    [Senate Hearing 114-917]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-917

                          S. 2102, THE STANDARD MERGER
                        AND ACQUISITION REVIEWS THROUGH
                            EQUAL RULES ACT OF 2015

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

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON ANTITRUST,
                             COMPETITION POLICY AND
                                CONSUMER RIGHTS

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                OCTOBER 7, 2015

                                   __________

                               Serial No. J-114-33

                                   __________

             Printed for the use of the Committee on the Judiciary

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                            www.judiciary.senate.gov
                                www.govinfo.gov

                                     __________

                       U.S. GOVERNMENT PUBLISHING OFFICE
    53-824                     WASHINGTON : 2025

    -----------------------------------------------------------------------------------

                           COMMITTEE ON THE JUDICIARY

                      CHARLES E. GRASSLEY, Iowa, Chairman
    ORRIN G. HATCH, Utah                 PATRICK J. LEAHY, Vermont, Ranking
    JEFF SESSIONS, Alabama                   Member
    LINDSEY O. GRAHAM, South Carolina    DIANNE FEINSTEIN, California
    JOHN CORNYN, Texas                   CHARLES E. SCHUMER, New York
    MICHAEL S. LEE, Utah                 RICHARD J. DURBIN, Illinois
    TED CRUZ, Texas                      SHELDON WHITEHOUSE, Rhode Island
    JEFF FLAKE, Arizona                  AMY KLOBUCHAR, Minnesota
    DAVID VITTER, Louisiana              AL FRANKEN, Minnesota
    DAVID PERDUE, Georgia                CHRISTOPHER A. COONS, Delaware
    THOM TILLIS, North Carolina          RICHARD BLUMENTHAL, Connecticut

                Kolan L. Davis, Chief Counsel and Staff Director
          Kristine Lucius, Democratic Chief Counsel and Staff Director

            .........................................................

                     SUBCOMMITTEE ON ANTITRUST, COMPETITION
                           POLICY AND CONSUMER RIGHTS

                         MICHAEL S. LEE, Utah, Chairman
    DAVID PERDUE, Georgia                AMY KLOBUCHAR, Minnesota, Ranking
    THOM TILLIS, North Carolina              Member
    CHARLES E. GRASSLEY, Iowa            CHRISTOPHER A. COONS, Delaware
    ORRIN G. HATCH, Utah                 AL FRANKEN, Minnesota
                                         RICHARD BLUMENTHAL, Connecticut

                 William Levi, Chief Counsel and Staff Director
         Elizabeth Farrar, Democratic Chief Counsel and Staff Director

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page

    Lee, Hon. Michael S..............................................     1
    Leahy, Hon. Patrick J.
        Prepared statement...........................................    87

                                   WITNESSES

    Clanton, David A.................................................    18
        Prepared statement...........................................    32
        Responses to written questions...............................    88

    Garza, Deborah...................................................    16
        Prepared statement...........................................    40
        Responses to written questions...............................    94

    Jacobson, Jonathan M.............................................    21
        Prepared statement...........................................    51
        Responses to written questions...............................   102

    Lipsky, Abbott B., Jr............................................    20
        Prepared statement...........................................    62
        Responses to written questions...............................   104

    Ramirez, Edith...................................................     2
        Prepared statement...........................................    72
        Responses to written questions...............................   111

                                    APPENDIX

    Items submitted for the record...................................    31

                          S. 2102, THE STANDARD MERGER
                        AND ACQUISITION REVIEWS THROUGH
                            EQUAL RULES ACT OF 2015

                                  ----------

                           WEDNESDAY, OCTOBER 7, 2015

                                  United States Senate,
                         Subcommittee on Antitrust, Competition
                                   Policy, and Consumer Rights,
                                    Committee on the Judiciary,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 10:10 a.m., in
    Room 226, Dirksen Senate Office Building, Hon. Michael S. Lee,
    Chairman of the Subcommittee, presiding.
        Present: Senators Lee [presiding], Tillis, Hatch,
    Klobuchar, and Blumenthal.

               OPENING STATEMENT OF HON. MICHAEL S. LEE,

                 A U.S. SENATOR FROM THE STATE OF UTAH

        Chairman Lee. Welcome. Senator Klobuchar, the Ranking
    Democrat, has been held up in another meeting. She may be
    joining us in a little while, but we are going to go ahead and
    proceed without her in the meantime.
        Today's hearing focuses on the Standard Merger and
    Acquisition Reviews through Equal Rules Act, or the SMARTER
    Act. The SMARTER Act contains a series of important reforms
    that are designed to address existing disparities in the
    standards applied to and processes used by the two antitrust
    enforcement agencies--the Department of Justice and the Federal
    Trade Commission--when they seek to prevent the consummation of
    a proposed transaction.
        These disparities were examined by the bipartisan Antitrust
    Modernization Commission, which was formed pursuant to the
    Antitrust Modernization Act and charged with conducting
    comprehensive examination of the antitrust laws and existing
    enforcement practices.
        In the Commission's view, ``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
    importantly, it creates the impression that the ultimate
    decision as to whether a merger may proceed depends in
    substantial part on which agencies--agency reviews the
    transaction.''
        Accordingly, the Commission recommended and the SMARTER Act
    implements two principal reforms. The first ensures that,
    regardless of which agency reviews a proposed transaction, the
    standard by which a court grants a preliminary injunction is
    the same. The second requires the Federal Trade Commission to
    go to court, just like the Department of Justice, when it seeks
    an injunction of a proposed transaction, rather than using its
    internal administrative process to review the merits.
        These reforms are necessary to ensure that the antitrust
    laws are applied in a manner that is consistent and fair to all
    parties. I look forward to our discussion.
        We will proceed now with our first witness. Chairwoman
    Ramirez, will you please stand and be sworn? Do you affirm that
    the testimony you are about to give before the Committee will
    be the truth, the whole truth, and nothing but the truth, so
    help you God?
        Chairwoman Ramirez. I do.
        [Witness is sworn in.]
        Chairman Lee. Thank you.
        Chairwoman Edith Ramirez was sworn in as Commissioner of
    the Federal Trade Commission in April 2010 and became
    Chairwoman of the FTC in March 2013. At the FTC Chairwoman
    Ramirez has focused on promoting competition and innovation in
    the technology and health care sectors, protecting consumers
    from deceptive and unfair practices, and safeguarding consumer
    privacy.
        Before joining the FTC, Chairwoman Ramirez was a partner in
    the Los Angeles office of Quinn Emanuel Urquhart & Sullivan,
    where she litigated complex business disputes, including
    intellectual property, antitrust, unfair competition, and
    advertising matters. She is a graduate of Harvard Law School,
    where she was an editor of the Harvard Law Review, and also a
    graduate of Harvard College.
        Chairwoman Ramirez, thank you for joining us, and we look
    forward to your testimony.

              STATEMENT OF HON. EDITH RAMIREZ, CHAIRWOMAN,

                FEDERAL TRADE COMMISSION, WASHINGTON, DC

        Chairwoman Ramirez. Thank you, Chairman Lee and Members of
    the Subcommittee, for inviting me to testify. I appreciate the
    opportunity to discuss the Federal Trade Commission's efforts
    to promote competition, the value of the Commission's merger
    enforcement process, and my concerns with the proposed
    legislation.
        In my view, the bill is unnecessary and would remove
    authority that the Commission has used successfully for over
    100 years to promote competition and advance consumer welfare.
    We all know, competition is the core of our economy. Robust
    competition leads to lower prices, higher-quality goods, and
    innovation. The FTC seeks to promote competition through a
    careful and thorough fact-intensive approach to law
    enforcement.
        One of the Commission's most important responsibilities is
    preventing mergers that may substantially lessen competition in
    violation of Section 7 of the Clayton Act. Although most
    mergers do not raise competitive concerns, we seek to identify
    and, where necessary, challenge anticompetitive transactions.
    Those efforts have preserved competition in vital sectors of
    the economy, including health care, technology, consumer goods
    and services, and energy, among others.
        Between FY 2010 and 2014, the FTC challenged approximately
    21 mergers per year. Most of those proceeded with negotiated
    divestitures, but in one or two cases each year, the Commission
    filed suit in Federal court to block the merger pending an
    administrative trial. These numbers are similar to those of the
    Department of Justice during the same time period.
        The FTC's administrative process has played an important
    role in challenging harmful mergers and advancing consumers'
    interests. As Congress intended, the Commission's
    administrative role has proven especially valuable for
    developing antitrust law in complex cases where the FTC has
    been able to apply its competition expertise.
        The Commission's efforts to prevent anticompetitive
    consolidation among health care providers is an important
    example. After losing a number of hospital merger cases, the
    FTC used its information gathering and research capabilities to
    improve its approach to litigating hospital cases. The
    Commission's 2007 administrative decision in the Evanston case
    laid the groundwork for a string of successful FTC challenges
    against other anticompetitive hospital mergers and has likely
    deterred still more that similarly threatened higher prices and
    lower-quality care.
        The Commission has brought its expertise to bear through
    the administrative process in other merger cases as well as in
    non-merger matters involving significant areas of antitrust
    law. These include pay-for-delay settlements between branded
    and generic pharmaceutical companies and the scope of the State
    action doctrine.
        Importantly, FTC administrative decisions are subject to
    judicial review, and courts have affirmed Commission
    administrative decisions at a very high rate. This includes
    wins in 10 out of 13 Commission administrative competition
    decisions over the last two decades. This number rises to a 11
    once we factor in that the Commission's 2003 ruling in
    Schering-Plough, which was reversed by the Eleventh Circuit,
    was ultimately vindicated by the Supreme Court's 2013 decision
    in the Actavis case.
        I believe the proposed legislation risks undermining the
    Commission's beneficial administrative role in merger
    enforcement. Although the FTC's process for challenging mergers
    includes an administrative hearing, there is no evidence that
    the Commission's procedures prejudice the parties involved. In
    2009, for instance, the FTC modified its rules to streamline
    the administrative process in response to concerns the process
    was too long. This included expediting the pretrial hearing and
    appeal phases as well as imposing tight deadlines for the
    Commission to rule on the merits of a case. As a result, the
    length of FTC administrative litigation is comparable to that
    in federal court.
        Additionally, although the preliminary injunction standard
    in the FTC Act is worded differently than the one that applies
    to the Department of Justice, in my view there is no practical
    difference between what each agency must show to obtain a
    preliminary injunction. Both agencies must make a robust
    evidentiary and legal showing that a transaction is likely to
    substantially lessen competition.
        In the Commission's two most recent PI actions--one a win
    and another a loss--both courts made clear that they were
    assessing the FTC's likelihood of success on the merits as well
    as balancing the equities, just as occurs in a DOJ case.
        Furthermore, this past March, the Commission reaffirmed its
    policy that when a Federal court denies a request for
    preliminary injunction, it will carefully consider whether to
    press forward with administrative litigation. Notably, over the
    last 20 years, the Commission has not proceeded
    administratively following a loss at the preliminary injunction
    stage. In short, there is no evidence that the FTC's
    administrative process prejudices parties. In my view the
    bill's proposed modifications to the Commission's adjudicative
    authority are unnecessary and unwarranted.
        Indeed, by eliminating the ability of the FTC to use its
    administrative process in certain merger cases, the proposed
    legislation would alter a fundamental feature of the FTC's
    institutional design, one that Congress very deliberately
    granted the agency more than 100 years ago. Such a change risks
    eroding the FTC's effectiveness in ensuring a competitive
    marketplace to the detriment of consumers. For these reasons, I
    have serious concerns about the bill.
        Thank you, and I am happy to respond to any questions you
    may have.
        [The prepared statement of Chairwoman Ramirez appears as a
    submission for the record.]
        Chairman Lee. Thank you very much, Chairwoman Ramirez.
        The Department of Justice's approach to blocking a merger
    is pretty straightforward. The Department of Justice seeks a
    preliminary injunction in Federal district court, and it then
    agrees with the parties to the transaction to combine these
    proceedings with respect to both the preliminary injunction and
    a permanent injunction.
        The parties then litigate before a Federal District Judge,
    the same Federal District Judge, both the merits of the case
    and the preliminary injunction. This is one proceeding in front
    of one judge.
        By contrast, the FTC's practice is to seek only a
    preliminary injunction in Federal court, and if the FTC first
    prevails in Federal court on its motion for a preliminary
    injunction, any trial on whether the transaction would be
    unwound would occur not in front of the same district judge
    that handled the PI, but in an entirely separate proceeding and
    at a later date.
        Accordingly, the parties that end up before the FTC are, in
    effect, forced to litigate twice--the preliminary injunction in
    Federal court and then the merits in the FTC's administrative
    process. All this occurs simply because of the fact that the
    agency that is reviewing the transaction is the FTC rather than
    the Department of Justice.
        Help me understand, Chairwoman Ramirez, is there a good
    reason for subjecting certain parties or certain industries to
    one process and other parties to another more onerous process?
    In other words, is there anything unique about the jurisdiction
    of the FTC and the types of industries or companies that are
    subject to the FTC's jurisdiction that makes your process
    uniquely suited to those types of transactions?
        Chairwoman Ramirez. This was a decision that Congress made
    when it created the Federal Trade Commission back in 1914. It
    very deliberately authorized the FTC to have an administrative
    process. It wanted to have an expert bipartisan body that would
    have the ability to exercise its competition expertise in this
    arena. That was a very deliberate decision made by Congress.
        Let me also say that, first of all, when the Department of
    Justice elects to combine its preliminary injunction phase
    along with the ultimate merits of the case, that is a decision
    that is made by the Department of Justice and the parties. In
    litigation, typically one goes through a preliminary injunction
    phase and then proceeds to ultimately litigate on the merits.
    That is just a choice that is made during the course of
    litigation by DOJ and the parties.
        I believe that the process at the FTC, while certainly
    different and including an administrative process, is both
    fair, works quite well, and works to the advantage of
    consumers. My concern with eliminating this authority is that
    it will--it risks undermining the effectiveness of the FTC,
    which has played a very important and beneficial role in
    preserving competition.
        Chairman Lee. You have got the authority to do that. I
    mean, the FTC seeks permanent injunctions in many other
    contexts, including some consummated mergers. It does not lack
    the authority to do so. It does not lack the authority to seek
    a permanent injunction. Why doesn't the FTC simply consolidate
    the PI with the permanent injunction proceedings in the same
    manner that DOJ does?
        Chairwoman Ramirez. Again, the--this is part of the Federal
    Trade Commission's DNA. We were designed to have this
    administrative function, and that is an authority that I think
    the agency ought to use. It uses it I think quite ably as
    evidenced by the track record that we have.
        I believe that the procedures, again, while different, are
    comparable and fair. I do not believe that the processes, the
    differing processes result in any different outcome for
    parties. They are different, but in my mind, they are fair,
    they work well, and I think altering that authority risks
    eroding a very important component of why it was that the FTC
    was created by Congress.
        Chairman Lee. Sure. I understand that. I understand this
    has been in place for over a century and that Congress made a
    choice when it gave the FTC this authority. Of course, it is
    our job as a Congress to review these things from time to time
    and to figure out whether it still makes sense. I am not sure
    that there--I am not aware of any indication that Congress at
    the time was contemplating this particular dynamic, this
    particular disparity that we have now seen develop in this area
    of the law. We will follow up more on that in a minute, but my
    time has expired. We will go now to Senator Klobuchar.
        Senator Klobuchar. Thank you very much, Mr. Chairman. I
    apologize for being late. I had a Steering Committee meeting,
    and it went over a little bit. I know we like to start these
    things on time. I welcome the Chairwoman. Chairwoman Ramirez,
    thank you so much for being here, and congratulations. She won
    a consumer award last night. I happened to be there, so
    congratulations for that.
        Just to summarize, I think two of the arguments, while this
    is modest legislation, I think proposed for good reasons, from
    one side, in terms of the costs of doing this just to summarize
    because it is a complex subject, I think the first would be
    that just losing the benefits of the FTC applying its expertise
    in administrative litigation, in rare cases a court may deny a
    preliminary injunction because economic learning and research
    may develop faster than the legal doctrine. I suppose the
    argument would be that the FTC would eliminate--would not be
    allowed to pursue this possibility of administrative litigation
    or using its expertise; the second argument being sort of the
    risk of unintended consequences, that by passing this change,
    would we raise the standard for obtaining a preliminary
    injunction for both agencies, or despite that stated attempt,
    the courts apply the SMARTER Act provisions to unconsummated
    mergers or other conduct. Would that be fair to summarize the
    issues that you raise?
        Chairwoman Ramirez. That is a fair summary, yes. Thank you.
        Senator Klobuchar. Okay. Just a question about whether
    eliminating this ability to use administrative litigation in
    challenging these unconsummated mergers. The argument would be
    that it would undermine the antitrust enforcement and, then
    thus, harm consumers. Is that right?
        Chairwoman Ramirez. Yes.
        Senator Klobuchar. Okay. Some have said that the SMARTER
    Act represents modest changes to merger enforcement, sort of
    codifying some of the current project. Help me understand why
    the agency believes the SMARTER Act would undermine the ability
    to promote competition and protect consumers.
        Chairwoman Ramirez. Let me back up a bit and also just say
    that--as I think is evidenced by both my oral testimony here
    this morning as well as the written testimony that we
    submitted, this is authority that we use in limited
    circumstances.
        Senator Klobuchar. Right.
        Chairwoman Ramirez. In my view, the process does work well
    when it is used, but the bill risks, again, eroding our ability
    to use authority that Congress gave us and that I believe we
    have used quite ably over the course of our history,
    including----
        Senator Klobuchar. You have a right to be proud of that
    work, so thank you.
        Chairwoman Ramirez. In addition to that, I also do not
    believe that there is any evidence that parties are prejudiced
    by the fact that our process includes an administrative
    component to it. If you look at the data and you look at how
    many cases are litigated as compared to the Department of
    Justice, if you look at how many cases are settled or abandoned
    when before the FTC as compared to the Department of Justice, I
    think you see that the numbers are quite comparable. In my
    mind, that suggests that the FTC exercises no greater leverage
    over parties. Otherwise, I think you would see a disparity in
    those numbers. In my mind, there is no evidence that this type
    of a change is necessary or warranted.
        I also am concerned about unintended consequences. Whenever
    you have a change, a major institutional change of this nature,
    I believe that you risk creating uncertainty. We can anticipate
    what some of those questions might be, but then, in addition,
    there are also ones that sitting here today I probably will not
    be able to anticipate, but that will play out when parties
    inevitably end up litigating over what these changes signify.
        Senator Klobuchar. Do you think there could be a situation
    in the future where the case law has not kept up with economic
    thinking or is too restrictive and the FTC actually brings a
    preliminary injunction to protect consumers from a transaction?
        Chairwoman Ramirez. I do. I think that we, as an agency,
    have used our decisions to develop important areas of law. I
    think the reverse payment patent settlement cases are certainly
    one where, back in 2003, the Commission issued a decision that
    ultimately was vindicated by the Supreme Court in 2013. I do
    believe that the development of antitrust doctrine is a very
    important aspect of what the Commission does.
        Senator Klobuchar. Very good. Thank you very much. I also
    wanted--Mr. Chairman, with your permission, Senator Leahy, our
    Ranking Member on the Judiciary Committee, asked that you--that
    we put on the record that he was unable to attend today because
    of another commitment, but he has a statement for the record,
    Mr. Chairman.
        Chairman Lee. Thank you very much, Senator Klobuchar. We
    have now been joined by Senator Hatch, who I want to thank for
    his cosponsorship of the SMARTER Act, and we now recognize you,
    Senator Hatch.
        Senator Hatch. Thank you, Senator Lee. We appreciate you
    and your leadership on this matter. Let me just ask this
    question to you, Chairwoman Ramirez. I would like to read you a
    quote from the Antitrust Modernization Commission report:
        ``Parties to a proposed merger should receive comparable
    treatment and face similar burdens regardless of whether the
    FTC or the 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.''
        If you would, tell me why you think the Antitrust
    Modernization Commission--this is a bipartisan Commission
    composed of experts who have spent years investigating ways to
    improve our Nation's antitrust laws--was wrong.
        Chairwoman Ramirez. Senator, I want to emphasize that the
    authority that we use when we exercise our authority to go into
    court, challenge a transaction, and then proceed
    administratively is authority that is used in very limited
    circumstances. Most of the transactions that we review are
    procompetitive and do not raise anticompetitive concerns. And
    so we really are talking about a very small number of
    transactions that ultimately are litigated.
        As to those, I believe that, notwithstanding the
    differences in procedure, that parties do receive fair
    treatment and that our merger enforcement process works well. I
    do not believe that parties are prejudiced. I do not believe
    that they face a substantially greater burden. I do not believe
    that there is a difference in outcome depending on which agency
    a party is before. In my mind, the proposed legislation is
    neither necessary, nor is it warranted.
        In addition, I feel that making such a change would risk
    hurting consumers, risk undermining the ability of the Federal
    Trade Commission to preserve competition in important areas,
    like health care, which has been a top priority for the agency
    over decades, among other sectors of the economy. I believe
    also that whenever you have this type of reform and change, I
    believe that it risks a number of unintended consequences and
    creates, frankly, more uncertainty.
        As a litigator of 20 years and currently a law enforcer, I
    can tell you that I do not believe it is going to be a wise use
    of taxpayer money and limited FTC resources to be litigating
    over the precise contours of the proposed reforms.
        Senator Hatch. You point in your testimony to a number of
    instances in which you say that Part 3 proceedings in merger
    cases yielded positive results for consumers. It is one thing
    to say look at Part 3, it has produced all these great results.
    It is another thing to say that Part 3 was necessary to achieve
    those results. Can you give me examples of instances in which
    Part 3 proceedings in merger cases yielded benefits to
    consumers that could not have been achieved throughout standard
    Section 7 district court litigation?
        Chairwoman Ramirez. Senator, the authority that was given
    to the FTC was a very deliberate authority that was given by
    Congress. Congress elected in 1914, when it created the agency,
    to augment the then-existing antitrust authority that the
    Department of Justice had. I think that was a very deliberate
    decision. I think it has played out well.
        Admittedly, it is authority that we have used in the
    unconsummated merger context rarely. That to me also suggests
    yet another reason why I believe this particular set of changes
    are unnecessary. I think if you look at a number of merger
    cases, including the Evanston case, the Polypore case, the
    ProMedica case, we have addressed complex issues of antitrust
    law, and we have been affirmed by the appellate courts. I think
    these have been important developments that have benefited
    consumers over the long term.
        Senator Hatch. Okay. If the Commission cannot convince a
    court that blocking a merger is in the public interest, why
    does it make sense to allow the Commission to continue trying
    to stop a merger through its own internal administrative
    processes? If an independent adjudicator rejects the
    Commission's arguments, why should the Commission be able to
    continue prosecuting a case internally as both judge and jury?
        Chairwoman Ramirez. Let me unpack your question, Senator,
    if I may.
        Senator Hatch. Sure.
        Chairwoman Ramirez. I want to make clear that the FTC can
    go into court to seek a preliminary injunction. If the FTC
    loses that request for preliminary injunction, at that point in
    time the Commission--we have a policy where we will examine
    whether it would be appropriate for us to continue with our
    administrative process. It has been a very long time since the
    Commission has elected to do that, and I assure you that in
    instances when that happens, the Commission will examine
    whether it is appropriate. It may not be appropriate, and at
    that point the matter would then be dismissed from the Part 3
    process. That is something that just does not happen as a
    matter of course. It is a very serious issue. The commission
    will examine it and look at it very, very carefully.
        Senator Hatch. Thank you. Thank you, Mr. Chairman. My time
    is up.
        Chairman Lee. Thank you, Senator Hatch. I want to note for
    the record that we will include Senator Leahy's statement for
    the record, without objection.
        Chairman Lee. Senator Blumenthal.
        Senator Blumenthal. Thanks, Mr. Chairman. Thank you for
    being here, Chairwoman Ramirez, and for your extraordinary and
    distinguished service as a litigator and now as the Chairperson
    of the FTC.
        I think in my humble opinion, with the greatest respect to
    the proponents of this legislation, the best thing about this
    proposal is its title, and I admire the creativity and
    ingenuity of its proponents because it seems to me that it is
    truly a solution in search of a problem. There is no real
    problem here. I want to just follow up on the point that you
    were just making because the Chairman of the Subcommittee has
    raised the specter of two separate trials or fact proceedings
    before two different judges imposing an inordinate burden on
    the parties. How often does that happen?
        Chairwoman Ramirez. It happens very rarely. It has been
    more than two decades since that has happened.
        Senator Blumenthal. Two decades ago.
        Chairwoman Ramirez. Yes.
        Senator Blumenthal. There has been no instance in the last
    two decades where, in fact, two different district court judges
    held factual hearings requiring the parties to come forward and
    present their cases.
        Chairwoman Ramirez. It has been more than two decades since
    the Commission has lost a preliminary injunction and then
    proceeded administratively, correct.
        Senator Blumenthal. Because of the policy that you just
    mentioned, if you lose a preliminary injunction proceeding, it
    is a pretty good indication as to what the merits of the case
    are.
        Chairwoman Ramirez. That maybe right.
        Senator Blumenthal. Let me ask you, in your experience--and
    you are a pretty experienced antitrust litigator--does this
    difference in procedure involved in Department of Justice
    versus FTC actions result in different outcomes?
        Chairwoman Ramirez. In my view, it does not.
        Senator Blumenthal. That is because both agencies apply the
    same law. Is that correct?
        Chairwoman Ramirez. Absolutely.
        Senator Blumenthal. Do the different procedures result in
    different costs or burdens on the parties?
        Chairwoman Ramirez. The FTC procedure may be a longer
    procedure because typically it is a two-step process whereby we
    would first go into federal court and then proceed
    administratively. I will note that parties could stipulate to a
    PI and then proceed immediately to a Part 3 process. Given
    reforms that we undertook in 2009 to streamline our
    administrative process, I believe the timeframe would be
    comparable to that in federal court.
        Senator Blumenthal. If a merger fails to withstand the
    scrutiny of a preliminary injunction proceeding, it may also be
    an indication to the parties that they need to reconsider a
    merger. Correct?
        Chairwoman Ramirez. Yes.
        Senator Blumenthal. Is it not a fact that a lot of mergers
    are abandoned after an unsuccessful defense in a preliminary
    injunction proceeding?
        Chairwoman Ramirez. Yes, that is so.
        Senator Blumenthal. In the long run, actually it may save
    the parties some money and a lot of travail and inconvenience
    and, in fact, internal costs to know right away as a result of
    a preliminary injunction proceeding that they are not going to
    succeed.
        Chairwoman Ramirez. It could very well.
        Senator Blumenthal. Let me just say I regard this
    legislation simply as an attempt to tinker with the current
    procedure without there being a real demonstrated need for it.
    In fact, it could have the effect of preventing or undermining
    effective antitrust scrutiny, which I think is all the more
    important today than ever before. The trend toward
    consolidation in various industries--airline, telecom,
    pharmaceutical, health care--in my view is bad for consumers,
    and I would ask, with the Chairman's permission to enter into
    the record a very cogent article written on July 8th by Greg Ip
    in the Wall Street Journal entitled, ``Why Corporate America
    Could Use More Competition.''
        Chairman Lee. Without objection.
        [The information appears as a submission for the record.]
        Senator Blumenthal. As well, a letter written by the
    Consumers Union on the subject of this legislation, which
    states very well the reasons that we ought to approach with a
    lot of skepticism this kind of legislation. It is October 6,
    2015, written by the Consumer Union to the Chairman and Ranking
    Member of this Subcommittee.
        Chairman Lee. Thank you, Senator Blumenthal. That will be
    received into the record.
        [The information appears as a submission for the record.]
        Chairman Lee. Senator Tillis.
        Senator Tillis. Thank you, Mr. Chair. Thank you for being
    here, Ms. Ramirez. I think I am the only non-attorney on the
    panel today, so I am not going to ask you a lot of legal
    questions. I am going to ask you a few practical questions.
        How on Earth could we assume that the present policy is
    really a time saver or money saver for businesses that are
    going through this? I mean, it just defies logic, particularly,
    let us say that you are not successful with getting the
    injunction, the merger moves on, and then the administrative
    processes continue. Why would anybody think that when you
    consider the merger is moving on, you are going through the
    administrative process, how on Earth could this in any way be a
    positive thing for the business moving forward with a merger? I
    mean, why can't--and let me ask you another question as we are
    going along with that. That is probably rhetorical. It just
    does not make sense. Again, I am viewing it from a business
    perspective.
        The Antitrust Commission report seemed to suggest that some
    of the changes that are proposed by the SMARTER Act may have
    merit. By the way, I am sure this is the first time in Congress
    that we have ever used a title like ``smarter'' to represent
    maybe an underlying bill that people would be opposed to. Can
    you give me some assessment--I assume you have read the
    Commission report and why you would disagree with the
    Commission's report on certain things that seem to link two
    provisions of the SMARTER Act?
        Chairwoman Ramirez. Let me address your first question. I
    want to clarify that I am not taking the position that the two-
    step process that is typically used by the Federal Trade
    Commission is a time saver. What I am saying is that I do not
    believe that our process prejudices parties; I do not believe
    that it enhances the leverage that the FTC exercises over
    parties in connection with merger challenges. I am saying also
    saying that the process does not have an impact on outcomes,
    and that it is ultimately comparable to what transpires when
    the Department of Justice is looking at transactions.
        Then with regard to your second question, I will just make
    two points. One is just that the overarching process is a fair
    one and an appropriate one. Again, I will emphasize that this
    was----
        Senator Tillis. That does not really get to my question,
    though. I know that you have consistently responded with your
    belief that the current process is fair and open. What I am
    getting to specifically are some of the recommendations of the
    Commission report and why, rather than defending your position
    by saying you think it is fair and open, discuss why the
    proposed changes, some of which map to some of the SMARTER
    provisions do not make sense. In other words, let us get into a
    specific reason why the proposed changes represent a problem.
    To go back to your line of responses, explain to me why the
    changes would make it an unfair and inconsistent process.
        Chairwoman Ramirez. A key concern expressed by the
    Commission was an issue about the preliminary injunction
    standard that is used by the Federal Trade Commission in
    contrast to the Department of Justice. I have to say that if
    one looks at how the courts have applied those standards--the
    standards are, in fact, stated differently--but the way that
    the courts have applied them, they apply them in the same way.
    Both the Federal Trade Commission and the Department of Justice
    have to make a rigorous evidentiary and legal showing that the
    proposed transaction is likely to substantially lessen
    competition, and it is only when that showing has been made
    that a court will grant a preliminary injunction.
        That central concern of the Commission is one that when one
    actually examines what transpires in the courts--I do not
    believe is justified.
        Senator Tillis. Mr. Chair, I was running late to this
    Committee because I was in a Senate Armed Services Committee
    hearing. I repeatedly say in Senate Armed Services that I never
    want our men and women in uniform to go into a fair fight. In
    other words, I always want them to be better equipped and
    better trained. In this particular case, it seems to me that
    the devices that we have, that the Government has available to
    it now almost make it certain that businesses go under this
    with an unfair fight and an unfair advantage. For that reason,
    I support the SMARTER Act, and I look forward to seeing it move
    through the Committee. Thank you, Mr. Chair.
        Chairman Lee. Thank you, Senator Tillis.
        Most merger cases tend to settle after the grant of a
    preliminary injunction. Doesn't this counsel in favor of having
    a bench trial on the merits at the same time? Wouldn't that
    suggest that we ought to have that? In other words, if the
    answer is no because the parties sometimes prevail in later
    litigation on the merits, isn't this an even stronger reason to
    ensure that the preliminary injunction and merits are litigated
    at the same time? Some of the same arguments you are using--one
    of the arguments you are using here is that, you know, you have
    not used this authority in 20 years, it rarely arises, and so
    why worry about it. I do worry about it because of the fact
    that if in practical effect most of the time you have one bite
    at the apple anyway, and in your case, in the case of something
    that under the jurisdiction of the FTC, if the bite at the
    apple tends to be at the preliminary injunction phase, then why
    not have the more fulsome type of review that you have when you
    have a whole review on the merits? Why not have that all at
    once?
        I am sympathetic to the view in this and in every other
    area of the law that we do not want to adopt things that are
    solutions in search of problems. I think the same criticism can
    be made of the existing provision of law. If the existing
    provision of law is itself a solution in search of a problem,
    then why not make the two standards the same? Why not put
    people through the same process?
        Chairwoman Ramirez. Mr. Chairman, I would argue that the
    parties can, under our current system--what they can do is that
    they can stipulate to a preliminary injunction, which is
    something that we seek in order to enable us to obtain
    meaningful relief at the conclusion of a merits trial. The
    parties could very easily stipulate to not consummate the
    particular merger or to a robust hold separate, and then
    proceed to a merits trial, and there you would then be before
    the Commission, and you would go through the merits trial
    before a Commission and then obviate a step before a federal
    court.
        That is a process, if parties so choose, that is available
    to them. I would argue that that is another route that one can
    take, and one need not alter the existing system in order to
    allow for that, to address the concerns that you have
    expressed.
        Chairman Lee. Yet that does not happen in this context, at
    least not with the same regularity that it happens----
        Chairwoman Ramirez. Parties actually--
        Chairman Lee [continuing]. When a matter is before the DOJ.
        Chairwoman Ramirez. Apologies for interrupting you, but it
    actually does occur on occasion.
        Chairman Lee. With the same regularity----
        Chairwoman Ramirez. On occasion. We are speaking about a
    very small number of matters. The Ardagh case, that was a
    situation where there was such a stipulation, and then it
    proceeded to a merits trial. Ultimately they are resolved via
    settlement. Again, we are speaking about a very small universe
    of cases, and so the numbers are not large.
        Chairman Lee. I want to make sure I understand your
    position correctly. Do you believe there is no difference
    between the preliminary injunction standard prescribed for the
    FTC under Section 13(b) of the FTC Act and the one that applies
    to the DOJ?
        Chairwoman Ramirez. There is no question that the standards
    are worded differently. There is different language that is
    used under the authority that we exercise. But in my----
        Chairman Lee. In effect, though----
        Chairwoman Ramirez. In my view, in effect, they are the
    same--I believe district courts take their role very seriously.
    They absolutely understand the importance of this preliminary
    injunction phase. I think we see that evidenced by the two most
    recent matters in which we have sought a preliminary
    injunction: the Sysco matter, in which we prevailed and did get
    a grant of an injunction. The court wrote this incredibly
    detailed 130-page opinion. It was thorough, careful. Courts
    undertake this role very seriously, and I believe that they end
    up applying the same standard that they end up applying when
    the Department of Justice seeks the preliminary injunction.
        Chairman Lee. If they are, in effect, the same, if they
    have the same practical effect, why not have them also be the
    same?
        Chairwoman Ramirez. Ultimately, in the abstract, I have no
    issue with harmonizing the preliminary injunction standards. My
    fear, again, and I say this with 20 years of litigation
    experience and in my experience of several years as a law
    enforcer with the Commission, my fear is that a change in the
    standard--given that right now it is the same standard as the
    Department of Justice, my fear is that courts would then not
    understand the purpose of the change and perhaps end up
    imposing either a higher standard or it simply would create
    uncertainty as to what exactly the new standard ought to be. I
    think it risks uncertainty, but in theory, harmonization of the
    standards I do not see as a problem. I believe they are already
    de facto similar standards.
        Chairman Lee. Okay. I think I understand your position
    there. I struggle with it just the same because if I am
    understanding you correctly, you are saying we have got two
    different standards, but they are interpreted the same way by
    courts. If we make the standards as they are written into the
    law literally the same, then the courts might make them
    different. I do struggle with that.
        Chairwoman Ramirez. Senator, my point is simply that I do
    not believe there is a need to make a change here. My worry is
    that with any change, attorneys who zealously advocate for
    their clients and parties who, as you know, look for any
    argument that they can make, I just fear needless litigation
    over issues about what the standard might mean if there is a
    change, given that in my mind it is being applied appropriately
    today. Why make a change?
        Furthermore, this particular bill goes far beyond that and
    then addresses, again, the adjudicative authority that we have.
    My concerns extend beyond simply harmonization of the PI
    standard.
        Chairman Lee. What would you say responding to my concern
    that the courts, as a matter of--canons of statutory
    construction tell judges that they are not supposed to assume
    that differences in legislative language are irrelevant. They
    are not supposed to just lightly ignore surplus or minor
    differences. I mean, I think I could--if what you are worried
    about is consistency in the application of the law, I could
    make a corresponding argument to yours that would say the
    greater risk is that at some point courts are going to realize,
    hey, these are not the same standard, there must be a
    difference, and that could change that way.
        We, of course, do not have control over what the courts do,
    but we do have control over what the law says. If what you are
    telling me is that the law ought to provide for the same
    substantive standard, the same standard in effect, I do
    struggle with the idea that we should not change the law to
    make sure that the law actually says the same thing in these
    two areas. Do you want to respond to that?
        Chairwoman Ramirez. Senator, let me take issue with the way
    that you have constructed your comment. The courts are not
    comparing the FTC standard to the Department of Justice
    standard. Let me also state that the standard that is applied,
    of course, with the Department of Justice is the traditional
    preliminary injunction standard that is in the common law, that
    is articulated by courts. They are not comparing the language
    that is in the FTC Act to that traditional standard. I think
    your point about statutory construction I do not believe it is
    opposite to the way courts approach this issue.
        I would urge the Members of the Committee to look closely
    at the way that the courts in the Sysco matter, the decision in
    June, and also the recent decision in the Steris case, see how
    those courts apply the standard and compare that to the way
    courts have applied the standard in Department of Justice
    cases. You will see that same requirement--that the FTC must
    establish a likelihood of success on the merits. Again, in my
    mind, the way the standards are articulated end up no
    differently, and the outcomes in my mind are also not
    determinative, depending on who it is that you are in front of.
        Chairman Lee. Harm could come from additional efforts at
    statutory clarity.
        Chairwoman Ramirez. I am sorry?
        Chairman Lee. If we attempt to clarify the standard, harm
    could come from that. That is your concern.
        Chairwoman Ramirez. That is a worry. More fundamentally, my
    concerns are--go beyond the issue of harmonization of the PI
    standard. My major concern about this proposed legislation is
    with regard to the effort to eliminate the administrative
    process. That is the fundamental concern.
        Chairman Lee. Got it. Thank you. Senator Klobuchar.
        Senator Klobuchar. Thank you very much. I just had one side
    question about pharmaceuticals. As you know, Turing
    Pharmaceuticals announced a 5,000-percent price increase on
    Daraprim, a drug used to prevent malaria and treat
    toxoplasmosis. Yesterday, I sent a letter to the FTC asking you
    to investigate whether Turing was restricting supply, and we
    are well aware of the price increase, but this is about whether
    or not they are restricting supply to prevent generics from
    getting on the market and to delay generic competition.
        On Monday, the New York Times also covered price increases
    by Valeant Pharmaceuticals. What role do you see antitrust laws
    in general, without maybe commenting on the specific situation
    as you look into it, what role does the FTC and antitrust laws
    have to play in this clearly emerging problematic area?
        Chairwoman Ramirez. Senator, as I think you are well aware,
    it is a top priority for us to monitor the pharmaceutical
    industry. It is an area that we have been active in for
    decades. We share your concern when we see significant price
    hikes. We look closely when we do see price hikes. As a general
    matter, price hikes alone may not necessarily mean that there
    is anticompetitive conduct. If there is, we certainly will be
    taking appropriate action should we find there has been a
    violation of the antitrust laws.
        Senator Klobuchar. Do you think we are going to need a
    different legislative solution rather than antitrust laws if
    this kind of behavior is allowed and these patients are just at
    the mercy of people increasing prices if, in fact, there is not
    per se an antitrust violation?
        Chairwoman Ramirez. I think that is an issue that certainly
    your Committee and other Members of Congress should examine. In
    the meantime, we are certainly going to do our job and ensure
    that the antitrust laws are appropriately enforced and that we
    do what we can to protect consumers.
        Senator Klobuchar. Okay. Thank you very much.
        Chairman Lee. Thank you very much, Chairwoman Ramirez. We
    will give our next panel a few minutes to get situated, and
    then we will resume.
        Chairwoman Ramirez. Thank you.
        Chairman Lee. Thank you very much.
        [Setting up second panel.]
        Chairman Lee. Okay. Can I get this panel of witnesses to
    now stand and be sworn? Do you affirm that the testimony you
    are about to give before the Committee will be the truth, the
    whole truth, and nothing but the truth, so help you God?
        Ms. Garza. I do.
        Mr. Clanton. I do.
        Mr. Lipsky. I do.
        Mr. Jacobson. I do.
        [Witnesses are sworn in.]
        Chairman Lee. Thank you. Okay. I will introduce all of the
    witnesses together, and then we will come back to you for your
    opening statements.
        Ms. Deborah Garza is the co-chair of Covington & Burling's
    Antitrust and Competition Law Practice Group. With more than 30
    years of experience in both the private and public sectors, Ms.
    Garza has been involved in some of the largest antitrust
    matters in the last 30 years, including the merger of Exxon and
    Mobil, the U.S. Government's suit against Microsoft, the USFL
    suit against the NFL, 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. She was also appointed by President George W. Bush
    to chair the Antitrust Modernization Commission, the 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. Ms. Garza received her
    bachelor's degree from Northern Illinois University and her
    J.D. from the University of Chicago--which happens to be
    Senator Klobuchar's alma mater.
        Mr. David Clanton is senior counsel at Baker & McKenzie,
    where he also serves 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 Baker & McKenzie,
    Mr. Clanton served as a Commissioner and as Acting Chairman of
    the Federal Trade Commission. Mr. Clanton received his
    bachelor's degree from Andrews University and his J.D. from
    Wayne Law School, where he served on the Law Review.
        Mr. Tad Lipsky is a partner in the Washington, DC 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 chief antitrust lawyer for The
    Coca-Cola Company for 10 years. Mr. Lipsky also served as
    Deputy Assistant Attorney General under William F. Baxter. Mr.
    Lipsky received his B.A. from Amherst College, his M.A. from
    Stanford, and his J.D. from Stanford.
        Mr. Jonathan Jacobson is a partner in the New York office
    of Wilson Sonsini Goodrich & Rosati. He has significant merger
    experience, including trials in cases brought by the Justice
    Department and Federal Trade Commission, as well as numerous
    fully cleared transactions and consent decrees. He currently
    serves as vice chair of the ABA's Section of Antitrust Law,
    having previously served as an officer, council member, and in
    several other Antitrust Section positions, including editorial
    chair of Antitrust Law Developments. Prior to joining Wilson
    Sonsini, Jonathan was a partner at Akin Gump Strauss Hauer &
    Feld's New York office, where he co-chaired the firm's National
    Antitrust Practice. He served as a Commissioner on the
    Antitrust Modernization Commission.
        All the witnesses' written statements will be entered into
    the record in their entirety. I ask that each witness summarize
    her or his testimony in 5 minutes or less. Thank you for being
    here.
        Ms. Garza, the floor is yours.

               STATEMENT OF DEBORAH GARZA, FORMER CHAIR,

            ANTITRUST MODERNIZATION COMMISSION, AND PARTNER,

                COVINGTON & BURLING LLP, WASHINGTON, DC

        Ms. Garza. Chairman Lee, Ranking Member Klobuchar and
    fellow Chicago alum, and staff and Members of the Subcommittee,
    thank you for the opportunity to appear before you today in
    support of the proposed SMARTER Act. I would like to join my
    voice to those of the folks who commented in the prior panel
    about how great the title is. I also think it is a great title.
        As you mentioned, from May 2003 through May 2007, I served
    as chair of the bipartisan Antitrust Modernization Commission,
    which was created by Congress to review and report on the state
    of U.S. antitrust law enforcement. The AMC Report included
    three recommendations that are relevant to this hearing.
        The first was that when the FTC seeks injunctive relief in
    HSR Act merger cases in Federal court, it should seek both
    preliminary relief and permanent injunctive relief, and it
    should seek to consolidate those proceedings so long as it is
    able to do so by reaching an agreement with an appropriate
    scheduling order with the parties.
        Two, Congress should amend Section 13(b) of the FTC Act to
    prohibit the FTC from pursuing administrative litigation in HSR
    merger cases.
        Three, Congress should ensure that the same standard for
    granting a preliminary injunction in a merger case should apply
    to both the FTC and the DOJ.
        The SMARTER Act essentially adopts those recommendations,
    and it is a great honor and pleasure to be here today to
    testify in support of the Act. Although it has been 8 years
    since the AMC made its recommendation, I have never lost faith
    that the good-government vision of those recommendations would
    someday prevail. I will note that there are a lot more
    recommendations in the report, should you ever want to consider
    any of those as well.
        The premise of the SMARTER Act is simple: A merger should
    not be treated differently depending on which antitrust
    enforcement agency--the DOJ or the FTC--happens to review it.
    Regulatory outcomes should not be determined by a flip of the
    merger agency coin. I know there is a question that a number of
    the Senators have about how exactly the differences could
    potentially affect outcomes, and I look forward to talking
    about that in the Q&A.
        I think the legislation is needed because it is important
    to maintain consensus about the value of a strong antitrust
    enforcement regime. A perception of unequal or unfair treatment
    undermines that consensus.
        When the AMC was considering what issues to study and
    examine and report on, we decided to include this issue in a
    very large group of issues we were considering precisely
    because we did hear from people that they did perceive, and I
    think for good reason, that there were significant differences
    between the ways that the two agencies looked at pre-notified
    mergers that needed to be addressed.
        I would like to close--I will not repeat my favorite part
    of the AMC--well, maybe I will. I guess I will. It has been
    said three or four times, but I like it so much I will say, as
    the AMC explained, parties to a merger should receive
    comparable treatment and face similar burdens regardless of
    whether the FTC or the 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. That is bad for antitrust
    enforcement.
        I would like to close by making three points clear about
    the AMC's recommendations and the SMARTER Act:
        One, they are not anti-FTC. I think the FTC has done a
    terrific job. I admire Chairwoman Ramirez and all of her staff
    at the FTC. The AMC recommendations and the SMARTER Act are not
    anti-enforcement. This is not about tying the FTC's hands or
    doing anything to inhibit merger enforcement.
        The recommendations in the SMARTER Act I do not think
    should be perceived as partisan. Five of six Commissioners
    appointed by Democrats agree to the first recommendation,
    including Mr. Jacobson. Five of six Commissioners appointed by
    Democrats agree to the second recommendation. Mr. Jacobson was
    a dissenter. All six Commissioners appointed by Democrats agree
    to the third recommendation. While we may have differences on
    what is the best way to proceed--and there are some complex
    questions here--I hope that will not be treated as a political
    issue but, rather, as a good-government issue.
        [The prepared statement of Ms. Garza appears as a
    submission for the record.]
        Chairman Lee. Thank you very much, Ms. Garza. I figure
    better late than never as far as the delay between the issuance
    of the report--I love the conviction with which you have
    described the report and quoted it. For a minute there, I
    thought you were going to break into song in describing----
        Ms. Garza. You would not want me to break into song.
        [Laughter.]
        Chairman Lee. Senator Klobuchar and I had a hearing a few
    months ago where we had a bunch of songwriters, and one of them
    was a country music songwriter. Senator Klobuchar observed that
    everything the man said sounded as if it were a country music
    song.
        Senator Klobuchar. We have high standards.
        Chairman Lee. High standards here, yes. Mr. Clanton.

                 STATEMENT OF DAVID A. CLANTON, SENIOR

             COUNSEL, BAKER & MCKENZIE LLP, WASHINGTON, DC

        Mr. Clanton. Chairman Lee, Senator Klobuchar, thanks for
    inviting me.
        What I would like to do to follow up on what Ms. Garza
    mentioned is to focus on the changes to the administrative
    process, primarily, and come back and talk about the injunction
    standards. It is important to take a step back and look at the
    fact that this legislation is primarily focused on HSR
    reportable transactions. That was the whole thrust of the AMC
    recommendation.
        The reason for that is, unlike any other area that the
    antitrust enforce, statute is one that was designed to have the
    agencies work together to create a system whereby would have
    opportunity to review transactions, get the information they
    need to conduct a thorough investigation, and hold up the deal
    until a chance to. I can tell you from personal experience--and
    all of us can do that investigative process takes a long time.
    It takes many months in most cases.
        Frequent reference has been made to the Sysco case, where
    the Commission did win a preliminary injunction. The
    investigation there from before the parties went to court was
    over a year, slightly over a year. Then after that, you had a
    preliminary injunction hearing that lasted about 4 months, and
    after that, the parties abandoned the transaction before the
    matter went back to an administrative hearing. This is really
    where the specific issue comes into play in terms of what
    happens.
        At the end of that lengthy process, whether it is 6 months,
    8 months, 10 months, or a year, the agency and the parties are
    ready to go to trial, and they are ready to go to trial on the
    merits, not just a preliminary injunction. Frankly, that is
    what you see happening at the Department of Justice.
        Typically, in recent years DOJ, the parties have agreed to
    consolidate the proceeding and have a trial on the merits,
    which gives the parties an opportunity to defend and requires
    the Government to prove by a preponderance of evidence that the
    transaction Section 7 of the Clayton Act.
        By contrast, on the FTC side, the process works this way:
    The agency goes to seek a preliminary injunction. The parties
    defend that. The evidence that is put in preliminary injunction
    is pretty much the same evidence that would go into a trial on
    the merits. There might be fewer witnesses than would be in an
    administrative hearing or in a consolidated hearing. By and
    large, the investigation has been completed by that time.
        The question then is, what is the reasonable process for
    litigating those issues and how do you get to a point where you
    have a decision that is on the merits or a reasonable
    opportunity. Just use the Sysco case as an example, since it is
    current--and I refer to it in my statement took a year for the
    investigation. It took for the preliminary injunction hearing.
    Then if the parties had not abandoned the transaction and the
    case had gone through an administrative process, would have
    taken--from the time of decision, another 8 months: a month
    until the hearing date started and then another 7 months under
    the Commission rules for a final decision.
        I think it is important to keep in mind that not only is
    it, but if you look at the Commission process--and the
    Commission has done a good job in trying to speed up its rules,
    and I will give them credit. It is a two-stage. You have got an
    administrative law judge a hearing, which would be analogous to
    a district court hearing on the merits. Then after that, issues
    a decision. Then there is an appeal to the full Commission. The
    full Commission reviews and issues its decision as a mini-
    internal appellate court.
        When you add all those elements together, it is a long
    time, and it is a lot longer. I gave as two examples cases that
    DOJ went through and handled in a consolidated fashion, a few
    years ago. One of those lasted 5 months, the other lasted 6
    months, for the entire trial on the merits.
        We are talking about, using Sysco, if it had been tried--
    and it was not. If it had been tried administratively, it would
    have taken twice as long from the end of the investigation
    until you get a final decision. That does not even take into
    account appellate court if either party wants to appeal.
        You add all that up, it is not surprising that the Sysco
    parties decided to abandon, because at the end of all that
    would have been two years or you would have gotten a final
    decision on the merits.
        I think it is important to understand how that process
    works and what the implications are, and I might say that
    reference made that the Commission has not continued a
    proceeding where they lost the preliminary injunction in 20
    years. There has not been an administrative hearing they in 20
    years. There has been no administrative decisions articulating
    the law in the last 20 years either way, whether the Commission
    wins or loses.
        Suggests to me that changing this law and having everything
    handled at the court level is not going to on the Commission's
    administrative process, and the cases that Chairwoman Ramirez
    cited, Evanston, Polypore, ProMedica. All consummated. They
    would not have been covered by this legislation. The Commission
    still has an opportunity to articulate its views in those
    matters.
        I am over my time. Thank you.
        [The prepared statement of Mr. Clanton appears as a
    submission for the record.]
        Chairman Lee. Thank you. Mr. Lipsky.

                  STATEMENT OF ABBOTT B. LIPSKY, JR.,

             PARTNER, LATHAM & WATKINS LLP, WASHINGTON, DC

        Mr. Lipsky. Thank you, Mr. Chairman and Senator Klobuchar.
    I am very grateful for the opportunity to testify.
        I guess--very much enjoyed that very substantive exchange
    with Chairwoman Ramirez. A very interesting conversation.
    Having come after two other excellent witnesses, I guess I am
    in the position where everything that needs to be said probably
    has been said, but just not by me. I am going to try to limit
    myself to supplemental points.
        I did want to state that I am here as somebody who totally
    supports the idea of a competitive market and sound enforcement
    of antitrust as a means of maintaining a competitive market to
    maximize American productivity and innovation. I totally
    support the antitrust mission. I support this legislation
    because I believe it will improve in the conduct of that
    mission.
        It has been mentioned that it has been 20 years since there
    was an administrative litigation involving a case where there
    was a preliminary injunction loss. I want to point out that was
    because of sound activity at the Commission itself. As I have
    described at some length in my testimony, there was a 9-year
    litigation involving a post-transaction hearing involving the
    Coca-Cola attempt to acquire Dr Pepper. There was a 6-year
    litigation when R.R. Donnelley tried to acquire Meredith/Burda.
        The consensus professional learning from those two
    experiences was that those hearings were a waste of public
    resources, and the Commission, under the democratically
    appointed Chairman Bob Pitofsky, to his great credit,
    implemented the 1995 policy statement and adopted 16 CFR 3.26,
    which, although it did not say this in so many words, was
    widely understood in the profession as essentially implementing
    what came to be called the ``Pitofsky rule,'' namely, that
    administrative litigation would not be used in those
    circumstances. That piece prevailed until the amendment of the
    rule in 2008, I believe it was. 16 CFR 3.26 was actually
    repealed, although it was recently reinstated, I believe at
    least partially in consciousness of the possibility of this
    legislation going forward.
        What we are asking for fundamentally in this legislation is
    that the sound administration that began with Chairman Pitofsky
    and proceeded until 2008, that that essentially be codified. As
    other witnesses have described, we do not think that will have
    any significant impact on the Commission's antitrust mission.
        The other thing that I think has not been emphasized that I
    would like to hear emphasized in consideration of this
    legislation is that merger activity is one type of competitive
    conduct where speed and efficiency in decision making is
    particularly critical. In a situation where an agency begins an
    investigation over something that has occurred in the past,
    whether it is a price-fixing cartel, the formation of a trade
    association or the activities of some other body, the record
    is, as the investigation reveals and discovers it, and the
    agency can--and, of course, it is always good to have efficient
    and speedy procedures. In a merger and acquisition situation,
    everybody is waiting for the decision in order for their
    business history to be written.
        It is only fairly recently that the Commission has been
    given some very substantial powers to prevent transactions from
    occurring. Remember, 13(b) was passed in 1973, and at that time
    the only ability of the Commission to go in and stop a
    prospective merger would be to invoke the--go to a Federal
    appellate court and invoke the All Writs Act and seek an
    injunction under what was a terribly punishing standard. The
    Commission has to establish that divestiture following
    consummation of the transaction would be--I think the phrase is
    ``nearly impossible,'' which is much more than likelihood of
    success on the merits and balance of the equities.
        Then shortly thereafter, we got the Hart-Scott-Rodino Act,
    which basically blows the whistle on any substantial
    acquisition until the agency has a full opportunity to
    investigate and opine on the legality of the merger. With those
    two extremely powerful tools in their toolkit, the Commission
    has a very adequate means of investigating and then going to
    court and using that permanent injunction standard in 13(b)--
    permanent injunction authority in 13(b), as, Mr. Chairman, I
    think you very effectively suggested they might try to do.
    Thank you very much.
        [The prepared statement of Mr. Lipsky appears as a
    submission for the record.]
        Chairman Lee. Thank you. Mr. Jacobson.

              STATEMENT OF JONATHAN M. JACOBSON, PARTNER,

                 WILSON SONSINI GOODRICH & ROSATI, PC,

              NEW YORK, NEW YORK, AND FORMER COMMISSIONER,

                   ANTITRUST MODERNIZATION COMMISSION

        Mr. Jacobson. Chairman Lee, thank you very much for having
    me here today. I oppose that part of this bill that would
    eliminate Part 3 administrative adjudication in HSR cases.
        I want to start by answering a question that you posed
    earlier today, and that is, why should there be a second shot
    by the FTC? Here is the reason: Sometimes courts get it really,
    really wrong, and I think our experience with the hospital
    merger cases in the 1990s shows that quite convincingly.
        What do you do when the courts are getting it really,
    really wrong? Well, the Justice Department has only one avenue,
    which is to appeal. The FTC is an administrative agency, and
    like the IRS' ability to nonacquiesce in court decisions, the
    FTC here has comparable authority in--to take the case into a
    Part 3 and get an administrative adjudication, which will later
    be reviewed by a court of appeals, but on a basis where a
    record can be established. There may be new theories. There may
    be new ways of looking at the evidence that a busy district
    judge who, you know, has many other matters pending just is not
    going to have the time to address appropriately. I would
    suggest that the Part 3 process that has been in place for so
    long is a necessary and very important part of the basic
    administrative mission of the Federal Trade Commission.
        One of the basic premises of the bill is that the
    availability of these proceedings makes it harder to get an FTC
    deal through and concluded than one cleared to DOJ, and that
    has just not been my experience. My experience to the contrary
    is that the idea that one agency has an advantage over the
    other is a myth.
        The potential to commence a Part 3 proceeding can be used
    in negotiations. I have never heard it, but it is certainly
    theoretically possible. What really matters when you are trying
    to get your deal through is what staff has been assigned to
    your deal. It is not just, you know, the clearance process,
    which is something the AMC recommended Congress address, and I
    would strongly urge you, Senator Lee, to take a look at that
    series of recommendations. In terms of what really matters in
    getting the deals through, it is the staff, and the staffs at
    the DOJ are different. There are different merger shops at the
    DOJ. The staffs at the FTC are different. There is no advantage
    in getting the deal through, which is really what the companies
    really care about. The fact of a potential Part 3, which has
    not happened in over 20 years, just does not play a role in the
    negotiations in the real world.
        The FTC's case-by-case approach is the appropriate
    approach. There has been no occasion to use this authority for
    a long period of time. Where it is--and I mentioned the
    hospital type of cases--that is something where consumers are
    going to benefit from a careful review by the agency, subject
    to appellate review by the court of appeals of the defendant's
    choice.
        A lot has been said about the inconvenience to the parties.
    It is important to recognize that if the preliminary injunction
    has been denied, the deal can close. The stockholders get their
    money. The bankers get their fees, which is, you know, very
    important to them, certainly. There is additional legal
    expense, but there is no delay. The legal expense is not
    different than you face in any merger context. A merger can
    always be challenged post-consummation. It can be challenged by
    the DOJ. There is no statute of limitations applicable to post-
    consummation challenges by the DOJ. It can be challenged within
    4 years by private parties or by any of the various State
    attorneys general. This is an inherent risk that you get in
    every case, and the fact of the Part 3 proceedings really does
    not exacerbate it at all.
        Finally, I would refer you to my written statement. There
    are some language issues in terms of the draft of the
    legislation, so if it does go forward, I would urge you to look
    at the proposed changes in my written remarks. Thank you.
        [The prepared statement of Mr. Jacobson appears as a
    submission for the record.]
        Chairman Lee. Thank you very much. I would like to start
    with Ms. Garza. The FTC's administrative process, as we have
    established today, has been used rarely, if at all, in roughly
    20 years to block an unconsummated merger. Tell me what your
    opinion about--what is the best case you can make about what,
    if any, value there is to the FTC of that unused proceeding,
    you know, separate and apart from any value of the FTC's
    administrative processes more generally. I am talking about in
    this context.
        Ms. Garza. I think the FTC does perceive a value in it, and
    I think to see how that works, you might consider the context
    of the hospital mergers that we have been talking about. There
    was a long period of time in which both the Justice Department
    and the Federal Trade Commission had poor success in convincing
    courts to block mergers, and this is an example, by the way, of
    where both the DOJ and the FTC do happen to look at mergers in
    the same industry in hospital cases. There had been a series of
    losses.
        As people have said in their testimony, their written
    testimony and a bit today, the FTC focused on how to change
    that, which is fine, which is what you would want an agency to
    do. One of the ways was to--was the Evanston case, which is a
    post-consummation proceeding at which they used to develop the
    evidence and to show how that a hospital merger could be
    anticompetitive so they had that to use.
        Then you come to the Inova merger in Northern Virginia,
    where, in part with the leadership of Commissioner Tom Rosch,
    the FTC made a concerted effort to turn their track record
    around. What they did there was, in part, they had basically
    withdrawn, as Tad said, as Mr. Lipsky said, withdrawn the
    Pitofsky rule, so they said no longer are--we are not bound
    anymore by our policy of not pursuing administrative hearings
    if we lose a preliminary injunction.
        They amended their rules for administrative hearings to
    make it somewhat more efficient and streamlined and quicker.
    Then they went into the court and tried to convince the court
    to give--I would say to apply a less severe or less difficult
    standard to the issuance of a preliminary injunction by telling
    the court that it should really defer to the FTC and allow--
    just have enough to say that there is enough of a basis to
    allow the FTC to go into Part 3. They started the Part 3
    hearing process at the same time that they went into court.
        The combination of all of that was intended to and did
    influence the parties' decision not to fight. The parties
    issued a statement after the fact that said we had to give up--
    oh, and, by the way, the other thing they did is that--all for
    good measure, is that Tom Rosch, Commissioner Rosch was to
    serve as the Administrative Law Judge in the proceeding that
    tried the merger case.
        The whole--it was a smart use of the toolkit that the FTC
    had. It was definitely intended to help them to win this merger
    case, which they wanted to do. No one, I think, begrudges the
    FTC that it used that toolkit. That is what you want an agency
    to do. The problem is that it was perceived at the time, not
    only by the parties but by other folks, as basically an example
    of how the FTC could get the results it wanted, in this case it
    would be good to have the parties abandon the transaction by
    using its unique processes and procedures, which are different
    from the DOJ.
        The reason, I think, that the legislation is appropriate is
    because you should not expect the FTC to itself not exercise
    and use all of the tools in its toolkit. Congress should decide
    whether it is appropriate to have two different procedures, and
    if it is not, then it should legislate.
        Chairman Lee. It is going to use those tools, and the fact
    that it has the tools at all and can use them and occasionally
    does use them has an impact on the parties and the way they----
        Ms. Garza. It has an impact, and I will not go on too long,
    but at some point think about how you advise a client when they
    are deciding whether to enter into a transaction and how to
    allocate risk or when they are before an agency--I will not do
    it now because it would take too long, but the way that you
    describe what the situation is at DOJ that they face is very
    different from what they will face at the FTC when you are a
    lawyer telling them that. Believe me, it sounds different, and
    I know that it impacts decisions on whether or not to go into a
    transaction in the first place and how far the parties will
    stick to a transaction and whether or not they abandon it and
    whether or not they concede to provisions and consent decrees
    that they would prefer not to, but they cannot take the risk of
    waiting 2 years potentially in order to close their merger.
        Chairman Lee. Thank you. Mr. Clanton, you described how for
    FTC cases the preliminary injunction is the de facto merits
    hearing because mergers do not survive in FTC cases beyond the
    PI stage. Is this hearing, this type of hearing, the hearing at
    the preliminary injunction stage, is it less robust than the
    type of review that you would have in a consolidated hearing,
    the type of hearing that you would typically have in a case
    involving the DOJ?
        Mr. Clanton. I think it is less robust, but I will say and
    I would acknowledge that in some cases the court has given very
    extensive scrutiny to what should be the primary issue, which
    is likelihood of success. I think that did happen in the Sysco
    case. I think the Commission briefs pretty deliberately focused
    on that standard as the thing that the court should look to as
    the primary factor.
        You do have decisions where there has been a fairly robust
    consideration of the legal issues, and, again, you would expect
    that from the standpoint of, you know, how the matter has been
    investigated, the long time that has been involved in that.
        I would also point to other decisions--and Ms. Garza
    mentioned that as well--where this--the PI standard, the lower
    PI--well, there are two issues: a lower PI standard, number
    one; and number two, the fact that the hearing is on a PI and
    not on the merits. Fundamentally, I think that is wrong as a
    matter of fairness in terms of a reasonable opportunity for a
    defendant to get a determination on whether this transaction is
    lawful or not.
        One thing I would mention is if you go back--and there has
    been various statements over the years, but the Commission sent
    a letter to Chairman Conyers in 2008, unanimously, expressly
    endorsing a lower standard and citing the Whole Foods case and
    others that set forth a standard that does not specifically or
    primarily put emphasis on the likelihood of success.
        You know, you have got inconsistencies, significant
    inconsistencies over time in terms of how the Commission has
    interpreted and advocated the scope of their authority to seek
    a PI.
        Chairman Lee. Thank you. Mr. Lipsky, does the Pitofsky rule
    obviate the need for legislation here, obviate the need for
    legislation removing the FTC's option of pursuing
    administrative litigation with respect to proposed mergers?
        Mr. Lipsky. No. I think the Pitofsky rule should be
    codified precisely because it has proven to be so changeable
    over the years with the policy statement having survived more
    or less in its 1995 form, but the Commission going back on
    adoption of this Rule 3.26, which actually tries to implement
    that and it has been interpreted largely as embodying the
    Pitofsky rule. It is exactly, as David Clanton just mentioned,
    the tendency of the Commission, depending on its membership,
    depending on, you know, the themes of the times, to shift
    interpretations of its authority, which, of course, is natural
    and probably unavoidable to a great extent. I think that is the
    strongest type of reason for asking Congress to fix it
    according to its own judgment and to make sure that this
    provision will be enforced as written.
        Chairman Lee. Thank you. Mr. Jacobson, what is the best
    argument you can give me for subjecting certain industries and,
    therefore, certain types of proposed mergers to one set of
    standards and processes and another industry and another set of
    proposed mergers to a different set of standards and procedures
    based on what we could call ``the coin flip'' of which agency
    happens to review their transactions?
        Mr. Jacobson. As you will see----
        Chairman Lee. Push the red button, if you will.
        Mr. Jacobson. Sorry. As you will see from the AMC report, I
    wish it was a coin flip, but it is a little more complicated
    than that. Why should there be a different substantive
    standard? I do not think there is, and I want to make clear I
    am not opposing that part of the legislation. I think some
    clarity on that cannot be unduly harmful given all of the ink
    that has been spilled on whether the standard should be the
    same or different.
        Chairman Lee. Right, but you are not opposing the part of
    the bill that proposed a different standard.
        Mr. Jacobson. Right.
        Chairman Lee. What about the procedures?
        Mr. Jacobson. I think as U.S. consumers we are fortunate
    that the FTC has the option to pursue Part 3 administrative
    litigation when it----
        Chairman Lee. Why not give that to the DOJ?
        Mr. Jacobson. DOJ absolutely has that option. It is a
    current policy for DOJ to consolidate the preliminary
    injunction and merits trial. It is not written in a statute
    such as the SMARTER Act.
        Chairman Lee. They do not have administrative proceedings
    though.
        Mr. Jacobson. No, they do not, and that was--I mean, we are
    getting into, you know, do we really want two antitrust
    agencies? For the reasons stated in my separate statement for
    the Antitrust Modernization Commission, I believe that
    plurality of antitrust enforcement is critical to the
    administration of the antitrust laws.
        Yes, the DOJ is not an administrative agency. The FTC is an
    administrative agency. That has been true since 1914.
        I do want to correct what I think may be a misunderstanding
    on what the Pitofsky rule is. The Pitofsky rule was not that we
    will never commence a Part 3. The Pitofsky rule, which is
    codified and is cited in my statement, has a five-factor test
    to determine whether administrative cases will proceed. Really
    it boils down to was the district court off the deep end. I do
    think when the district court goes off the deep end--and there
    are instances like that--the taking of Part 3 is good for
    American consumers.
        Chairman Lee. What if the Pitofsky rule disappeared? What
    if they dropped it? What if they abandoned it? Would that
    affect your analysis?
        Mr. Jacobson. I do not think they will, but it would put
    them in the same sort of discretionary bucket that the DOJ is
    on whether to do a permanent at the same time as a preliminary
    injunction. As a matter of policy, I firmly support the
    Pitofsky rule, and I would be very disappointed if it were to
    be changed. I think the Inova situation was an outlier, as I
    say in my statement, that this was attributable in part to the
    very strong personality of an excellent Federal Trade
    Commissioner, Republican Commissioner, Tom Rosch.
        Chairman Lee. Right, Okay. The fact that it is an outlier
    does not do anything for me. I mean, the fact that it is an
    outlier still exists, and the fact that it is an outlier, the
    fact that those outliers can arise as a result of the fact that
    we have got two different systems, that matters, doesn't it?
        Mr. Jacobson. I think it matters in a way that we should
    support not oppose. I think----
        Chairman Lee. Okay. You would not disagree with Ms. Garza's
    conclusion that this undoubtedly affects parties, it affects
    the behavior of parties to----
        Mr. Jacobson. I completely disagree with that. It has
    absolutely not been my experience. When you are trying to get a
    deal through the agency, you are focused on, ``Am I going to
    get a preliminary injunction or not?'' You are not focused on
    the later possibility of a permanent injunction trial with DOJ
    or a Part 3 with the FTC. It absolutely plays no role in the
    analysis.
        Chairman Lee. I want to give Ms. Garza a chance to respond
    to that point, but before I do that, I want to make sure I
    understand your answer to my question. My most fundamental
    question is: What is the--the policy justification for
    subjecting one industry to one set of procedures and another to
    another set of procedures, how do we justify that? You seem to
    be saying that the FTC's--the procedures available to the FTC
    are good, are better.
        Mr. Jacobson. No; they are different. I think the fact that
    they are different is a plus for the American consumer.
        Chairman Lee. If it is a plus, why not make the same--why
    not create a universe in which we either have two FTCs or we
    somehow give DOJ the ability to conduct administrative
    proceedings, administration litigation?
        Mr. Jacobson. I would oppose that because of my strong
    belief in the plurality of antitrust enforcement,
    particularly----
        Chairman Lee. Right, but that is my idea of having two
    FTCs. Let us have another one called the ``Federal Antitrust
    Bureau.'' Let us just pretend DOJ does not exist here for a
    second. We have two separate ones. Would you give that other
    entity these same procedures? Because your idea behind the
    plurality of antitrust enforcement agencies, that is the--you
    do not want to put all your eggs in one basket. Isn't that----
        Mr. Jacobson. Yes, and you want--you know, sometimes there
    is a liberal Democrat who appoints a very interventionist
    Assistant Attorney General. When we have the Federal Trade
    Commission, we have no more than three from one party. We have
    a bipartisan agency. I strongly support that.
        Would I prefer two FTCs, two different FTCs, as opposed to
    today's system? No. I think the system we have today with the
    DOJ and the FTC, they have both done remarkable things over a
    long period of time. I think it has worked fantastically well,
    and I would not tinker with it.
        Chairman Lee. I want to make clear that I am not saying
    that I am opposed to differences in every circumstance. What I
    am saying is that here the reason for opposition to this
    legislation does not seem to make sense to me, and I am
    struggling with the ability to understand why that opposition
    exists.
        Ms. Garza, why don't we hear from you and have you respond
    to Mr. Jacobson's assessment that it does not affect the
    behavior--the differences in the two procedures does not affect
    the behavior of the parties.
        Ms. Garza. I have two points. It does if you are a buyer.
    Okay? If you are buying a business, if you are the acquirer,
    and the issue is, well, after--I could go through the
    investigation, and then I can go to court, and then I can win
    on a preliminary injunction. Then the agency, if it thinks the
    court was off the deep end or just simply disagrees with the
    court's decision, can commence an administrative proceeding
    that ties me up even after I close with the object of undoing
    my transaction. How could that not affect the acquirer? It does
    not make any sense to me, and it is not what I have experienced
    over 34 years of practice.
        The other thing I would say, to my ears, to say that the
    reason that you need to preserve the right to go into Part 3
    proceedings after an injunction has been denied is because the
    court may have gone off the deep end or because the court may
    have gotten it wrong is the problem. To me, to my ears, that is
    the problem. That is saying basically if the FTC does not like
    what happened in court, it can go around that and it can use
    its administrative proceeding, which is to me why businesses
    perceive it as being unfair. I do not mean to say that I think
    that the FTC is unfair. I do not mean to impugn any of the work
    that Chairwoman Ramirez and everyone does. That is absolutely
    seen as a fairness issue, because we have a system where you
    have to go to court, you make your best case, you win or you
    lose, you have your appeal. What they are asking for, what they
    are saying is, ``I do not really like that. I prefer to go
    through my administrative proceeding with my ALJ, which will
    then be appealed to the Commission that voted out the
    complaint.'' I am telling you, that sounds unfair to the
    business person that is before the Federal Trade Commission.
        Chairman Lee. Yes, among other things, it seemed to create
    the very real possibility of a much more protracted process.
    How much longer on average might this process take if the
    transaction went to the FTC rather than to the DOJ?
        Ms. Garza. Some of my colleagues have done more of the
    statistical analysis, but the difference is, if I am at the DOJ
    and I have gone my 6-, 7-, 8-, maybe longer number of months of
    investigation, then I go to my--to the hearing, the
    consolidated hearing, which could take 3 or 4 more months, and
    then you get your decision, you appeal it or not. If you are at
    the Federal Trade Commission, you have more or less the same--
    you have that 6-, 7-, 8-month investigation. Then you go to the
    preliminary injunction hearing, which might be 2, 2\1/2\, 3
    months. Then, again, there is the risk that, depending on how
    that hearing goes and if you lose--if the FTC loses the
    hearing, then it goes into Part 3. Your deal has closed, but it
    remains at risk for the duration of the Part 3 proceeding.
        Chairman Lee. Mr. Clanton, will the FTC be able--would the
    FTC still be able to develop effective merger policy through
    its own proceedings if the SMARTER Act becomes law? If Congress
    were to pass it, will the FTC still be able to develop
    effective merger policy?
        Mr. Clanton. Yes, and that is what they are doing today.
    You know, the cases that Chairwoman Ramirez cited in her
    statement talking about the development of the law are
    administrative cases that are not covered by the SMARTER Act.
    You know, that to me is part of the telling point about the
    lack of impact that this is going to have on the Commission's
    ability to develop law administratively. There are just a lot
    of decisions out there, merger and non-merger, where the
    Commission is developing law through the administrative
    process. That will continue. This is not going to harm that.
        Chairman Lee. Mr. Lipsky, in your testimony you note that
    quote, ``Antitrust practitioners have long perceived that the
    possibility of continued administrative litigation by the FTC
    following a court decision constitutes a significant
    disincentive for parties to invest resources in transaction
    planning and execution.'' Can you elaborate on that a little
    bit for us?
        Mr. Lipsky. Whenever a company is considering a major
    transaction, it is sometimes a life-changing event for the
    company or in any event is a very significant matter that can
    involve the expenditure of hundreds of millions or billions or
    many billions of dollars, can transform their lines of
    business, can alter their competitive strategy. This is the
    kind of decision that is often considered very, very carefully.
    You hire financial advisers, you hire an investment banker, you
    hire all kinds of specialists, consultants, to support what the
    management and the board of directors of the company are
    ultimately going to decide. A part of that--and sometimes an
    important part of that--will be the antitrust advice, and
    generally you are advising on two risks. One we refer to as
    ``completion risk.'' What is the risk that we will be able to
    do this transaction more or less as envisioned at the end of
    the day? The other major risk is timing risk. Interest rates,
    market prices, especially nowadays, change very substantially
    in short periods of time. An economically and competitively
    wise decision on day one can be a very poor decision 6 months,
    8 months, 10 months, a year later.
        That is why I emphasize that we need to consider the fact
    that when you are talking about transactions that are generally
    held up by the legal apparatus, by the Hart-Scott-Rodino Act
    and so forth, the delay and expense is a particularly punishing
    risk for companies that are in the position of trying to do a
    transaction.
        I think--I thought I heard, considering all of the
    witnesses today, including Chairwoman Ramirez, I thought I
    heard kind of a consensus that if you are going to have an
    administrative litigation phase before the FTC, it is
    definitely going to be slower, and I think partly for that
    reason more expensive and sometimes substantially slow. That is
    why the 9-year proceeding in the Coke-Dr Pepper case and the 6-
    year proceeding in the Donnelley-Meredith/Burda case did have
    such an impact and made such an impression on the bar, because
    if there was any serious risk of having a delay of that
    character because of the possibility of FTC administrative
    litigation, there are many, many transactions that either would
    not be considered or would not be seriously proposed.
        Chairman Lee. Particularly taking into account the timing
    risk.
        Mr. Lipsky. Absolutely.
        Chairman Lee. Mr. Jacobson, anything you want to respond to
    that we have just heard?
        Mr. Jacobson. The completion----
        Chairman Lee. Push your button, if you will.
        Mr. Jacobson. Sorry. This is my first time. The completion
    risk and the timing risk are identical. Remember, the deal can
    close if the preliminary injunction has been denied. The advice
    that is given is: Is this deal going to go through? Do I have
    to agree to a consent? That is all focused on the preliminary
    injunction stage. That is the completion risk.
        The timing risk, you know, once the PI is denied, the deal
    can close. Is--does that have an impact on the acquirer's plans
    for integration? It has not been my experience--in fact, I
    would argue the opposite, that if there is an administrative
    proceeding, the company is going to proceed more quickly to
    integrate the merged companies, in part because that makes
    divestiture more difficult. That is one of the reasons the
    Hart-Scott-Rodino Act was passed, to allow review before
    scrambling of the egg.
        I agree there is a completion risk and a timing risk in
    every deal. I just do not think it would be impacted by the
    statute at all.
        Chairman Lee. Notwithstanding the fact that there is an
    additional procedure that may take place that may----
        Mr. Jacobson. After closing.
        Chairman Lee. Okay. I want to thank all of you for being
    here today. This has been very enlightening, very helpful, and
    your testimony before the Committee is greatly appreciated.
        Senator Klobuchar was required to be in another Committee
    hearing and wanted to be here at the end, but had to go to that
    Committee. Regardless, we will keep the record open for 1 week
    in case we have anything else to supplement the record.
        Thank you very much. We will be adjourned.
        [Whereupon, at 11:51 a.m., the hearing was adjourned.]
        [Additional material submitted for the record follows.]

                                A P P E N D I X

    Miscellaneous Submissions:

     American Hospital Association, statement.........................   120
     Chamber of Commerce, letter of Support...........................   126
     ConsumersUnion Policy & Action from Consumer Reports.............   128
     Competitive Enterprise Institute, July 20, 2015..................   131
     Competitive Enterprise Institute, August 27, 2015................   150
     Federal Trade Commission, December 23, 2008......................   115
     Iain Murray -- Liquid Capital Was the First Killer App, August
        17, 2015......................................................   140
     Iain Murray -- Minimum Wage, Maximum Damage, October 27, 2014....   149
     Iain Murray -- The Poor Need Affordable Energy, June 2, 2015.....   143
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