now recognize the Ranking Member of the 
Subcommittee on Regulatory Reform, Commercial and Antitrust 
Law, Mr. Johnson of Georgia, for his opening statement.
    Mr. Johnson. Thank you, Mr. Chairman.
    Today's hearing is an important opportunity to consider the 
Federal Trade Commission's critical role in developing and 
enforcing antitrust law.
    Congress first established the Federal Trade Commission in 
1914 to safeguard consumers against anticompetitive behavior by 
specifically empowering the Commission with the authority to 
enforce, clarify, and develop antitrust law. Under the process 
of administrative litigation, also known as Part III 
litigation, the Committee may seek permanent injunctions in its 
own administrative court in addition to its ability to seek 
preliminary injunctions in Federal district court.
    This additional authority is a unique mechanism that takes 
advantage of the Commission's longstanding expertise to develop 
some of the most complex issues in antitrust law.
    Today, this Subcommittee will consider the Standard Merger 
and Acquisition Review Through Equal Rules, or SMARTER Act. 
This bill would create a uniform standard for preliminary 
injunctions in cases involving mergers, acquisitions, joint 
ventures, or similar transactions and, alarmingly, eliminate 
the Commission's century-old authority to administratively 
litigate these cases.
    Proponents of the SMARTER Act argue that divergent 
standards for enjoining mergers may undermine the public's 
trust in the efficient and fair outcomes of merger cases. But 
it is unclear that these differences are material, let alone 
that the differences have led to divergent outcomes in merger 
cases.
    In the absence of any evidence, it is difficult to support 
wholesale changes to longstanding antitrust practices at the 
FTC for consistency's sake alone based solely on speculative 
harms. But even assuming that there are material differences in 
cases brought under these standards, we should strike a balance 
in favor of competition by lowering the burden of proof in 
cases brought by the Justice Department, not by raising the 
Commission's burden for obtaining preliminary injunctions. 
Courts already require a lower burden of proof in cases brought 
by the Commission and Justice Department precisely because both 
are expert agencies equipped with large staffs of economists 
who analyze numerous mergers on a regular basis that may only 
bring cases that are in the public interest.
    To the extent that we should address perceived differences 
in the standard for preliminary injunctions in merger cases, 
legislation should favor increased competition, not the 
interest of merging parties.
    The SMARTER Act would also eliminate the FTC's authority to 
administratively litigate mergers and other transactions under 
Section 5(b) of the FTC Act. Leading authorities in antitrust 
across party lines have expressed serious reservations with 
eliminating the Commission's administrative litigation 
authority.
    For instance, Bill Kovacic, a former Republican chair of 
the Commission, has referred to this aspect of the bill as 
``rubbish,'' noting that the Commission has used administrative 
litigation to win a string of novel antitrust cases that courts 
have ultimately upheld where the Commission has had to fight 
every single foot along the way.
    Edith Ramirez, the chairwoman of the FTC, likewise wrote 
last Congress that eliminating the FTC's administrative 
litigation authority would ``fundamentally alter the nature and 
function of the FTC.''
    In light of these concerns, I sincerely hope that we can 
work to find an evenhanded solution that promotes competition 
in the market and protects the public interest.
    And with that, I thank the Chairman, and I yield back.
    Mr. Marino. Thank you, Mr. Johnson.
    The Chair now recognizes the Chairman of the full Judiciary 
Committee, Mr. Bob Goodlatte of Virginia, for his opening 
statement.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    I believe our Nation's antitrust laws serve an important 
function in rooting out anti-competitive and discriminatory 
behavior in the marketplace. I also believe that to be 
effective, these laws must be administered fairly and 
consistently.
    Today's hearing focuses on the ``Standard Merger and 
Acquisition Reviews Through Equal Rules Act,'' or the ``SMARTER 
Act,'' which makes important reforms to ensure that our 
antitrust laws are prosecuted in this manner. Specifically, the 
bill amends the standards and processes applied to proposed 
transactions so that they are no longer determined by the flip 
of a coin.
    One of the responsibilities of the Judiciary Committee is 
to ensure that the enforcement of our Nation's antitrust laws 
is fair, consistent, and predictable. We discharge this 
responsibility through vigorous oversight of the antitrust 
enforcement agencies and vigilant supervision of the existing 
antitrust laws. To assist the Committee in its antitrust 
oversight, the Antitrust Modernization Commission was formed 
and charged with conducting a comprehensive examination of the 
antitrust laws and existing enforcement practices.
    Following this review, the AMC issued a 540-page report 
that detailed the issues it examined and provided a number of 
recommendations for legislative, administrative, and judicial 
action. One of the issues the AMC examined was the existing 
disparities in the standards applied to, and processes used by, 
the Department of Justice and the Federal Trade Commission when 
they seek to prevent the consummation of a proposed 
transaction.
    As the AMC report states, ``Parties to a proposed merger 
should receive comparable treatment and face similar burdens 
regardless of whether the FTC or DOJ reviews their merger. A 
divergence undermines the public's trust that the antitrust 
agencies will review transactions efficiently and fairly. More 
important, it creates the impression that the ultimate decision 
as to whether a merger may proceed depends in substantial part 
on which agency reviews the transaction.''
    The subject of today's hearing, the SMARTER Act, solves the 
issue highlighted by the AMC. Specifically, the bill eliminates 
the disparities in the merger review process so that companies 
face the same standards and processes regardless of whether the 
FTC or DOJ reviews their proposed transaction.
    The SMARTER Act contains two principal reforms to the 
antitrust laws. First is the harmonization of the preliminary 
injunction standards that DOJ and the FTC must meet in court. 
The second reform is the removal of the FTC's ability to pursue 
administrative litigation following judicial denial of a 
preliminary injunction request.
    The Department of Justice cannot conduct administrative 
litigation, and it is unfair for some parties to be subject to 
administrative litigation while others avoid this prospect 
merely as a result of the identity of the reviewing antitrust 
enforcement agency. Notably, the removal of the FTC's 
administrative powers is constructed narrowly and applies 
solely to the context of merger review cases.
    The AMC recommended this removal and went on to state, 
``elimination of administrative litigation in HSR Act merger 
cases will not deprive the FTC of an important enforcement 
option. Although administrative litigation may provide a 
valuable avenue to develop antitrust law in general, it appears 
unlikely to add significant value beyond that developed in 
Federal court proceedings for injunctive relief in HSR Act 
merger cases. Whatever the value, it is significantly 
outweighed by the costs it imposes on merging parties in 
uncertainty and litigation costs.''
    The SMARTER Act is a common-sense, straightforward measure 
that implements reforms advanced by the bi-partisan members of 
the AMC. Furthermore, it is an important step to achieving this 
Committee's goal of ensuring our Nation's antitrust laws are 
enforced in a manner that is fair, consistent, and predictable.
    I look forward to hearing today's testimony from our 
esteemed panel of witnesses regarding the SMARTER Act, and I 
yield back the balance of my time.
    Mr. Marino. Thank you, Chairman Goodlatte.
    The Chair recognizes the full Judiciary Committee Ranking 
Member, Mr. Conyers of Michigan, for his opening statement.
    Mr. Conyers. Thank you, Mr. Chairman, and to my colleagues. 
This so-called SMARTER Act would make the Federal Trade 
Commission adhere to the same merger enforcement procedures as 
the Justice Department's Antitrust Division for proposed 
mergers, acquisitions, and other similar transactions. There 
are several reasons that lead me not to recommend this measure.
    By weakening the Commission's independence this bill, in 
fact, undermines Congress' original intent in creating the 
Commission in the first place. For good reasons that are still 
relevant today, Congress established the Commission to be an 
independent administrative agency, and we must be mindful of 
these reasons as we consider arguments in favor of the SMARTER 
Act.
    Even though the Justice Department's antitrust enforcement 
authority already existed at the time the Congress created the 
Commission in 1914, Congress established this agency in direct 
response to the Department's failure to enforce the Sherman 
Antitrust Act of 1890, as well as the Act's perceived failure 
to stop the wave of mergers and corporate abuses that occurred 
during the 24 years following its enactment.
    The Commission is an independent body of experts tasked 
with the developing antitrust law and policy free from 
political influence and particularly executive branch 
influence. Congress specifically gave the Commission broad 
administrative powers to investigate and enforce laws to stop 
unfair methods of competition, as well as the authority to use 
an administrative adjudication process to help it develop 
policy expertise rather than requiring the Commission to try 
cases before a generalist Federal judge.
    Unfortunately, the SMARTER Act, rather than strengthening 
the Commission's authority, does the opposite.
    A greater concern is the act's elimination of the 
administrative adjudication process for merger cases under 
Section 5(b) of the Federal Trade Commission Act. By doing so, 
the bill effectively transforms the Commission from an 
independent administrative agency into another enforcement 
agency indistinguishable, in fact, from the Justice Department.
    The Commission's administrative authority is designed to 
serve its role as an independent administrative agency. 
Eliminating it, therefore, threatens the Commission's 
distinctive role and independence. Make no mistake, eliminating 
the Commission's administrative authority opens the door for 
ultimate elimination of the Commission's role in competition 
and antitrust enforcement and policy development.
    You don't have to take my word for it alone. While 
supporting the bill's harmonization of preliminary injunction 
standards applicable to two antitrust enforcement agencies, the 
former Republican Commission Chairman has also publicly said 
that the rest of the SMARTER Act is ``rubbish.'' The former 
Chairman understood the ultimate effect of the SMARTER Act, and 
so do I, when he commented, let me put it this way, behind the 
rest of the SMARTER Act is the fundamental question of whether 
you want the Federal Trade Commission involved in competition 
law.
    Similarly, Commission Chairwoman Ramirez observed last year 
that the bill would have far-reaching immediate effects and 
fundamentally alter the nature and function of the Commission, 
as well as the potential for significant unintended 
consequences.
    So, finally, the SMARTER Act is problematic because it may 
apply to conduct well beyond large mergers, which could further 
curtail the Commission's effectiveness. In particular, the 
SMARTER Act would eliminate the Commission's authority to use 
administrative adjudications not just for the largest mergers, 
but for any ``proposed merger.''
    It also removes such authority to review a joint venture or 
similar transaction. Moreover, the measure could be read to 
eliminate the use of administrative processes for already 
consummated acquisitions, joint ventures, and other types of 
transactions that are not mergers as currently drafted.
    I recognize that the bill's authors have tried in good 
faith to respond to some of the concerns expressed by myself 
and by the Commission last year in response to an early draft 
of the SMARTER Act, and I appreciate these efforts. Moreover, I 
recognize that the Commission itself earlier this year changed 
its procedural rules to make it easier to end the use of 
administrative litigation where it loses a preliminary 
injunction proceeding in court.
    My disagreement with the sponsors, however, is more 
fundamental, at least regarding whether the Commission should 
retain its administrative litigation authority at all in merger 
cases. This disagreement leads me to oppose the so-called 
SMARTER Act, even in its written form.
    I thank the Chair and yield back my time.
    Mr. Marino. Thank you, Mr. Conyers.
    Without objection, other Members' opening statements will 
be made part of the record.
    Would the witnesses please rise to be sworn in and raise 
your right hand?
    Do you swear that the testimony you are about to give 
before this Committee is the truth, the whole truth, and 
nothing but the truth, so help you God?
    Let the record reflect that the witnesses have answered in 
the affirmative.
    Please be seated.
    I am going to begin by introducing all of the witnesses, 
and then we will come back for your opening statements. If I 
mispronounce your name, please do not hesitate to tell me.
    Our first witness is Ms. Garza, the co-chair of Covington & 
Burling's antitrust and competition law practice group. In 
private practice, she has been involved in some of the largest 
antitrust matters in the last 30 years, and many other 
litigation and regulatory matters on behalf of Fortune 500 
companies. Before joining Covington, Ms. Garza served as acting 
Assistant Attorney General in charge of the Antitrust Division 
at the Department of Justice.
    Ms. Garza also was appointed by President George W. Bush to 
chair the Antitrust Modernization Commission, a bipartisan, 
blue-ribbon panel created by Congress to study and report to 
the President and Congress on the state of antitrust 
enforcement in the United States. The AMC report has been 
widely praised for providing a valuable framework for policy 
proposals.
    Ms. Garza received her B.S. from Northern Illinois 
University and her J.D. from the University of Chicago.
    Welcome, Ms. Garza.
    Mr. Clanton as the senior counsel at Baker & McKenzie, 
where he also served as head of the firm's global and North 
American antitrust practice groups. Mr. Clanton has over 30 
years of experience representing clients in high-profile and 
complex antitrust matters. Prior to joining the law firm, Mr. 
Clanton served as a commissioner and acting chairman of the 
Federal Trade Commission.
    Mr. Clanton received his B.A. from Andrews University and 
his J.D. from Wayne Law School, where he served on law review.
    Welcome, Mr. Clanton.
    Mr. Tad Lipsky is a partner in the Washington, D.C., office 
of Latham & Watkins. He is recognized internationally for his 
work on both U.S. and global antitrust law and policy, and has 
handled antitrust matters throughout the world.
    Before Latham & Watkins, Mr. Lipsky served as the chief 
antitrust lawyer for the Coca-Cola Company for 10 years. Mr. 
Lipsky also served as Deputy Assistant Attorney General under 
William F. Baxter, who sparked profound antitrust law changes 
while serving as President Reagan's Chief Antitrust Official.
    Mr. Lipsky received his B.A. from Amherst College, his M.A. 
from Stanford University, and his J.D. from Stanford Law 
School.
    Welcome, sir.
    Our final witness is Mr. Bert Foer, the founder and former 
president of the American Antitrust Institute. Prior to 
founding AAI, Mr. Foer served in both private and public 
capacities in the antitrust field. His public service includes 
serving as the Assistant Director and Acting Deputy Director of 
the Federal Trade Commission's Bureau of Competition. His 
private sector experience includes working at Hogan & Hartson, 
serving as the CEO of a midsize chain of retail jewelry stores, 
working in various trade associations and nonprofit leadership 
positions, and teaching antitrust to undergraduate and graduate 
business school students.
    Mr. Foer received his B.A. magna cum laude from Brandeis 
University, and M.A. in political science from Washington 
University, and his J.D. from the University of Chicago Law 
School where he was an associate law review editor.
    Welcome, sir.
    Each of the witnesses' written statements will be entered 
into the record in its entirety. I ask that each witness 
summarize his or her testimony in 5 minutes or less. And to 
help you with that, you have timing lights in front of you. A 
light will switch from green to yellow, indicating that you 
have 1 minute to conclude your testimony. And when the light 
turns red, it indicates that the witness's 5 minutes have 
expired. When it gets to the point of when the light flashes 
red, I know you are intent on getting in your statement, I will 
politely pick up my hammer and just give you a little 
indication to please wrap up.
    Ms. Garza, your 5-minute opening statement, please?

   TESTIMONY OF DEBORAH A. GARZA ESQ., PARTNER, COVINGTON & 
                          BURLING LLP

    Ms. Garza. Thank you, Chairman Marino, Vice Chairman 
Farenthold, and Members of the Judiciary Committee and the 
Subcommittee. It is a pleasure to testify in support of the 
SMARTER Act as the former chair of Congress' Antitrust 
Modernization Commission. That Commission was a 12-member 
bipartisan, blue-ribbon panel comprised of six Democrats, five 
Republicans, and one independent. It was a bipartisan panel. We 
were an engaged group of experienced practitioners, several 
former enforcers and zealous advocates of strong antitrust 
enforcement, including a former general counsel of the Federal 
Trade Commission during the Clinton administration, and two 
former heads of the Antitrust Division during Democratic 
administrations.
    So I wanted to put that out there. It is not in my opening 
statement, but I wanted to be clear that we were Congress' 
committee and we were structured to be bipartisan, and that is 
the way that our recommendations came out.
    The AMC made three recommendations, each of them with 
bipartisan support, that relate to the subject matter of this 
hearing, which is creating greater parity between the DOJ and 
the FTC with respect to merger enforcement.
    One recommendation was that the FTC should adopt a policy 
that when it seeks to block a merger, it should seek both a 
preliminary injunction and permanent relief, and consolidate 
those two into a single hearing as long as agreement can be 
reached between the enforcement agency and the parties on an 
appropriate scheduling order. All of the commissioners joined 
in that recommendation, with the exception of one Democrat, so 
five Democrats joined in that recommendation.
    Second, the AMC recommended that Congress should amend 
Section 13(b) of the FTC Act to prohibit the Federal Trade 
Commission from pursuing further administrative litigation if 
it lost its motion for a preliminary injunction. One Democratic 
Commissioner declined to join on the basis that, at the time, 
the FTC had adopted a policy statement saying that it would 
rarely actually pursue administrative proceedings after losing 
a preliminary injunction motion.
    I should say that that policy statement, which was in place 
at the time of the AMC vote, was revoked. This was the Pitofsky 
rule that Mr. Lipsky refers to in his testimony, and I do in 
mine.
    Third, the AMC recommended that Congress act to ensure that 
the same standard for the grant of a preliminary injunction 
apply to both the FTC and the DOJ. Five Democrats joined in 
that recommendation.
    The SMARTER Act accomplishes the objectives of each of 
these recommendations. The premise of the AMC recommendations 
and the SMARTER Act is very simple: Mergers should not be 
treated differently depending on which agency happens to review 
it. The regulatory outcome should not be determined by an 
agency flip of the coin.
    I would like to emphasize that this is not anti-enforcement 
legislation, at least not by the lights of the AMC. We regard 
it to be pro-enforcement. We regarded that legislative change 
was important to maintain consensus about the value of a strong 
enforcement regime and that a perception of unequal or unfair 
treatment undermines that consensus.
    Chairman Goodlatte had this in his statement, but I want to 
read the carefully crafted words of the Commission in 
explaining its recommendation. ``Parties to mergers should 
receive comparable treatment and face similar burdens, 
regardless of whether the FTC or the DOJ reviews the merger. A 
divergence undermines the public trust that the antitrust 
agencies will review transactions efficiently and fairly. More 
importantly, it creates the impression that the ultimate 
decision as to whether a merger may proceed depends in 
substantial part on which agency reviews a transaction. In 
particular, the divergence may permit the FTC to exert greater 
leverage in obtaining parties' assent to a consent decree.''
    In closing, I would like to say that no one on the AMC 
believed at the time, and I do not believe today, that this 
legislation would make it difficult or impossible for the 
Federal Trade Commission to do its job. The Justice Department 
has done very well in pursuing its merger enforcement agenda 
working with the standards that apply to it. And I firmly 
believe that the Federal Trade Commission can do so as well. 
Thank you.
    [The prepared statement of Ms. Garza follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]    
        
                               __________
                               
    Mr. Marino. Thank you, Ms. Garza.
    Mr. Clanton?

 TESTIMONY OF DAVID A. CLANTON, ESQ., SENIOR COUNSEL, BAKER & 
                          McKENZIE LLP

    Mr. Clanton. Thank you, Mr. Chairman, and Members of the 
Committee.
    As you mentioned before, I served on the Commission right 
after the HSR Act was passed, and when we put into place the 
procedures, which largely are still there today after nearly 40 
years.
    And let me explain just briefly why I think this 
legislation is right on point. It is targeted. It deals with an 
issue of fairness that I will explain. And it does not--it does 
not, I emphasize that--create any wholesale revision to the 
FTC's administrative process.
    This legislation will focus only on proposed mergers, which 
essentially are reportable and nonreportable mergers under the 
HSR Act. And when Congress passed that statute, it created 
essentially a unified structure for how proposed mergers are to 
be reported to the FTC and the timelines the FTC has and DOJ, 
because both agencies are equally involved in that process. The 
administration of the statute is jointly managed. The FTC is 
the lead manager in terms of the whole reporting process, but 
Justice has to concur.
    In addition to that, over the years, the two agencies for 
reportable mergers have developed very extensive, substantive 
merger guidelines that the courts increasingly are accepting 
and have adopted.
    So you really have a very unique structure that is specific 
to this idea and to this whole concept of how merger review 
should take place.
    And let me just then go on to talk about what happens in 
this process. So the parties file merger notifications with 
both agencies. Both agencies then determine which agency is 
going to review it. Sometimes you know that in advance. Many 
times you don't know that in advance. So it could go to one 
agency or another.
    After that, if there are antitrust concerns, which is why 
you end up in litigation, there is a very extensive discovery 
process, what we call a second request. And the whole process 
goes on for many, many months, typically 6 months or longer. 
And at the end of that, if there is a problem and the parties 
cannot work out a settlement, either the FTC or DOJ, depending 
on the agency, decides if they have to go to court.
    And here is where the differences start to take place. They 
haven't occurred previously, but here the FTC has one process 
where they can go to court and seek a preliminary injunction. 
And if they get that, then they move forward on their 
administrative proceeding.
    By contrast, DOJ goes into court exclusively, and what has 
happened over recent years, instead of seeking a preliminary 
injunction, the parties typically agree, and it is a hearing on 
the merits. And that hearing encompasses all of the substantive 
issues, and DOJ bears the burden of proving a violation of 
Section 7 of the Clayton Act. So you have a significant 
contrast right there.
    And let me just explain briefly on the administrative 
process for the FTC, they go into court. They seek a 
preliminary injunction. That preliminary hearing may take 
several months.
    There is a case that I mention in my testimony that is 
going on right now involving Sysco and U.S. Foods. That case 
was brought in February. The decision is probably going to 
happen fairly soon from the district court judge. The FTC 
administrative proceeding doesn't start until July 21 of this 
year, 5 months after the case was filed.
    If you just look at the FTC rules, that case will then last 
for another 7 months. And at that point, it will probably be, 
based on the history of how long it takes DOJ cases which are 
on the merits, not a preliminary injunction, in the range of 5 
or 6 months. And I give two examples of two cases where that 
happened, two significant cases, by the way.
    So to get to the point quickly, just using those examples, 
and we could come up with others, the FTC administrative 
process takes roughly twice as long as it does to go into 
Federal court. And at the end of the day, the FTC hearing 
probably ends on a preliminary injunction decision. If the 
companies lose, they don't have the time. They have already 
probably invested a year-plus of the deal defending this and 
going through the investigative process. And at the end of 
that, they face another 7 months, not to mention potential 
judicial review.
    So the process is inherently unfair and differential, and 
that is what the legislation seeks to change. And I think that 
makes sense. The FTC has all the authority in the world and has 
a lot of experience in bringing cases in Federal court. They 
are not going to be harmed by this.
    Thank you.
    [The prepared statement of Mr. Clanton follows:]
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                               __________
                               
    Mr. Marino. Thank you, Mr. Clanton.
    Mr. Lipsky, your statement, please?

  TESTIMONY OF ABBOTT B. LIPSKY JR., ESQ., PARTNER, LATHAM & 
                          WATKINS LLP

    Mr. Lipsky. Thank you, Mr. Chairman. I am very honored to 
be asked to testify today. I am glad to appear before you.
    I just wanted to quickly echo some of the comments of the 
previous witnesses. I think I speak for everybody at the 
witness table here in saying that we all think that the United 
States was very wise to choose competition and vigorously 
enforced antitrust law as the main rule of economic 
organization for the United States. It is one of the things 
that has helped make the United States the leading economic 
powerhouse and innovator that it is today.
    And I think if any of us thought that there was any 
possibility that this bill would diminish the value of the 
antitrust laws and antitrust agencies, we wouldn't be here 
testifying in support.
    But I do testify in support like my colleagues, Mr. Clanton 
and Ms. Garza, because this bill I think very responsibly and 
in a very limited fashion corrects a very evident unfairness 
and an illogical aspect of the way that the procedures have 
come to work.
    You will see my statement that I have taken this over a bit 
of history. I guess I have gotten to the point where I know 
more history than most people that are around. That is not a 
good comment. But this concern particularly about the use of 
administrative litigation following an FTC proceeding in court, 
it is actually based on some very tangible negative experience. 
And you will see I discuss the RR Donnelly, Meredith/Burda 
merger, which was proposed in 1989 and went through 
administrative litigation, which took 6 years. And ultimately, 
the Commission decided that the district court had been right 
in declining to enter a preliminary injunction.
    And I also mentioned a case involving the Dr Pepper soft 
drink brand, an administrative litigation where the FTC 
actually won a preliminary injunction under Section 13(b) in 
1986. And despite a declaration from the D.C. Circuit that that 
matter was moot because it was originally proposed to be 
acquired by the Coca-Cola Company, that was the merger that was 
enjoined. And then the Dr Pepper brand was sold off, eventually 
combined with the 7-Up brand to form the Dr Pepper Seven-Up 
Company.
    But while all that wonderful soft drink industry history 
was proceeding, the Federal Trade Commission was going along 
with an administrative litigation. So the RR Donnelly case and 
the Dr Pepper case happened to culminate at about the same 
time, which was about 1995, shortly after Bob Pitofsky had been 
appointed Chairman of the Federal Trade Commission by President 
Clinton.
    Bob Pitofsky knows a tremendous amount about the antitrust 
laws and before coming to the Commission as Chairman had been 
in several roles there, including as a commissioner in a prior 
administration. And he very wisely, I think, issued the so-
called Pitofsky rule, 16 CFR 3.26, the policy statement.
    Now the policy statement, if you read it carefully, is a 
little bit cagey. It doesn't make any commitments, but it does 
say that the decision to proceed to administrative litigation 
following a loss of preliminary injunction would be considered 
on a case-by-case basis.
    And in the context of those two merger cases where the use 
of administrative litigation had been very heavily criticized 
in the bar, it was understood to essentially acknowledge the 
unfairness and the irrationality of having a situation where if 
your merger is judged in the Justice Department, you end up in 
a judicial proceeding, whereas if you are judged in the Federal 
Trade Commission, you face the possibility of this nearly 
endless administrative litigation. In the Dr Pepper situation, 
it was 9 years, and that was even before the final disposition 
by the appellate court.
    So I think the Pitofsky rule was wise. I think that the 
Commission has largely acted in accordance with the Pitofsky 
rule. And all the SMARTER Act would do, really, is codify I 
think what is FTC's better judgment that if there is a loss in 
the district court, it is best that administrative litigation 
be foregone.
    It is true that Congress originally foresaw a very special 
role in creating this administrative litigation for the FTC. 
But we also have to take into account that when the 13(b) 
statute, the injunction statute, was passed in 1973, it did 
provide the Commission with the possibility to seek a permanent 
injunction in the Federal district court. So the Commission has 
a very clear and obvious available authority so that it could 
decide to go to the district court.
    I will stop there. Thank you.
    [The prepared statement of Mr. Lipsky follows:]
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                               __________
                               
    Mr. Marino. Thank you, Mr. Lipsky.
    
    Mr. Foer, your statement, please?

  TESTIMONY OF ALBERT A. FOER, ESQ., SENIOR FELLOW, AMERICAN 
                      ANTITRUST INSTITUTE

    Mr. Foer. Thank you, Mr. Chairman, Members of the 
Committee.
    In previous hearings on the SMARTER Act, you heard from 
Professor John Kirkwood, like myself, a senior fellow of the 
American Antitrust Institute, and similarly well experienced at 
the FTC, albeit years ago. We sent the Committee a letter, and 
that is attached. This is a year ago, so that is attached to 
the testimony, and I understand it will be included.
    Our position on this legislation, though, has not changed. 
Put simply, we do not think that the case has been made for new 
legislation. I will give three reasons.
    First, while we agree there is no need for differently 
articulated standards for obtaining a preliminary injunction, 
we do not perceive that the differences between the FTC and the 
Justice Department that are addressed by this bill are 
differences that, in fact, make a difference.
    Federal courts generally require both agencies to make 
strong showings of probable anticompetitive effect before a 
preliminary injunction is issued. In actual practice, it rarely 
if ever occurs that a merger outcome is influenced much less 
determined by the theoretically more lenient public interest 
test for a preliminary injunction under Section 13(b) of the 
FTC Act.
    Second, if a single theoretical standard is somehow deemed 
so important, then we suggest, as I think Ranking Member 
Johnson suggested, that it would make more sense to modify the 
DOJ standard to conform to the FTC standard, so that the 
Department of Justice would share the presumption of expertise 
that is implicit in the FTC standard.
    And third, prudence compels caution. I sound like a real 
conservative here. Prudence demands caution when tinkering with 
the system of dual enforcement, including but not limited to 
administrative adjudication at the FTC. This system emerged out 
of robust debate during the 1912 presidential election 
campaign. Congress then was concerned about leaving antitrust 
enforcement exclusively in the hands of generalist judges, 
preferring to establish a sister administrative agency with 
group decision-making by a body of experts.
    It is no accident that modern merger law has been the 
result of administrative guidelines developed jointly by the 
two antitrust agencies rather than by judicial interpretations. 
It is administrative guidelines to which both agencies are 
particularly well-qualified to contribute which are the key to 
predictability and efficiency in merger controls.
    Administrative adjudication of mergers offers an important 
outlet for the application of such guidelines.
    Because of differences in the agency statutes and 
procedures, special care must be taken to foresee possible 
unintended consequences. To mention one such risk that can 
probably be fixed by additional drafting, consummated 
transactions involving nonprofit organizations, such as some 
important hospital mergers, might be precluded from 
administrative adjudication by the FTC. I don't think that is 
intended. I don't think it would be wise.
    But more important, if Congress takes away the FTC's 
administrative adjudication for mergers, it could be starting 
down one of those slippery slopes where brakes are likely to 
fail.
    The Clayton Act Congress and the FTC Congress were one and 
the same. Those farsighted legislators valued a competitive 
marketplace, which they saw endangered by ever-growing 
commercial establishments with ever-growing economic and 
political power. And they became convinced that having two 
agencies conceived with different structures share the 
responsibility, that that would be best to ensure the 
competitive economy they wanted to maintain.
    We at the AAI believe that the DOJ and FTC have contributed 
importantly to the evolution of merger law and policy, both as 
cooperators in a joint enterprise and occasionally as rivals, 
motivated by the desire to outshine the other in the public 
eye.
    In this regard, I might mention that the FTC has shown that 
it has already heard the criticisms of the Antitrust 
Modernization Commission by taking important steps, including 
3.26 of its rules to make their process both fairer and 
quicker.
    So why act now? Why not let the FTC continue to work its 
way through? We have not seen a lot of examples of problems, 
and the examples we see are very old and before the FTC took 
its lessons from the modernization commission.
    So I say, why fix a wheel that simply ain't broke?
    Thank you for, again, listening to our views.
    [The prepared statement of Mr. Foer follows:]
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                               __________
    Mr. Marino. Thank you, sir.
    We begin now with our questioning for 5 minutes. I am going 
to ask each of the Members to keep their questions to 5 
minutes.
    Please bear in mind that we like to get to ask each of you 
a question, so keep your answers as succinct as possible.
    I am going to begin with Ms. Garza, please. Ms. Garza, some 
suggest that the SMARTER Act will make merger enforcement more 
difficult for the FTC. Do you think DOJ is effective at 
preventing anticompetitive transactions? And is there any 
reason to think that the FTC cannot be equally as effective 
operating under the same rules?
    Ms. Garza. Congressman, I think the FTC can be equally 
effective, and they have shown themselves to be in a number of 
cases.
    The way it works now is that after investigating a 
transaction pursuant to the HSR Act, as Mr. Clanton has 
mentioned, after undertaking discovery and investigating for 3, 
4, 6, 8, 12 months, the Justice Department then generally goes 
to court, if it believes there is a problem. And it produces 
its evidence and has been successful in a number of cases in 
proving its case or in extracting a consent judgment from the 
parties that it feels adequately addresses the issues.
    There is no reason why the Federal Trade Commission that 
has the equal ability to get the same discovery for the same 
length of time cannot do the very same thing, go into a Federal 
court, prove that a merger is anticompetitive, and prevail in 
that way.
    All we are talking about here is basically giving the 
parties a chance to actually have that day in court. The 
concern is that the deal will not hold together. The concern is 
that the FTC has the ability and has been exploiting the 
process to try to win, not by the merits but by the process, 
and that is a problem.
    Mr. Marino. Thank you.
    Mr. Clanton, the FTC recently reinstated the Pitofsky rule 
that purports to create a higher threshold for proceeding with 
administrative litigation against a proposed transaction.
    Do you believe this rule is sufficient on its own, or is 
the SMARTER Act still necessary?
    Mr. Clanton. Mr. Chairman, I think the change made sense. 
The Commission did the right thing. But it only dealt with one 
part of the problem, and that relates to transactions where the 
Commission loses and the parties close the transaction and the 
Commission continues to litigate. I think they have not done 
that in a long time.
    There were some bad examples going back a few years, but my 
concern really is what happens when the FTC wins and then you 
start another phased administrative hearing that ends up 
doubling the length of time that you would have if you went 
into Federal court directly on the merits.
    Mr. Marino. Thank you, sir.
    Mr. Lipsky, in your testimony you discussed two cases where 
the FTC pursued administrative litigation after a Federal court 
ruling. In one case, the FTC continued administrative 
litigation for nearly 6 years after a Federal court denied its 
preliminary injunction request. In the other, the FTC continued 
administrative litigation after they had won in Federal court 
and the parties abandoned the transaction.
    Would these administrative litigation cases have been 
allowed to continue if the SMARTER Act was enacted into law?
    Mr. Lipsky. No, Mr. Chairman. I think they would be 
prohibited by the SMARTER Act, and I think that is the great 
virtue.
    I think the intent of the Pitofsky rule and the revision 
enacted this year is to try to achieve that same result. And I 
think this act is an improvement over the mere administrative 
policy statements, because it gives parties the assurance that 
the Commission will, indeed, act as it suggests it will act in 
these policy statements.
    And we have to remember that in 2008, there was a 
retrenchment. I believe Ms. Garza mentioned that they actually 
reversed the Pitofsky rule for a time back in 2008 when they 
were focusing on the acceleration of administrative litigation 
and involving the Commission much more directly in the conduct 
of the hearings.
    So this is a classic example of a good policy that the 
Commission has followed since 1995, by and large. But one of 
the primary merits of the legislation is that it would give 
parties the assurance that the Commission would adhere to that 
sound policy.
    Mr. Marino. Mr. Foer, in 20 seconds, why should some 
companies be subject to FTC standards and processes and others 
to DOJ standards and processes? Does having different standards 
and processes result in fair and consistent enforcement for our 
antitrust laws?
    Mr. Foer. I am not certain I understood the question.
    Mr. Marino. Having different standards and processes, is 
that fair and consistent?
    Mr. Foer. The question is theoretical because, in theory, 
there are some differences. But my point is that, in fact, the 
way things work, these differences don't really make a 
difference and are not sufficiently large, in view of the 
downside potentials, to justify legislation right now.
    Mr. Marino. Thank you, sir.
    The Chair now recognizes the Ranking Member, the gentleman 
from Georgia, Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman.
    Ms. Garza, in your statement, you write, ``The premise of 
SMARTER is simple. A merger should not be treated differently 
depending on which antitrust enforcement agency, DOJ or FTC, 
happens to review it. Regulatory outcomes should not be 
determined by a flip of the merger agency coin.''
    I was puzzled by your characterization of how the agencies 
go about determining which one will assert jurisdiction.
    Can you explain what you mean by the flip of a merger 
agency coin?
    Ms. Garza. Representative Johnson, there was a time when, I 
can honestly tell you, we seriously discussed coin flips when I 
was at the Justice Department.
    The issue is that, by and large, the FTC and the DOJ have 
concurrent jurisdiction to review a merger.
    Mr. Johnson. And they have determined between themselves 
when they will assert jurisdiction over a particular matter, 
depending upon each agency's decades of experience over the 
relevant merging parties' industry. Isn't that correct?
    Ms. Garza. Not exactly. There are some industries that tend 
to be looked at by one agency.
    Mr. Johnson. Well, then in those instances where it can't 
be determined, the agencies go through a careful process 
outlined by the antitrust laws and in some cases implemented 
through the Code of Federal Regulations. Isn't that correct?
    Ms. Garza. I am not sure I caught all of that. But what I 
would suggest to you is that it is not always----
    Mr. Johnson. Well, I guess what I am suggesting is that it 
is a little bit more than just simply a coin flip in 99.9 
percent of the cases. Isn't that correct?
    Ms. Garza. I probably don't agree with you on that. But I 
would ask you the question of why should one industry like the 
paper industry be subjected to a different standard than, I 
don't know, another industry, like the pharma industry.
    The problem is, if you are going to have two very 
diametrically different processes, Congress should consider, 
well, is there a reason why one industry--let's just assume, 
for the sake of argument, that----
    Mr. Johnson. Well, I don't want you to take up all of my 
time.
    Ms. Garza. Okay, I don't want to do that either. I can 
follow up in writing.
    Mr. Johnson. Okay.
    I would like to hear Mr. Foer's response to what you have 
said in response to my questions.
    Mr. Foer. Look, I would say that, I said before, there is a 
theoretical difference in the standards of how a preliminary 
injunction can be issued. But in point of practice, that 
doesn't seem to make much difference.
    So the real difference comes down to whether or not the FTC 
ought to be able to bring a case in front of the administrative 
process. And yes, that does take time.
    But one question we should look at, and the elephant in the 
room, I think, is what do we want our merger policy to be? We 
are only talking about less than 3 percent of those mergers big 
enough to notify get a second request. And only about half of 
those, about 1.5 percent a year, go through any kind of process 
that leads to a change in the terms or to stopping a merger.
    So it is a very small percentage of just those mergers that 
are really important for the country.
    Now, how much time do we think we should spend on 
understanding those mergers? If we spend very little time by 
rushing it through preliminary and final injunctions, which is 
the way we try to do it, then we are giving the advantage to 
the merger. If we take a lot of time, we are giving advantage 
to the government. We need to find the right balance.
    I think the FTC has a pretty good balance here, which 
says----
    Mr. Johnson. Well, let me ask then, Mr. Lipsky, you cited a 
couple cases--and excuse me for interrupting--one back in 1987 
and the other in 1991. Can you cite any more recent cases that 
show where the FTC continuing to litigate after a preliminary 
injunction has been denied has worked an undue hardship on one 
of the parties due to the length of time?
    Mr. Lipsky. I think probably the lead example of where the 
Commission was using its administrative procedures to really 
put tremendous pressure on the parties is the more recent Inova 
case.
    As I mentioned, since the issuance of the Pitofsky rule in 
1995, the Commission has been pretty good about adhering to 
that rule. It is just their persistent declining to affirm that 
that would be the rule--they say they have discretion to do 
what they have been doing, but they will never quite promise to 
do what they have been doing. I think that is where this 
legislation would really give the assurance to all the 
businesses that have to think about and plan for this process 
that is necessary to establish the rationality of the 
enforcement regime.
    Mr. Johnson. Thank you. I yield back.
    Mr. Marino. Thank you, Mr. Johnson.
    The Chair now recognizes the other gentleman from Georgia, 
Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman.
    I appreciate this hearing, again. As we have done a lot, it 
is time to get some stuff that we have done last Congress, it 
is time to get it again this Congress. Let us move some stuff 
forward. So I am hoping this will lead toward mark up and lead 
toward the floor, because we have had a very similar hearing to 
this last year. In fact, I think three of you were witnesses in 
the last hearing we did on this.
    But I want to make it clear that I am strongly in favor of 
a strong antitrust enforcement to prevent anticompetitive 
behavior, as I think are most the Members here today.
    But that said, Mr. Lipsky you mentioned in the last 
hearing, and we do go back and actually look at those, but it 
stuck with me. You said that, in some cases, the cost and 
duration of administrative litigation can discourage 
stakeholders from behavior that is actually procompetitive.
    Now, I don't know if you still feel that way or not, but it 
did stick with me at that point.
    You seem to want to make a comment. Do you still feel that 
way?
    Mr. Lipsky. Yes, absolutely.
    Mr. Collins. I think that is the interesting thing, because 
we don't want to do something in preventing anticompetitive 
behavior and get into discouraging procompetitive behavior. I 
believe this bill is a step in the right direction to ensure 
that, and I think that our antitrust laws and enforcement 
efforts are functioning effectively.
    So I think some questions I want to follow up on, Ms. 
Garza, as you know, in the 2003 Antitrust Modernization 
Commission report, it stated that parties to a proposed merger 
should receive comparable treatment and face similar burdens, 
regardless of whether it is FTC or DOJ reviews of the merger, 
and highlighted that differing treatment could undermine the 
public trust that transactions are reviewed efficiently and 
fairly.
    Last Congress, we discussed the importance of the process. 
I want to touch on that again. In your opinion, is there a real 
or perceived disparity in enforcement by the two agencies? And 
how does the process play into that disparity?
    Ms. Garza. So it is clear that there is a perception that 
there is a disparity. We heard that over and over again in 
testimony before the Commission, and it was something that the 
commissioners believed. As I mentioned, a lot of our 
commissioners are very experienced both in the government 
enforcement side and the advisory side.
    I believe that if you sat down in a bar with folks over at 
the DOJ and the FTC and have a discussion with them, they would 
agree with you, too.
    The fact of the matter is that in one case, if I am at DOJ, 
I am able to count on, if I want to, being able to have a day 
in court. I know that the DOJ is going to agree to do a 
consolidated preliminary injunction, permanent injunction 
hearing. It is going to take a while. It could still take more 
than a year, which is a long time to hold a deal together, but 
I know that I am going to get a hearing. There is some 
certainty.
    If I am at the Federal Trade Commission right now, I know 
that I am going to go through that same very lengthy 
investigation process, and then I am going to go to court where 
they are going to seek a preliminary injunction, and I would 
argue to you that if it is in the District of Columbia where a 
lot of these cases are going to be, I am going to have a 
deferential standard applied, whereas Rich Parker described it 
last year as sort of if it is a tie, the tie goes to the FTC, 
unlike with the DOJ. The DOJ actually has to prove its case.
    For the FTC, arguably, all they have to do is get to a tie, 
and then that gets them to an administrative hearing with 
several months more with an ALJ who is an FTC employee, and 
then possibly to an appeal to the Commission that issued the 
complaint, and then possibly back to the court, which applies a 
deferential standard. That is a difference in process.
    Mr. Collins. You just said something that was not in my 
questions, but you just made a comment that I think highlights 
a bigger issue that goes even beyond this hearing. It is the 
general perception of the public and what we do up here not 
only on the Capitol Hill and in Congress, but also the 
administrative agencies and executive branch agencies.
    And what you said--I don't think you meant what I am going 
to talk about, but I am going to at least take up what you 
said--is the American public today, and whether it is with 
going through agencies that don't turn over emails or going 
through problems of budgeting, they always feel like the tie 
goes to the government. The tie goes to the government.
    That is an interesting process here where we talk about 
where you said the DOJ has to prove the case. I think what we 
have to do, and I think this bill from my friend from Texas 
actually does that. But I think when we talk about this, 
whether it is anticompetitive or procompetitive, the government 
should not be in the way. This is not baseball where the tie 
goes to the--this should not be the tie goes to the government. 
It should be what is best for the American people, the very 
ones who put us here.
    And I think, Mr. Foer, in your testimony, one of things you 
actually had sort of implied is they try to outshine each 
other, that basically I think is the way you termed that.
    How do we get by that? I think that is the reason for this 
hearing. I think that is why this is actually a good bill.
    And that is why, Mr. Chairman, I am proud to have done 
that.
    But I think you raised a great point on that.
    And with that, Mr. Chairman, I yield back.
    Mr. Marino. Thank you, Mr. Collins.
    The Chair now recognizes the Ranking Member of the full 
Committee, the gentleman from Michigan, Mr. Conyers.
    Mr. Conyers. Thank you, Mr. Chairman.
    And I thank the witnesses for the discussion here.
    There is a 1989 report on the role of the Federal Trade 
Commission. The American Bar Association's Antitrust Law 
Section recognized that merger enforcement was probably the 
FTC's most important antitrust role.
    Mr. Foer, what is your response to that?
    Mr. Foer. Sir, would you mind repeating the case you are 
talking about?
    Mr. Conyers. Yes, the American Bar Association's Antitrust 
Law Section thought that the merger enforcement role was 
probably the FTC's most important activity as an antitrust 
provider.
    Mr. Foer. I am sorry, I am not catching on to what rule we 
are talking about here.
    Mr. Conyers. Mr. Lipsky, are you familiar with that?
    Mr. Lipsky. I think that is referred to as Kirkpatrick 2. 
It was an ABA report. It was a very broad report on all the 
functions of the FTC, right?
    Mr. Conyers. Yes.
    Mr. Lipsky. I think you would probably agree with that or 
maybe you don't.
    Mr. Foer. I think it was an extremely important document 
that led directly to the rebirth of the FTC as a functioning 
agency, a reputable agency of government.
    Mr. Conyers. Let me ask this question, Mr. Foer, why might 
the SMARTER Act threaten to create a slippery slope to ending 
joint enforcement of antitrust law by both FTC and DOJ?
    Mr. Foer. The problem is, why do we need an FTC? 
Ultimately, the question would be asked, why do we need a 
second body to enforce the laws if, for example, the 
administrative process is considered a failure here? ``It takes 
too long. We have to make everything move faster.''
    The slippery slope is that the precedent of removing this 
power of adjudication can lead people to believe that the 
adjudication is not an appropriate way to deal with antitrust 
cases. For those of us who believe in strong antitrust 
enforcement, and possibly everybody at the table would agree, I 
don't know, but I think it would be a disaster.
    Mr. Conyers. Mr. Lipsky, am I reading too much into your 
comments to suggest that you might not feel too badly if we end 
the FTC's antitrust enforcement role?
    Mr. Lipsky. Oh, I wouldn't support that statement at all. I 
think that is the kind of thing that would require a much more 
comprehensive look at the whole enforcement system. We are just 
talking about one very limited but impactful aspect of the 
enforcement system and a very targeted way of correcting it, 
and that is why I support the legislation, not because I have 
any broader argument with the existence of the FTC.
    Mr. Conyers. I am glad to hear that.
    Back to Bert Foer again, why is it important for the FTC to 
retain its ability to use administrative adjudication in merger 
cases?
    Mr. Foer. The importance is probably not central, because a 
lot of cases could be dealt with through the preliminary 
injunction route and are.
    But there ought to be and there are reserved under this 
Commission rule 3.26 the possibility under various 
circumstances where the public interest would actually require 
holding a trial. And the FTC made it clear it won't use that 
ability very frequently or very easily, but we should not take 
that possibility away, and especially if we see it as being 
used in a responsible way.
    Mr. Conyers. Thank you very much.
    And I thank the panel for their comments.
    I yield back, Mr. Chairman.
    Mr. Marino. Thank you, Mr. Conyers.
    The Chair now recognizes the Congresswoman from the State 
of Washington, Ms. DelBene.
    Ms. DelBene. Thank you, Mr. Chair.
    Thanks to all of you for being here today. We appreciate 
your time.
    I kind of have a question for everyone, and so we will see 
how we go here, but it could be argued that one of the 
strengths of administrative litigation is the ability of the 
Commission to consider novel legal theories and employ 
innovative forms of economic analysis, things that the DOJ may 
not be able to do.
    So how does the Commission use of innovative evidence and 
novel legal theories advance antitrust law, especially in 
today's complex and rapidly changing digital economy where 
there may not be precedents out there to rely on?
    I guess I will start with you, Ms. Garza.
    Ms. Garza. I don't think I understand the premise of the 
question. Both the DOJ and the FTC follow the same merger 
guidelines that they have jointly developed and issued. It is 
not clear to me what innovative approaches anyone has in mind 
with respect to mergers, but to the extent that there are any, 
it is not clear to me why the DOJ would be less well placed to 
pursue them than the FTC.
    Ms. DelBene. Part of, I think, the question has been around 
having people who have expertise in a given area and 
understanding, and are able to bring that expertise to the 
table, especially on a newer industry or newer type of 
technology.
    Ms. Garza. But then again, what you are suggesting is 
that--you still have the role of the court, of the FTC, in 
deciding whether or not there should be a preliminary 
injunction. So there is the issue of whether they should have a 
lesser standard. Then it goes to a single ALJ, which is an 
employee of the FTC.
    The question is, why would the ALJ be in any better 
position to assess a merger than any of our judges that we 
have?
    Bert talks about the difference between a generalist court 
and a specialist court, but the problem, I think what people 
perceive, is that what you are really setting up is a system 
where you get a lower standard for a preliminary injunction, 
and then it goes to a judge who is an employee of the Federal 
Trade Commission, and then it goes to the Commission that 
issued the complaint in the first place.
    I am not aware of any evidence such suggests that somehow 
or other that ALJ is in any better position than would be a 
district court judge in the District of Columbia or any other 
district to consider the arguments and the evidence that the 
DOJ or the Federal Trade Commission would put forward as to why 
a transaction would be anticompetitive.
    Ms. DelBene. Okay. Mr. Foer, if I could get your feedback 
on that?
    Mr. Foer. I think that the ALJ problem is a problem. You 
have to make sure that you have top level, top quality ALJs. 
But an ALJ who deals with antitrust issues day in and day out 
over years is likely to be much more expert and much more able 
to contribute to the systematic development of the law than a 
whole bunch of Federal district court judges, many of whom are 
not trained in economics at all and none of whom get very much 
experience with these cases. Very few Federal district court 
judges deal with more than a few merger cases, let's say, in 
any given year or maybe in a lifetime in a court.
    So there is a big difference between attempting to develop 
in a systematic, predictable way a pattern of law, and we are 
doing that largely through guidelines, jointly written 
guidelines, which is great, but we are not getting much 
assistance from the courts in developing this body of law.
    There are probably two reasons for that. One I gave you, 
the lack of expertise. But these cases are very fact intensive, 
and it is hard to have appeals or to develop appellate 
jurisprudence in these kinds of cases. In fact, we could have a 
guess about how long it has been since the Supreme Court took 
on a merger case. I don't know if any of us remember one in our 
lifetimes.
    So it is very useful, I think, to have a body of experts 
that can handle this law.
    Ms. DelBene. Thank you.
    Also, Mr. Foer, I think in your testimony you had talked 
about any concern about the SMARTER Act reaching transactions 
other than proposed Hart-Scott-Rodino mergers, so I wondered 
what your thoughts were on that and whether you think the bill 
would apply to other things like consummated transactions or 
non-merger activity, or move into that area.
    Mr. Foer. Well, I don't think it is going to apply outside 
of merger, joint venture, and whatever similar transactions 
might mean, although that in itself is an interesting question.
    It could give rise to some litigation down the road of what 
is covered and what is not covered. But I don't think that 
monopolization cases or cartel cases are going to be affected 
by this, nor would nonconsummated mergers. I did raise a 
question about nonprofits in that regard, but, hopefully, this 
bill would be interpreted so as not to create a problem that 
way.
    And it is intended to be narrow. I think it largely 
achieves that goal. But it is not bad in the sense that this 
bill will change areas outside of mergers.
    Ms. DelBene. Thank you.
    And I yield back my time, or I am out of time. Thanks.
    Mr. Marino. Thank you, Ms. DelBene.
    Seeing no other Members to ask questions, and I am told 
that we are going to be voting within the next 10 or 15 
minutes, this concludes today's hearing.
    I want to thank the witnesses for attending. It was very 
insightful and pleasant to hear a discussion from four lawyers 
who are very, very well-qualified and just brilliant in their 
field. So I want to thank you all for being here.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional materials for the record.
    I want to thank the people in the gallery for being here, 
and this hearing is adjourned.
    [Whereupon, at 3:24 p.m., the hearing was adjourned.]
                            A P P E N D I X

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