[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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