[House Report 114-449]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 114-449
======================================================================
STANDARD MERGER AND ACQUISITION REVIEWS THROUGH EQUAL RULES ACT OF 2015
_______
March 14, 2016.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Goodlatte, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 2745]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 2745) to amend the Clayton Act and the Federal Trade
Commission Act to provide that the Federal Trade Commission
shall exercise authority with respect to mergers only under the
Clayton Act and only in the same procedural manner as the
Attorney General exercises such authority, having considered
the same, reports favorably thereon without amendment and
recommends that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 2
Hearings......................................................... 6
Committee Consideration.......................................... 6
Committee Votes.................................................. 6
Committee Oversight Findings..................................... 7
New Budget Authority and Tax Expenditures........................ 8
Congressional Budget Office Cost Estimate........................ 8
Duplication of Federal Programs.................................. 9
Disclosure of Directed Rule Makings.............................. 9
Performance Goals and Objectives................................. 9
Advisory on Earmarks............................................. 10
Section-by-Section Analysis...................................... 10
Changes in Existing Law Made by the Bill, as Reported............ 11
Dissenting Views................................................. 35
Purpose and Summary
H.R. 2745, the ``Standard Merger and Acquisition Reviews
Through Equal Rules Act of 2015,'' or the ``SMARTER Act,''
harmonizes the standards applied to the Department of Justice
(DOJ) and the Federal Trade Commission (FTC) when each agency
seeks a preliminary injunction to a proposed merger or
acquisition. Additionally, the SMARTER Act amends the Clayton
Act to provide the FTC with the same authority DOJ already
possesses to seek an injunction against a proposed merger in
Federal court, and, in doing so, removes the ability of the FTC
to pursue internal administrative litigation following a
court's denial of an FTC preliminary injunction request. The
SMARTER Act would preserve each agency's authority to challenge
monopolistic transactions or ones that would substantially
lessen competition and not affect the judicial remedies
available to address such transactions.
Background and Need for the Legislation
A. BRIEF OVERVIEW OF ANTITRUST ENFORCEMENT BY DOJ AND THE FTC OF
PROPOSED MERGERS AND ACQUISITIONS
Two Federal agencies, the Antitrust Division of DOJ and the
FTC, share responsibility for government enforcement of the
Federal antitrust laws.\1\ The position of Assistant Attorney
General for Antitrust was created in 1903, and the Antitrust
Division became a separate operating unit within DOJ thirty
years later.\2\ In 1914, Congress passed the Federal Trade
Commission Act (the FTC Act),\3\ which created the FTC and
conferred to the independent agency antitrust enforcement
authority that would, in part, supplement DOJ's antitrust
enforcement authority.
---------------------------------------------------------------------------
\1\Antitrust Modernization Commission, Report and Recommendations,
at 129 (Apr. 2007), available at http://govinfo.library.unt.edu/amc/
report-recommendation/amc-final-report.pdf [hereinafter, the ``AMC
Report''].
\2\Id.
\3\15 U.S.C. Sec. Sec. 41-58 (1914).
---------------------------------------------------------------------------
Section 7 of the Clayton Act (Section 7) prohibits mergers
and acquisitions that would ``substantially lessen
competition'' or ``tend to create a monopoly.''\4\ The
Antitrust Division and the FTC have essentially identical
authority to enforce Section 7. The manner in which they review
and enforce their Section 7 authority largely is prescribed by
the Hart-Scott-Rodino Antitrust Improvements Act (the HSR
Act).\5\ Under the HSR Act, each of the antitrust enforcement
agencies is notified in advance of a proposed transaction and
afforded a period of time to review the effects of such a
transaction.\6\ Only one agency takes responsibility for the
review of a proposed transaction.\7\ For the vast majority of
transactions, the antitrust enforcement agencies will grant an
early termination of the statutory waiting period or simply
allow the waiting period to expire without taking any formal
action, both of which have the effect of allowing the
transaction to proceed to consummation.
---------------------------------------------------------------------------
\4\15 U.S.C. Sec. 18 (2013).
\5\15 U.S.C. Sec. 18a (2013), as amended.
\6\As a practical matter, virtually every transaction includes a
period of time between the execution of the initial transaction
documents that outline the intent of parties to enter into a deal and
the manner in which they intend to consummate the deal, and the
``closing'' of the transaction when the deal is consummated. Depending
on the size and complexity of the transaction, that period of time
could be anywhere between a matter of weeks to over a year.
\7\AMC Report, at 132 (2007) (explaining that there is not a
governing document or policy that determines which agency reviews each
proposed transaction; however, there are some historical practices that
can influence which agency reviews the transaction. For example, DOJ
typically reviews telecommunications transactions and the FTC typically
reviews health care transactions. These historical practices, however,
are not hard and fast rules and are not always followed.).
---------------------------------------------------------------------------
When the antitrust enforcement agencies conclude that the
consummation of a proposed transaction would violate Section 7,
the agencies pursue an injunction of the transaction in Federal
court. Generally speaking, if the court grants the injunction,
the parties abandon the merger; if the court denies the
injunction, the parties consummate the transaction shortly
thereafter.
B. DISPARATE PRELIMINARY INJUNCTION STANDARDS
The FTC and DOJ confront different standards when seeking a
preliminary injunction of a proposed transaction in court. When
reviewing the FTC's request for a preliminary injunction,
courts apply the standard explicitly set forth in Section 13(b)
of the FTC Act, which states that ``[u]pon a proper showing
that, weighing the equities and considering the Commission's
likelihood of ultimate success, such action would be in the
public interest, and after notice to the defendant, a temporary
restraining order or a preliminary injunction may be granted
without bond.''\8\ By comparison, Section 15 of the Clayton
Act, pursuant to which DOJ seeks injunctions, does not specify
a standard of review for courts when they determine whether to
grant preliminary injunctive relief. Consequently, DOJ must
meet the traditional preliminary injunction standard as applied
by the presiding Circuit Court, which generally requires ``a
reasonable likelihood of success on the merits'' and ``the
balance of equities'' favoring DOJ.\9\
---------------------------------------------------------------------------
\8\15 U.S.C. Sec. 53(b) (2013).
\9\See, e.g., United States v. Siemens Corp., 621 F.2d 499, 505-06
(2d Cir. 1980) (citations omitted). Although courts generally also
require a showing of irreparable injury or substantial harm to the
public to grant a preliminary injunction, many courts have held that
irreparable harm to the public should be presumed once the government
establishes a reasonable probability of success. See, e.g., id. at 506.
See also the American Bar Association, Section of Antitrust Law, Public
Comments Submitted to the Antitrust Modernization Commission Regarding
Differential Merger Enforcement Standards, at 3 (Oct. 28, 2005).
---------------------------------------------------------------------------
These disparate preliminary injunction standards can yield
different results. Some commentators go so far as to suggest
that the FTC may even be subject to a more lenient standard
than DOJ.\10\
---------------------------------------------------------------------------
\10\AMC Report, at 142 (2007). But see AMC Report at 142 n.90
statement of William Blumenthal (stating that the perception
continually changes, and that it is not invariably the case that people
would rather be before the DOJ).
---------------------------------------------------------------------------
C. DISPARATE PROCESSES TO PREVENT A PROPOSED TRANSACTION
Generally, DOJ agrees with the transaction parties to
combine the proceedings for both a preliminary injunction and
permanent injunction before the district court.\11\ In
contrast, the FTC's practice is to seek only a preliminary
injunction, despite the fact that it has the authority to
consolidate the proceedings in the same fashion as DOJ. In
fact, the FTC has affirmatively fought against efforts to
consolidate the preliminary injunction and permanent injunction
proceedings.\12\
---------------------------------------------------------------------------
\11\AMC Report, at 138 (2007).
\12\See Pl. FTC's Mem. in Opp'n to Defs.' Mot. Seeking
Consolidation of Prelim. & Permanent Injs., FTC v. Arch Coal, Inc.,
Case No. 1:04-CV-00534, at 3, 4 (Apr. 22, 2004) (arguing against
consolidation).
---------------------------------------------------------------------------
One of the primary reasons behind the FTC's practice to
pursue only a preliminary injunction is it preserves the FTC's
ability to pursue administrative litigation following the
denial of a preliminary injunction request. When the FTC seeks
to prevent the consummation of a proposed transaction, it will
file simultaneously an administrative complaint that initiates
the administrative litigation process and, because the
administrative complaint does not by itself prevent the
consummation of the transaction, a preliminary injunction
request in Federal court. Ostensibly, the preliminary
injunction is to preclude the parties from closing the
transaction while the administrative litigation is pending.
Absent such a request, the parties to the transaction
theoretically could consummate the transaction and continue
with their administrative litigation at the FTC. If the parties
lose their case, they would face the prospect of having their
transaction unwound. In contrast, DOJ does not have the
authority to conduct administrative litigation.
D. THE ANTITRUST MODERNIZATION COMMISSION AND ITS RECOMMENDATIONS
In early 2003, the bi-partisan Antitrust Modernization
Commission (the AMC) was formed pursuant to the Antitrust
Modernization Act.\13\ The AMC was charged with examining the
antitrust laws, soliciting the opinions of experts on the
operation of such laws, and publishing a report with the AMC's
recommendations for any improvement to the antitrust laws. On
April 2, 2007, the AMC issued a 540-page report that detailed
the issues it examined and provided a number of recommendations
for legislative, administrative, and judicial action.
---------------------------------------------------------------------------
\13\Antitrust Modernization Commission Act of 2002, Pub. L. No.
107-273, Sec. 11054(h), 116 Stat. 1856, 1857.
---------------------------------------------------------------------------
Included in the AMC report was an examination of the issues
attendant to the existing disparities in the preliminary
injunction standards applied to DOJ and the FTC, and the
disparate processes available to DOJ and the FTC when each
agency seeks to prevent a proposed transaction. As stated
within the AMC 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.\14\
---------------------------------------------------------------------------
\14\AMC Report, at 138-9 (2007). The importance of removing any
potential divergence is underscored by the fact that it often is mere
chance or, the ``flip of a coin,'' that determines which agency reviews
the proposed transaction.
The AMC report further explains that even the perception of a
difference between the standards applied to, and processes used
by, the agencies could impact how parties interact with the
agencies. For example, the FTC may be perceived as having
greater leverage when negotiating a consensual consent decree
with the proposed transaction parties.\15\ Again, ``just the
perception that the applicable rules depend on the happenstance
of which agency is reviewing the transaction can undermine
confidence in the fairness of a dual merger enforcement
regime.''\16\
---------------------------------------------------------------------------
\15\AMC Report, at 142 (2007).
\16\Id.
---------------------------------------------------------------------------
E. RECENT FTC ACTIONS
On March 13, 2015, the FTC announced that it was re-
adopting a rule created in 1995, often referred to as the
``Pitofsky Rule'' after the FTC Chairman at the time.\17\ In
brief, the Pitofsky Rule provides that if the FTC is
unsuccessful in obtaining a preliminary injunction against a
proposed transaction in Federal court, it will not
automatically proceed to continue to block the transaction
through administrative litigation. Rather, the FTC will review
each matter on a case-by-case basis and determine whether
proceeding to administrative litigation is warranted.
Additionally, the Pitofsky Rule provides for the automatic stay
of the pending administrative litigation following the denial
of the preliminary injunction request in Federal court.
---------------------------------------------------------------------------
\17\FTC, Commission Approves Revisions to Its Rules of Practice
(Mar. 13, 2015), https://www.ftc.gov/news-events/press-releases/2015/
03/commission-approves-revisions-its-rules-practice; Administrative
Litigation Following the Denial of a Preliminary Injunction: Policy
Statement, 60 Fed. Reg. 39,741 (1995).
---------------------------------------------------------------------------
In 2009, the FTC repealed the component of the Pitofsky
Rule that provided for the automatic stay of the administrative
litigation.\18\ The latest FTC action reinstates the automatic
stay component of the Pitofsky Rule. To be clear, the FTC still
retains the ability to continue administrative litigation
following the denial of a preliminary injunction request; and,
the Pitofsky Rule may be repealed in whole, or in part, by a
Commission vote. Notably, the Pitofsky Rule predates the AMC
Report.
---------------------------------------------------------------------------
\18\Debbie Feinstein, Changes to Commission Rule 3.26 re: Part 3
Proceedings Following Federal Court Denial of a Preliminary Injunction,
FTC (Mar. 16, 2015), https://www.ftc.gov/news-events/blogs/competition-
matters/2015/03/changes-commission-rule-326-re-part-3-proceedings.
---------------------------------------------------------------------------
F. THE SMARTER ACT
The SMARTER Act incorporates certain of the recommendations
made by the AMC, and provides the antitrust enforcement
agencies with consistent authority and processes when seeking
to prevent a proposed transaction. Specifically, the SMARTER
Act confers to the FTC the same authority that DOJ presently
possesses under the Clayton Act. In doing so, the SMARTER Act
also requires the FTC to petition the district court to seek an
injunction of a proposed transaction rather than using an
internal administrative process. The FTC will retain
administrative litigation capabilities in other contexts. As
the AMC report highlights:
Elimination of administrative litigation in HSR Act
merger cases will not deprive the FTC of an important
enforcement option. Although administrative litigation
may provide a valuable avenue to develop antitrust law
in general, it appears unlikely to add significant
value beyond that developed in Federal court
proceedings for injunctive relief in HSR Act merger
cases. Whatever the value, it is significantly
outweighed by the costs it imposes on merging parties
in uncertainty and litigation costs.\19\
---------------------------------------------------------------------------
\19\AMC Report, at 141 (2007) (citations omitted).
Accordingly, under the SMARTER Act, both DOJ and the FTC
remain able to pursue both preliminary and permanent
injunctions, and the standards applied by courts to both
agencies will be identical. Consequently, while there will
continue to be a dual antitrust enforcement regime, the
standards and processes applied to parties who undergo a
transaction review will be harmonized.
Hearings
On June 16, 2015, the Subcommittee on Regulatory Reform,
Commercial and Antitrust Law conducted a hearing on the SMARTER
Act. The witnesses at the hearing were: Deborah Garza, Esq.,
Partner, Covington & Burling LLP, former Chairwoman of the
Antitrust Modernization Commission, and former Acting Assistant
Attorney General of the Department of Justice; David Clanton,
Esq., Senior Counsel, Baker & McKenzie LLP, former
Commissioner, and former acting Chairman of the Federal Trade
Commission; Abbott (Tad) B. Lipsky, Jr., Esq., Partner, Latham
& Watkins LLP, former Deputy Assistant to the Assistant
Attorney General of the Department of Justice; and, Albert A.
Foer, Esq., founder and former president of the American
Antitrust Institute.
Three of the four witnesses testified in support of the
same preliminary injunction standard being applied to both
antitrust enforcement agencies. Additionally, these same three
witnesses testified in support of removing the FTC's ability to
pursue administrative litigation solely in the context of
merger reviews. These witnesses testified that such a change
would promote transparency, fairness, and predictability to the
merger review process as well as allow the United States to
continue its leadership role in global antitrust enforcement
policy. The Minority witness testified that he believed there
was not significant cause to amend the law.
During the 113th Congress, the Subcommittee on Regulatory
Reform, Commercial and Antitrust Law conducted a hearing on a
discussion draft of the SMARTER Act. The testimony provided at
this hearing similarly supported harmonizing the preliminary
injunction standard and removing the FTC's ability to pursue
administrative litigation solely in the context of merger
reviews.
Committee Consideration
On September 30, 2015, the Committee met in open session
and ordered the bill H.R. 2745 favorably reported, without
amendment, by a vote of 18-10, a quorum being present.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
following rollcall votes occurred during the Committee's
consideration of H.R. 2745:
1. Motion to report H.R. 2745 favorably to the House of
Representatives. Agreed to by a vote of 18 ayes to 10 noes.
ROLLCALL NO. 1
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX).................................
Mr. Chabot (OH)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC).................................
Mr. Labrador (ID)..............................
Mr. Farenthold (TX)............................ X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL)..............................
Ms. Walters (CA)............................... X
Mr. Buck (CO).................................. X
Mr. Ratcliffe (TX)............................. X
Mr. Trott (MI)................................. X
Mr. Bishop (MI)................................ X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................
Mr. Gutierrez (IL)............................. X
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Jeffries (NY).............................. X
Mr. Cicilline (RI)............................. X
Mr. Peters (CA)................................ X
------------------------
Total...................................... 18 10
------------------------------------------------------------------------
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 2745, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 16, 2015.
Hon. Bob Goodlatte, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2745, the
``Standard Merger and Acquisition Reviews Through Equal Rules
Act of 2015.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie,
who can be reached at 226-2860.
Sincerely,
Keith Hall,
Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 2745--Standard Merger and Acquisition Reviews Through Equal Rules
Act of 2015.
As ordered reported by the House Committee on the Judiciary
on September 30, 2015.
CBO estimates that implementing H.R. 2745 would not have a
significant effect on discretionary spending. Enacting H.R.
2745 would not affect direct spending or revenues; therefore,
pay-as-you-go procedures do not apply.
CBO estimates that enacting H.R. 2745 would not increase
net direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2026.
Under current law, both the Federal Trade Commission (FTC)
and the Department of Justice (DOJ) enforce Federal antitrust
laws, though in some instances, the manner in which the two
agencies exercise that authority is different. H.R. 2745 would
amend the Clayton Act and the Federal Trade Commission Act to
align certain procedures followed by the FTC when it reviews a
proposed merger or acquisition with the procedures followed by
DOJ.
Specifically, the bill would:
LHarmonize the standard each agency must meet
before a Federal court can issue a preliminary
injunction against a proposed transaction; and
LDirect the FTC to resolve certain contested
mergers or acquisitions through a Federal court rather
than through administrative litigation.
CBO expects that the FTC's efforts to prepare for and
litigate a contested merger in Federal court using the
harmonized standard specified in H.R. 2745 would not require a
significant increase in staffing levels. Over the past five
years, the FTC has filed eight preliminary injunctions in
Federal court. Based on information from the agency, CBO
expects that volume to remain relatively constant over the next
five years.
Similarly, the FTC approved, on average, fewer than 15
agreements related to proposed mergers over the past five
years. Under H.R. 2745, those agreements would be considered by
the Federal courts rather than the FTC under similar, though
not identical, procedures. Taking into account the small number
of agreements sought each year and the fact that the FTC
follows procedures similar to those required in H.R. 2745, CBO
estimates the increased workloads resulting from the new
requirement would have an insignificant effect on the FTC's
staffing levels and on the workload of the Federal courts.
H.R. 2745 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
The CBO staff contact for this estimate is Susan Willie.
The estimate was approved by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
Duplication of Federal Programs
No provision of H.R. 2745 establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was included in any
report from GAO to Congress pursuant to section 21 of Public
Law 111-139, or a program related to a program identified in
the most recent Catalog of Federal Domestic Assistance.
Disclosure of Directed Rule Makings
The Committee estimates that H.R. 2745 specifically directs
to be completed no specific rule makings within the meaning of
Sec. 5 U.S.C. 551.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
2745 amends the Clayton Act and the Federal Trade Commission
Act to provide the Federal Trade Commission with the same
authority as the Department of Justice with respect to mergers
under the Clayton Act.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 2745 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f) or 9(g) of Rule XXI.
Section-by-Section Analysis
The following discussion describes the bill as reported by
the Committee.
Section 1. Short Title.
Sets forth the short title of the legislation as the
``Standard Merger and Acquisition Reviews Through Equal Rules
Act of 2015.''
Section 2. Amendments to the Clayton Act.
Sec. 2(1): Section 4F of the Clayton Act provides that the
Attorney General must notify state attorneys general of any
antitrust action in which the Attorney General believes the
state could bring an action based on substantially similar
facts, and share related files with such state attorneys
general. The SMARTER Act amends this section to subject the FTC
to these same requirements.
Sec. 2(2)(A): Section 5(a) of the Clayton Act provides
that, in cases brought by the United States that result in
final judgments against a defendant, those judgments can be
used as prima facie evidence (i.e., unless rebutted, sufficient
to prove the allegation) of antitrust violations under
substantially similar facts brought by other parties. The
SMARTER Act amends this section to clarify that actions brought
by the United States include actions brought by the FTC under
Section 7.
Section 2(2)(B): Section 5(i) of the Clayton Act suspends
the statute of limitations for private and state rights of
action based on the conduct in question during a United States'
proceeding and for 1 year thereafter, except that claims
brought under section 4 or 4C of the Clayton Act only may be
brought during the United States' proceeding or within 4 years
after the cause of action accrued. The SMARTER Act amends this
section to clarify that the statute of limitations is also
tolled for actions brought by the FTC under Section 7.
Section 2(3): Section 11 of the Clayton Act authorizes the
enforcement of compliance with certain sections of the Clayton
Act by Federal agencies with specific expertise and provides
for procedures for such enforcement. For example, section 11
authorizes the Federal Reserve Board to enforce compliance of
these sections of the Clayton Act against banks, banking
associations, and trust companies. Section 11 also provides the
FTC with the authority to prosecute violations of the Clayton
Act through the FTC administrative litigation process. The
SMARTER Act amends the Clayton Act to exclude the FTC's
enforcement of Section 7 from these separate procedures, which
ensures that the FTC's Section 7 enforcement procedures will be
identical to the procedures applicable to the Attorney General.
Additionally, the SMARTER Act includes clarifying language that
the FTC may still enter into Section 7 consent decrees with
parties to the proposed transaction.
Section 2(4): Section 13 of the Clayton Act allows the
United States to issue subpoenas that will be effective in any
judicial district. The SMARTER Act amends this section to
clarify that the term United States includes the FTC when it is
prosecuting Section 7 cases.
Section 2(5): Section 15 of the Clayton Act provides that
it is the duty of the United States district attorneys, under
the direction of the Attorney General, to institute antitrust
lawsuits whereby they may seek temporary restraining orders or
other remedies against the offensive conduct. The SMARTER Act
amends this section to extend the duty to initiate lawsuits to
the FTC.
Section 3. Amendments to the FTC Act.
Section 3(1): Section 5 of the FTC Act allows the FTC to
initiate an administrative proceeding to evaluate an ``unfair
method of competition,'' which could include a proposed merger.
The SMARTER Act amends this section to preclude the FTC from
initiating an administrative proceeding against a proposed
transaction.
Section 3(2): Section 9 of the FTC Act, in the paragraph to
be amended, provides jurisdiction to the Federal courts to
issue writs of mandamus that command compliance with the FTC
Act. The process for obtaining such a writ of mandamus requires
the FTC to request the Attorney General to submit an
application to the courts for the writ. The SMARTER Act amends
this section to allow the FTC to submit independently an
application to the courts for such a writ for merger review
cases in which the FTC finds that the activity in question
constitutes an ``unfair method of competition.''
Section 3(3): Section 13(b) of the FTC Act provides
authority to the FTC to seek a preliminary injunction for a
violation of the FTC Act. The SMARTER Act amends this section
specifically to exclude the FTC from seeking a preliminary
injunction in a case brought under Section 7 because the FTC
now has this authority separately under the Clayton Act.
Section 3(4): Section 20(c)(1) of the FTC Act provides
authority to the FTC to issue subpoenas and take depositions.
The SMARTER Act amends this section to clarify that the FTC
also has this authority when prosecuting Section 7 cases.
Section 4. Effective Date; Application of Amendments.
Subsection 4(a) provides that the effective date of the
SMARTER Act will be the day that it is signed into law.
Subsection 4(b) provides that the SMARTER Act will not
apply to violations of Section 7 that occurred prior to the
enactment of the SMARTER Act, transactions that are in
compliance with Section 7A of the Clayton Act (i.e.,
transactions for which the parties have filed a Hart-Scott-
Rodino merger review notice), and consummated mergers.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
CLAYTON ACT
* * * * * * *
[actions by attorney general of the united states
[Sec. 4F. (a) Whenever the Attorney General of the United
States has brought an action under the antitrust laws, and he
has reason to believe that any State attorney general would be
entitled to bring an action under this Act based substantially
on the same alleged violation of the antitrust laws, he shall
promptly give written notification thereof to such State
attorney general.
[(b) To assist a State attorney general in evaluating the
notice or in bringing any action under this Act, the Attorney
General of the United States shall, upon request by such State
attorney general, make available to him, to the extent
permitted by law, any investigative files or other materials
which are or may be relevant or material to the actual or
potential cause of action under this Act.]
SEC. 4F. ACTIONS BY ATTORNEY GENERAL OF THE UNITED STATES OR THE
FEDERAL TRADE COMMISSION.
(a) Whenever the Attorney General of the United States has
brought an action under the antitrust laws or the Federal Trade
Commission has brought an action under section 7, and the
Attorney General or Federal Trade Commission, as applicable,
has reason to believe that any State attorney general would be
entitled to bring an action under this Act based substantially
on the same alleged violation of the antitrust laws or section
7, the Attorney General or Federal Trade Commission, as
applicable, shall promptly give written notification thereof to
such State attorney general.
(b) To assist a State attorney general in evaluating the
notice described in subsection (a) or in bringing any action
under this Act, the Attorney General of the United States or
Federal Trade Commission, as applicable, shall, upon request by
such State attorney general, make available to the State
attorney general, to the extent permitted by law, any
investigative files or other materials which are or may be
relevant or material to the actual or potential cause of action
under this Act.
* * * * * * *
Sec. 5. (a) A final judgment or decree heretofore or
hereafter rendered in any civil or criminal proceeding brought
by or on behalf of the United States under the antitrust laws
(including a proceeding brought by the Federal Trade Commission
with respect to a violation of section 7) to the effect that a
defendant has violated said laws shall be prima facie evidence
against such defendant in any action or proceeding brought by
any other party against such defendant under said laws as to
all matters respecting which said judgment or decree would be
an estoppel as between the parties thereto: Provided, That this
section shall not apply to consent judgments or decrees entered
before any testimony has been taken. Nothing contained in this
section shall be construed to impose any limitation on the
application of collateral estoppel, except that, in any action
or proceeding brought under the antitrust laws, collateral
estoppel effect shall not be given to any finding made by the
Federal Trade Commission under the antitrust laws or under
section 5 of the Federal Trade Commission Act which could give
rise to a claim for relief under the antitrust laws.
(b) Any proposal for a consent judgment submitted by the
United States for entry in any civil proceeding brought by or
on behalf of the United States under the antitrust laws shall
be filed with the district court before which such proceeding
in pending and published by the United States in the Federal
Register at least 60 days prior to the effective date of such
judgment. Any written comments relating to such proposal and
any responses by the United States thereto, shall also be filed
with such district court and published by the United States in
the Federal Register within such sixty-day period. Copies of
such proposal and any other materials and documents which the
United States considered determinative in formulating such
proposal, shall also be made available to the public at the
district court and in such other districts as the court may
subsequently direct. Simultaneously with the filing of such
proposal, unless otherwise instructed by the court, the United
States shall file with the district court, publish in the
Federal Register, and thereafter furnish to any person upon
request, a competitive impact statement which shall recite--
(1) the nature and purpose of the proceeding;
(2) a description of the practices or events giving
rise to the alleged violation of the antitrust laws;
(3) an explanation of the proposal for a consent
judgment, including an explanation of any unusual
circumstances giving rise to such proposal or any
provision contained therein, relief to be obtained
thereby, and the anticipated effects on competition of
such relief;
(4) the remedies available to potential private
plaintiffs damaged by the alleged violation in the
event that such proposal for the consent judgment is
entered in such proceeding;
(5) a description of the procedures available for
modification of such proposal; and
(6) a description and evaluation of alternatives to
such proposal actually considered by the United States.
(c) the United States shall also cause to be published,
commencing at least 60 days prior to the effective date of the
judgment described in subsection (b) of this section, for 7
days over a period of 2 weeks in newspapers of general
circulation of the district in which the case has been filed,
in the District of Columbia, and in such other districts as the
court may direct--
(i) a summary of the terms of the proposal for the
consent judgment,
(ii) a summary of the competitive impact statement
filed under subsection (b),
(iii) and a list of the materials and documents
under subsection (b) which the United States shall make
available for purposes of meaningful public comment,
and the place where such materials and documents are
available for public inspection.
(d) during the 60-day period as specified in subsection (b)
of this section, and such additional time as the United States
may request and the court may grant, the United States shall
receive and consider any written comments relating to the
proposal for the consent judgment submitted under subsection
(b). the Attorney General or his designee shall establish
procedures to carry out the provisions of this subsection, but
such 60-day time period shall not be shortened except by order
of the district court upon a showing that (1) extraordinary
circumstances require such shortening and (2) such shortening
is not adverse to the public interest. At the close of the
period during which such comments may be received, the United
States shall file with the district court and cause to be
published in the Federal Register a response to such comments.
Upon application by the United States, the district court may,
for good cause (based on a finding that the expense of
publication in the Federal Register exceeds the public interest
benefits to be gained from such publication), authorize an
alternative method of public dissemination of the public
comments received and the response to those comments.
(e)(1) Before entering any consent judgment proposed by the
United States under this section, the court shall determine
that entry of such judgment is in the public interest. For the
purpose of such determination, the court shall consider--
(A) the competitive impact of such judgment,
including termination of alleged violations, provisions
for enforcement and modification, duration of relief
sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous,
and any other competitive considerations bearing upon
the adequacy of such judgment that the court deems
necessary to a determination of whether the consent
judgment is in the public interest; and
(B) the impact of entry of such judgment upon
competition in the relevant market or markets, upon the
public generally and individuals alleging specific
injury from the violations set forth in the complaint
including consideration of the public benefit, if any,
to be derived from a determination of the issues at
trial.
(2) Nothing in this section shall be construed to require
the court to conduct an evidentiary hearing or to require the
court to permit anyone to intervene.
(f) In making its determination under subsection (e), the
court may--
(1) take testimony of Government officials or
experts or such other expert witnesses, upon motion of
any party or participant or upon its own motion, as the
court may deem appropriate;
(2) appoint a special master and such outside
consultants or expert witnesses as the court may deem
appropriate; and request and obtain the views,
evaluations, or advice of any individual, group or
agency of government with respect to any aspects of the
proposed judgment or the effect of such judgment, in
such manner as the court deems appropriate;
(3) authorize full or limited participation in
proceedings before the court by interested persons or
agencies, including appearance amicus curiae,
intervention as a party pursuant to the Federal Rules
of Civil Procedure, examination of witnesses or
documentary materials, or participation in any other
manner and extent which serves the public interest as
the court may deem appropriate.
(4) review any comments including any objections
filed with the United States under subsection (d)
concerning the proposed judgment and the responses of
the United States to such comments and objections; and
(5) take such other action in the public interest
as the court may deem appropriate.
(g) Not later than 10 days following the date of the filing
of any proposal for a consent judgment under subsection (b),
each defendant shall file with the district court a description
of any and all written or oral communications by or on behalf
of such defendant, including any and all written or oral
communications on behalf of such defendant by any officer,
director, employee, or agent of such defendant, or other
person, with any officer or employee of the United States
concerning or relevant to such proposal, except that any such
communications made by counsel of record alone with the
Attorney General or the employees of the Department of Justice
alone shall be excluded from the requirements of this
subsection. Prior to the entry of any consent judgment pursuant
to the antitrust laws, each defendant shall certify to the
district court that the requirements of this subsection have
been complied with and that such filing is a true and complete
description of such communications known to the defendant or
which the defendant reasonably should have known.
(h) Proceedings before the district court under subsections
(e) and (f) of this section, and the competitive impact
statement filed under subsection (b) of this section, shall not
be admissible against any defendant in any action or proceeding
brought by any other party against such defendant under the
antitrust laws or by the United States under section 4A of this
Act nor constitute a basis for the introduction of the consent
judgment as prima facie evidence against such defendant in any
such action or proceeding.
(i) Whenever any civil or criminal proceeding is instituted
by the United States to prevent, restrain, or punish violations
of any of the antitrust laws (including a proceeding instituted
by the Federal Trade Commission with respect to a violation of
section 7), but not including an action under section 4A, the
running of the statute of limitations in respect of every
private or State right of action arising under said laws and
based in whole or in part on any matter complained of in said
proceeding shall be suspended during the pendency thereof and
for one year thereafter: Provided, however, That whenever the
running of the statute of limitations in respect of a cause of
action arising under section 4 or 4C is suspended hereunder,
any action to enforce such cause of action shall be forever
barred unless commenced either within the period of suspension
or within four years after the cause of action accrued.
* * * * * * *
Sec. 11. (a) That authority to enforce compliance with
sections 2, 3, 7, and 8 of this Act by the persons respectively
subject thereto is hereby vested in the Surface Transportation
Board where applicable to common carriers subject to
jurisdiction under subtitle IV of title 49, United States Code;
in the Federal Communications Commission where applicable to
common carriers engaged in wire or radio communication or radio
transmission of energy; in the Secretary of Transportation
where applicable to air carriers and foreign air carriers
subject to the Federal Aviation Act of 1958; in the Federal
Reserve Board where applicable to banks, banking associations,
and trust companies; and in the Federal Trade Commission where
applicable to all other character of commerce to be exercised
as follows:
(b) Whenever the Commission, Board, or Secretary vested
with jurisdiction thereof shall have reason to believe that any
person is violating or has violated any of the provisions of
sections 2, 3, 7, and 8 of this Act, it shall issue and serve
upon such person and the Attorney General a complaint stating
its charges in that respect, and containing a notice of a
hearing upon a day and at a place therein fixed at least thirty
days after the service of said complaint. The person so
complained of shall have the right to appear at the place and
time so fixed and show cause why an order should not be entered
by the Commission, Board, or Secretary requiring such person to
cease and desist from the violation of the law so charged in
said complaint. The Attorney General shall have the right to
intervene and appear in said proceeding and any person may make
application, and upon good cause shown may be allowed by the
Commission, Board, or Secretary, to intervene and appear in
said proceeding by counsel or in person. The testimony in any
such proceeding shall be reduced to writing and filed in the
office of the Commission, Board, or Secretary. If upon such
hearing the Commission, Board, or Secretary, as the case may
be, shall be of the opinion that any of the provisions of said
sections have been or are being violated, it shall make a
report in writing, in which it shall state its findings as to
the facts, and shall issue and cause to be served on such
person an order requiring such person to cease and desist from
such violations, and divest itself of the stock, or other share
capital, or assets, held or rid itself of the directors chosen
contrary to the provisions of sections 7 and 8 of this Act, if
any there be, in the manner and within the time fixed by said
order. Until the expiration of the time allowed for filing a
petition for review, if no such petition has been duly filed
within such time, or, if a petition for review has been filed
within such time then until the record in the proceeding has
been filed in a court of appeals of the United States, as
hereinafter provided, the Commission, Board, or Secretary may
at any time, upon such notice and in such manner as it shall
deem proper, modify or set aside, in whole or in part, any
report or any order made or issued by it under this section.
After the expiration of the time allowed for filing a petition
for review, if no such petition has been duly filed within such
time, the Commission, Board, or Secretary may at any time,
after notice and opportunity for hearing, reopen and alter,
modify, or set aside, in whole or in part, any report or order
made or issued by it under this section, whenever in the
opinion of the Commission, Board, or Secretary conditions of
fact or of law have so changed as to require such action or if
the public interest shall so require: Provided, however, That
the said person may, within sixty days after service upon him
or it of said report or order entered after such a reopening,
obtain a review thereof in the appropriate court of appeals of
the United States, in the manner provided in subsection (c) of
this section.
(c) Any person required by such order of the commission,
board, or Secretary to cease and desist from any such violation
may obtain a review of such order in the court of appeals of
the United States for any circuit within which such violation
occurred or within which such person resides or carries on
business, by filing in the court, within sixty days after the
date of the service of such order, a written petition praying
that the order of the commission, board, or Secretary be set
aside. A copy of such petition shall be forthwith transmitted
by the clerk of the court to the commission, board, or
Secretary, and thereupon the commission, board, or Secretary
shall file in the court the record in the proceeding, as
provided in section 2112 of title 28, United States Code. Upon
such filing of the petition the court shall have jurisdiction
of the proceeding and of the question determined therein
concurrently with the commission, board, or Secretary until the
filing of the record, and shall have power to make and enter a
decree affirming, modifying, or setting aside the order of the
commission, board, or Secretary, and enforcing the same to the
extent that such order is affirmed, and to issue such writs as
are ancillary to its jurisdiction or are necessary in its
judgment to prevent injury to the public or to competitors
pendente lite. The findings of the commission, board, or
Secretary as to the facts, if supported by substantial
evidence, shall be conclusive. To the extent that the order of
the commission, board, or Secretary is affirmed, the court
shall issue its own order commanding obedience to the terms of
such order of the commission, board, or Secretary. If either
party shall apply to the court for leave to adduce additional
evidence, and shall show to the satisfaction of the court that
such additional evidence is material and that there were
reasonable grounds for the failure to adduce such evidence in
the proceeding before the commission, board, or Secretary, the
court may order such additional evidence to be taken before the
commission, board, or Secretary, and to be adduced upon the
hearing in such manner and upon such terms and conditions as to
the court may seem proper. The commission, board, or Secretary
may modify its findings as to the facts, or make new findings,
by reason of the additional evidence so taken, and shall file
such modified or new findings, which, if supported by
substantial evidence, shall be conclusive, and its
recommendation, if any, for the modification or setting aside
of its original order, with the return of such additional
evidence. The judgment and decree of the court shall be final,
except that the same shall be subject to review by the Supreme
Court upon certiorari, as provided in section 1254 of title 28
of the United States Code.
(d) Upon the filing of the record with it the jurisdiction
of the court of appeals to affirm, enforce, modify, or set
aside orders of the commission, board, or Secretary shall be
exclusive.
(e) No order of the commission, board, or Secretary or
judgment of the court to enforce the same shall in anywise
relieve or absolve any person from any liability under the
antitrust laws.
(f) Complaints, orders, and other processes of the
commission, board, or Secretary under this section may be
served by anyone duly authorized by the commission, board, or
Secretary, either (1) by delivering a copy thereof to the
person to be served, or to a member of the partnership to be
served, or to the president, secretary, or other executive
officer or a director of the corporation to be served; or (2)
by leaving a copy thereof at the residence or the principal
office or place of business of such person; or (3) by mailing
by registered or certified mail a copy thereof addressed to
such person at his or its residence or principal office or
place of business. The verified return by the person so serving
said complaint, order, or other process setting forth the
manner of said service shall be proof of the same, and the
return post office receipt for said complaint, order, or other
process mailed by registered or certified mail as aforesaid
shall be proof of the service of the same.
(g) Any order issued under subsection (b) shall become
final--
(1) upon the expiration of the time allowed for
filing a petition for review, if no such petition has
been duly filed within such time; but the commission,
board, or Secretary may thereafter modify or set aside
its order to the extent provided in the last sentence
of subsection (b); or
(2) upon the expiration of the time allowed for
filing a petition for certiorari, if the order of the
commission, board, or Secretary has been affirmed, or
the petition for review has been dismissed by the court
of appeals, and no petition for certiorari has been
duly filed; or
(3) upon the denial of a petition for certiorari,
if the order of the commission, board, or Secretary has
been affirmed or the petition for review has been
dismissed by the court of appeals; or
(4) upon the expiration of thirty days from the
date of issuance of the mandate of the Supreme Court,
if such Court directs that the order of the commission,
board, or Secretary be affirmed or the petition for
review be dismissed.
(h) If the Supreme Court directs that the order of the
commission, board, or Secretary be modified or set aside, the
order of the commission, board, or Secretary rendered in
accordance with the mandate of the Supreme Court shall become
final upon the expiration of thirty days from the time it was
rendered, unless within such thirty days either party has
instituted proceedings to have such order corrected to accord
with the mandate, in which event the order of the commission,
board, or Secretary shall become final when so corrected.
(i) If the order of the commission, board, or Secretary is
modified or set aside by the court of appeals, and if (1) the
time allowed for filing a petition for certiorari has expired
and no such petition has been duly filed, or (2) the petition
for certiorari has been denied, or (3) the decision of the
court has been affirmed by the Supreme Court, then the order of
the commission, board, or Secretary rendered in accordance with
the mandate of the court of appeals shall become final on the
expiration of thirty days from the time such order of the
commission, board, or Secretary was rendered, unless within
such thirty days either party has instituted proceedings to
have such order corrected so that it will accord with the
mandate, in which event the order of the commission, board, or
Secretary shall become final when so corrected.
(j) If the Supreme Court orders a rehearing; or if the case
is remanded by the court of appeals to the commission, board,
or Secretary for a rehearing, and if (1) the time allowed for
filing a petition for certiorari has expired, and no such
petition has been duly filed, or (2) the petition for
certiorari has been denied, or (3) the decision of the court
has been affirmed by the Supreme Court, then the order of the
commission, board, or Secretary rendered upon such rehearing
shall become final in the same manner as though no prior order
of the commission, board, or Secretary had been rendered.
(k) As used in this section the term ``mandate'', in case a
mandate has been recalled prior to the expiration of thirty
days from the date of issuance thereof, means the final
mandate.
(l) Any person who violates any order issued by the
commission, board, or Secretary under subsection (b) after such
order has become final, and while such order is in effect,
shall forfeit and pay to the United States a civil penalty of
not more than $5,000 for each violation, which shall accrue to
the United States and may be recovered in a civil action
brought by the United States. Each separate violation of any
such order shall be a separate offense, except that in the case
of a violation through continuing failure or neglect to obey a
final order of the commission, board, or Secretary each day of
continuance of such failure or neglect shall be deemed a
separate offense.
(m)(1) Except as provided in paragraph (2), in enforcing
compliance with section 7, the Federal Trade Commission shall
enforce compliance with that section in the same manner as the
Attorney General in accordance with section 15.
(2) If the Federal Trade Commission approves an agreement
with the parties to the transaction that contains a consent
order with respect to a violation of section 7, the Commission
shall enforce compliance with that section in accordance with
this section.
* * * * * * *
Sec. 13. That in any suit, action, or proceeding brought by
or on behalf of the United States (including a suit, action, or
proceeding brought by the Federal Trade Commission with respect
to a violation of section 7) subpoenas for witnesses who are
required to attend a court of the United States in any judicial
district in any case, civil or criminal, arising under the
antitrust laws may run into any other district: Provided, That
in civil cases no writ of supoena shall issue for witnesses
living out of the district in which the court is held at a
greater distance than one hundred miles from the place of
holding the same without the permission of the trial court
being first had upon proper application and cause shown.
* * * * * * *
Sec. 15. That the several district courts of the United
States are hereby invested with jurisdiction to prevent and
restrain violations of this Act, and it shall be the duty of
the several district attorneys of the United States, in their
respective districts, under the direction of the Attorney
General, and the duty of the Federal Trade Commission with
respect to a violation of section 7, to institute proceedings
in equity to prevent and restrain such violations. Such
proceedings may be by way of petition setting forth the case
and praying that such violation shall be enjoined or otherwise
prohibited. When the parties complained of shall have been duly
notified of such petition, the court shall proceed, as soon as
may be, to the hearing and determination of the case; and
pending such petition, and before final decree, the court may
at any time make such temporary restraining order or
prohibition as shall be deemed just in the premises. Whenever
it shall appear to the court before which any such proceeding
may be pending that the ends of justice require that other
parties should be brought before the court, the court may cause
them to be summoned, whether they reside in the district in
which the court is held or not, and subpoenas to that end may
be served in any district by the marshal thereof.
* * * * * * *
----------
FEDERAL TRADE COMMISSION ACT
* * * * * * *
Sec. 5. (a)(1) Unfair methods of competition in or
affecting commerce, and unfair or deceptive acts or practices
in or affecting commerce, are hereby declared unlawful.
(2) The Commission is hereby empowered and directed to
prevent persons, partnerships, or corporations, except banks,
savings and loan institutions described in section 18(f)(3),
Federal credit unions described in section 18(f)(4), common
carriers subject to the Acts to regulate commerce, air carriers
and foreign air carriers subject to the Federal Aviation Act of
1958, and persons, partnerships, or corporations insofar as
they are subject to the Packers and Stockyards Act, 1921, as
amended, except as provided in section 406(b) of said Act, from
using unfair methods of competition in or affecting commerce
and unfair or deceptive acts or practices in or affecting
commerce.
(3) This subsection shall not apply to unfair methods of
competition involving commerce with foreign nations (other than
import commerce) unless--
(A) such methods of competition have a direct,
substantial, and reasonably foreseeable effect--
(i) on commerce which is not commerce with
foreign nations, or on import commerce with
foreign nations; or
(ii) on export commerce with foreign
nations, of a person engaged in such commerce
in the United States; and
(B) such effect gives rise to a claim under the
provisions of this subsection, other than this
paragraph.
If this subsection applies to such methods of competition only
because of the operation of subparagraph (A)(ii), this
subsection shall apply to such conduct only for injury to
export business in the United States.
(4)(A) For purposes of subsection (a), the term
``unfair or deceptive acts or practices'' includes such
acts or practices involving foreign commerce that--
(i) cause or are likely to cause reasonably
foreseeable injury within the United States; or
(ii) involve material conduct occurring
within the United States.
(B) All remedies available to the Commission with
respect to unfair and deceptive acts or practices shall
be available for acts and practices described in this
paragraph, including restitution to domestic or foreign
victims.
(b) Whenever the Commission shall have reason to believe
that any such person, partnership, or corporation has been or
is using any unfair method of competition (excluding the
consummation of a proposed merger, acquisition, joint venture,
or similar transaction that is subject to section 7 of the
Clayton Act (15 U.S.C. 18), except in cases where the
Commission approves an agreement with the parties to the
transaction that contains a consent order) or unfair or
deceptive act or practice in or affecting commerce, and if it
shall appear to the Commission that a proceeding by it in
respect thereof would be to the interest of the public, it
shall issue and serve upon such person, partnership, or
corporation a complaint stating its charges in that respect and
containing a notice of a hearing upon a day and at a place
therein fixed at least thirty days after the service of said
complaint. The person, partnership, or corporation so
complained of shall have the right to appear at the place and
time so fixed and show cause why an order should not be entered
by the Commission requiring such person, partnership, or
corporation to cease and desist from the violation of the law
so charged in said complaint. Any person, partnership, or
corporation may make application, and upon good cause shown may
be allowed by the Commission to intervene and appear in said
proceeding by counsel or in person. The testimony in any such
proceeding shall be reduced to writing and filed in the office
of the Commission. If upon such hearing the Commission shall be
of the opinion that the method of competition or the act or
practice in question is prohibited by this Act, it shall make a
report in writing in which it shall state its findings as to
the facts and shall issue and cause to be served on such
person, partnership, or corporation an order requiring such
person, partnership, or corporation to cease and desist from
using such method of competition or such act or practice. Until
the expiration of the time allowed for filing a petition for
review, if no such petition has been duly filed within such
time, or, if a petition for review has been filed within such
time then until the record in the proceeding has been filed in
a court of appeals of the United States, as hereinafter
provided, the Commission may at any time, upon such notice and
in such manner as it shall deem proper, modify or set aside, in
whole or in part, any report or any order made or issued by it
under this section. After the expiration of the time allowed
for filing a petition for review, if no such petition has been
duly filed within such time, the Commission may at any time,
after notice and opportunity for hearing, reopen and alter,
modify, or set aside, in whole or in part, any report or order
made or issued by it under this section, whenever in the
opinion of the Commission conditions of fact or of law have so
changed as to require such action or if the public interest
shall so require, except that (1) the said person, partnership,
or corporation may, within sixty days after service upon him or
it of said report or order entered after such a reopening,
obtain a review thereof in the appropriate circuit court of
appeals of the United States, in the manner provided in
subsection (c) of this section; and (2) in the case of an
order, the Commission shall reopen any such order to consider
whether such order (including any affirmative relief provision
contained in such order) should be altered, modified, or set
aside, in whole or in part, if the person, partnership, or
corporation involved files a request with the Commission which
makes a satisfactory showing that changed conditions of law or
fact require such order to be altered, modified, or set aside,
in whole or in part. The Commission shall determine whether to
alter, modify, or set aside any order of the Commission in
response to a request made by a person, partnership, or
corporation under paragraph (2) not later than 120 days after
the date of the filing of such request.
(c) Any person, partnership, or corporation required by an
order of the Commission to cease and desist from using any
method of competition or act or practice may obtain a review of
such order in the circuit court of appeals of the United
States, within any circuit where the method of competition or
the act or practice in question was used or where such person,
partnership, or corporation resides or carries on business, by
filing in the court, within sixty days from the date of the
service of such order, a written petition praying that the
order of the Commission be set aside. A copy of such petition
shall be forthwith transmitted by the clerk of the court to the
Commission, and thereupon the Commission shall file in the
court the record in the proceeding, as provided in section 2112
of title 28, United States Code. Upon such filing of the
petition the court shall have jurisdiction of the proceeding
and of the question determined therein concurrently with the
Commission until the filing of the record and shall have power
to make and enter a decree affirming, modifying, or setting
aside the order of the Commission, and enforcing the same to
the extent that such order is affirmed and to issue such writs
as are ancillary to its jurisdiction or are necessary in its
judgment to prevent injury to the public or to competitors
pendente lite. The findings of the Commission as to the facts,
if supported by evidence, shall be conclusive. To the extent
that the order of the Commission is affirmed, the court shall
thereupon issue its own order commanding obedience to the terms
of such order of the Commission. If either party shall apply to
the court for leave to adduce additional evidence, and shall
show to the satisfaction of the court that such additional
evidence is material and that there were reasonable grounds for
the failure to adduce such evidence in the proceeding before
the Commission, the court may order such additional evidence to
be taken before the Commission and to be adduced upon the
hearing in such manner and upon such terms and conditions as to
the court may seem proper. The Commission may modify its
findings as to the facts, or make new findings, by reason of
the additional evidence so taken, and it shall file such
modified or new findings, which if supported by evidence, shall
be conclusive, and its recommendation, if any, for the
modification or setting aside of its original order, with the
return of such additional evidence. The judgment and decree of
the court shall be final, except that the same shall be subject
to review by the Supreme Court upon certiorari, as provided in
section 240 of the Judicial Code.
(d) Upon the filing of the record with it the jurisdiction
of the court of appeals of the United States to affirm,
enforce, modify, or set aside orders of the Commission shall be
exclusive.
(e) No order of the Commission or judgment of court to
enforce the same shall in anywise relieve or absolve any
person, partnership, or corporation from any liability under
the Antitrust Acts.
(f) Complaints, orders, and other processes of the
Commission under this section may be served by anyone duly
authorized by the Commission, either (a) by delivering a copy
thereof to the person to be served, or to a member of the
partnership to be served, or the president, secretary, or other
executive officer or a director of the corporation to be
served; or (b) by leaving a copy thereof at the residence or
the principal office or place of business of such person,
partnership, or corporation; or (c) by mailing a copy thereof
by registered mail or by certified mail addressed to such
person, partnership, or corporation at his or its residence or
principal office or place of business. The verified return by
the person so serving said complaint, order, or other process
setting forth the manner of said service shall be proof of the
same, and the return post office receipt for said complaint,
order, or other process mailed by registered mail or certified
mail as aforesaid shall be proof of the service of the same.
(g) An order of the Commission to cease and desist shall
become final--
(1) Upon the expiration of the time allowed for
filing a petition for review, if no such petition has
been duly filed within such time; but the Commission
may thereafter modify or set aside its order to the
extent provided in the last sentence of subsection (b).
(2) Except as to any order provision subject to
paragraph (4), upon the sixtieth day after such order
is served, if a petition for review has been duly
filed; except that any such order may be stayed, in
whole or in part and subject to such conditions as may
be appropriate, by--
(A) the Commission;
(B) an appropriate court of appeals of the
United States, if (i) a petition for review of
such order is pending in such court, and (ii)
an application for such a stay was previously
submitted to the Commission and the Commission,
within the 30-day period beginning on the date
the application was received by the Commission,
either denied the application or did not grant
or deny the application; or
(C) the Supreme Court, if an applicable
petition for certiorari is pending.
(3) For purposes of subsection (m)(1)(B) and of
section 19(a)(2), if a petition for review of the order
of the Commission has been filed--
(A) upon the expiration of the time allowed
for filing a petition for certiorari, if the
order of the Commission has been affirmed or
the petition for review has been dismissed by
the court of appeals and no petition for
certiorari has been duly filed;
(B) upon the denial of a petition for
certiorari, if the order of the Commission has
been affirmed or the petition for review has
been dismissed by the court of appeals; or
(C) upon the expiration of 30 days from the
date of issuance of a mandate of the Supreme
Court directing that the order of the
Commission be affirmed or the petition for
review be dismissed.
(4) In the case of an order provision requiring a
person, partnership, or corporation to divest itself of
stock, other share capital, or assets, if a petition
for review of such order of the Commission has been
filed--
(A) upon the expiration of the time allowed
for filing a petition for certiorari, if the
order of the Commission has been affirmed or
the petition for review has been dismissed by
the court of appeals and no petition for
certiorari has been duly filed;
(B) upon the denial of a petition for
certiorari, if the order of the Commission has
been affirmed or the petition for review has
been dismissed by the court of appeals; or
(C) upon the expiration of 30 days from the
date of issuance of a mandate of the Supreme
Court directing that the order of the
Commission be affirmed or the petition for
review be dismissed.
(h) If the Supreme Court directs that the order of the
Commission be modified or set aside, the order of the
Commission rendered in accordance with the mandate of the
Supreme Court shall become final upon the expiration of thirty
days from the time it was rendered, unless within such thirty
days either party has instituted proceedings to have such order
corrected to accord with the mandate, in which event the order
of the Commission shall become final when so corrected.
(i) If the order of the Commission is modified or set aside
by the circuit court of appeals, and if (1) the time allowed
for filing a petition for certiorari has expired and no such
petition has been duly filed, or (2) the petition for
certiorari has been denied, or (3) the decision of the court
has been affirmed by the Supreme Court, then the order of the
Commission rendered in accordance with the mandate of the
circuit court of appeals shall become final on the expiration
of thirty days from the time such order of the Commission was
rendered, unless within such thirty days either party has
instituted proceedings to have such order corrected so that it
will accord with the mandate, in which event the order of the
Commission shall become final when so corrected.
(j) If the Supreme Court orders a rehearing; or if the case
is remanded by the circuit court of appeals to the Commission
for a rehearing, and if (1) the time allowed for filing a
petition for certiorari has expired, and no such petition has
been duly filed, or (2) the petition for certiorari has been
denied, or (3) the decision of the court has been affirmed by
the Supreme Court, then the order of the Commission rendered
upon such rehearing shall become final in the same manner as
though no prior order of the Commission had been rendered.
(k) As used in this section the term ``mandate'', in case a
mandate has been recalled prior to the expiration of thirty
days from the date of issuance thereof, means the final
mandate.
(l) Any person, partnership, or corporation who violates an
order of the Commission after it has become final, and while
such order is in effect, shall forfeit and pay to the United
States a civil penalty of not more than $10,000 for each
violation, which shall accrue to the United States and may be
recovered in a civil action brought by the Attorney General of
the United States. Each separate violation of such an order
shall be a separate offense, except that in the case of a
violation through continuing failure to obey or neglect to obey
a final order of the Commission, each day of continuance of
such failure or neglect shall be deemed a separate offense. In
such actions, the United States district courts are empowered
to grant mandatory injunctions and such other and further
equitable relief as they deem appropriate in the enforcement of
such final orders of the Commission.
(m)(1)(A) The Commission may commence a civil action to
recover a civil penalty in a district court of the United
States against any person, partnership, or corporation which
violates any rule under this Act respecting unfair or deceptive
acts or practices (other than an interpretive rule or a rule
violation of which the Commission has provided is not an unfair
or deceptive act or practice in violation of subsection (a)(1))
with actual knowledge or knowledge fairly implied on the basis
of objective circumstances that such act is unfair or deceptive
and is prohibited by such rule. In such action, such person,
partnership, or corporation shall be liable for a civil penalty
of not more than $10,000 for each violation.
(B) If the Commission determines in a proceeding under
subsection (b) that any act or practice is unfair or deceptive,
and issues a final cease and desist order, other than a consent
order, with respect to such act or practice, then the
Commission may commence a civil action to obtain a civil
penalty in a district court of the United States against any
person, partnership, or corporation which engages in such act
or practice--
(1) after such cease and desist order becomes final
(whether or not such person, partnership, or
corporation was subject to such cease and desist
order), and
(2) with actual knowledge that such act or practice
is unfair or deceptive and is unlawful under subsection
(a)(1) of this section.
In such action, such person, partnership, or
corporation shall be liable for a civil penalty
of not more than $10,000 for each violation.
(C)(1) In the case of a violation through continuing
failure to comply with a rule or with section 5(a)(1), each day
of continuance of such failure shall be treated as a separate
violation, for purposes of subparagraphs (A) and (B). In
determining the amount of such a civil penalty, the court shall
take into account the degree of culpability, any history of
prior such conduct, ability to pay, effect on ability to
continue to do business, and such other matters as justice may
require.
(2) If the cease and desist order establishing that the act
or practice is unfair or deceptive was not issued against the
defendant in a civil penalty action under paragraph (1)(B) the
issues of fact in such action against such defendant shall be
tried de novo. Upon request of any party to such an action
against such defendant, the court shall also review the
determination of law made by the Commission in the proceeding
under subsection (b) that the act or practice which was the
subject of such proceeding constituted an unfair or deceptive
act or practice in violation of subsection (a).
(3) The Commission may compromise or settle any action for
a civil penalty if such compromise or settlement is accompanied
by a public statement of its reasons and is approved by the
court.
(n) The Commission shall have no authority under this
section or section 18 to declare unlawful an act or practice on
the grounds that such act or practice is unfair unless the act
or practice causes or is likely to cause substantial injury to
consumers which is not reasonably avoidable by consumers
themselves and not outweighed by countervailing benefits to
consumers or to competition. In determining whether an act or
practice is unfair, the Commission may consider established
public policies as evidence to be considered with all other
evidence. Such public policy considerations may not serve as a
primary basis for such determination.
* * * * * * *
Sec. 9. That for the purposes of this Act the commission,
or its duly authorized agent or agents, shall at all reasonable
times have access to, for the purpose of examination, and the
right to copy any documentary evidence of any corporation being
investigated or proceeded against; and the commission shall
have power to require by subpoena the attendance and testimony
of witnesses and the production of all such documentary
evidence relating to any matter under investigation. Any member
of the commission may sign subpoenas, and members and examiners
of the commission may administer oaths and affirmations,
examine witnesses, and receive evidence.
Such attendance of witnesses, and the production of such
documentary evidence, may be required from any place in the
United States, at any designated place of hearing. And in case
of disobedience to a subpoena the commission may invoke the aid
of any court of the United States in requiring the attendance
and testimony of witnesses and the production of documentary
evidence.
Any of the district courts of the United States within the
jurisdiction of which such inquiry is carried on may, in case
of contumacy or refusal to obey a subpoena issued to any
corporation or other person, issue an order requiring such
corporation or other person to appear before the commission, or
to produce documentary evidence if so ordered, or to give
evidence touching the matter in question; and any failure to
obey such order of the court may be punished by such court as a
contempt thereof.
Upon the application of the Attorney General of the United
States, at the request of the commission, the district courts
of the United States shall have jurisdiction to issue writs of
mandamus commanding any person or corporation to comply with
the provisions of this Act or any order of the commission made
in pursuance thereof.
Upon the application of the commission with respect to any
activity related to the consummation of a proposed merger,
acquisition, joint venture, or similar transaction that is
subject to section 7 of the Clayton Act (15 U.S.C. 18) that may
result in any unfair method of competition, the district courts
of the United States shall have jurisdiction to issue writs of
mandamus commanding any person or corporation to comply with
the provisions of this Act or any order of the commission made
in pursuance thereof.
The commission may order testimony to be taken by
deposition in any proceeding or investigation pending under
this Act at any stage of such proceeding or investigation. Such
depositions may be taken before any person designated by the
commission and having power to administer oaths. Such testimony
shall be reduced to writing by the person taking the
deposition, or under his direction, and shall then be
subscribed by the deponent. Any person may be compelled to
appear and depose and to produce documentary evidence in the
same manner as witnesses may be compelled to appear and testify
and produce documentary evidence before the commission as
hereinbefore provided.
Witnesses summoned before the commission shall be paid the
same fees and mileage that are paid witnesses in the courts of
the United States, and witnesses whose depositions are taken
and the persons taking the same shall severally be entitled to
the same fees as are paid for like services in the courts of
the United States.
* * * * * * *
Sec. 13. (a) Whenever the Commission has reason to
believe--
(1) that any person, partnership, or corporation is
engaged in, or is about to engage in, the dissemination
or the causing of the dissemination of any
advertisement in violation of section 12, and
(2) that the enjoining thereof pending the issuance
of a complaint by the Commission under section 5, and
until such complaint is dismissed by the Commission or
set aside by the court on review, or the order of the
Commission to cease and desist made thereon has become
final within the meaning of section 5, would be to the
interest of the public,
the Commission by any of its attorneys designated by it for
such purpose may bring suit in a district court of the United
States or in the United States court of any Territory, to
enjoin the dissemination or the causing of the dissemination of
such advertisement. Upon proper showing a temporary injunction
or restraining order shall be granted without bond. Any suit
may be brought where such person, partnership, or corporation
resides or transacts business, or wherever venue is proper
under section 1391 of title 28, United States Code. In
addition, the court may, if the court determines that the
interests of justice require that any other person,
partnership, or corporation should be a party in such suit,
cause such other person, partnership, or corporation to be
added as a party without regard to whether venue is otherwise
proper in the district in which the suit is brought. In any
suit under this section, process may be served on any person,
partnership, or corporation wherever it may be found.
(b) Whenever the Commission has reason to believe--
(1) that any person, partnership, or corporation is
violating, or is about to violate, any provision of law
enforced by the Federal Trade Commission (excluding
section 7 of the Clayton Act (15 U.S.C. 18) and section
5(a)(1) with respect to the consummation of a proposed
merger, acquisition, joint venture, or similar
transaction that is subject to section 7 of the Clayton
Act (15 U.S.C. 18)), and
(2) that the enjoining thereof pending the issuance
of a complaint by the Commission and until such
complaint is dismissed by the Commission or set aside
by the court on review, or until the order of the
Commission made thereon has become final, would be in
the interest of the public--
the Commission by any of its attorneys designated by it for
such purpose may bring suit in a district court of the United
States to enjoin any such act or practice. Upon a proper
showing that, weighing the equities and considering the
Commission's likelihood of ultimate success, such action would
be in the public interest, and after notice to the defendant, a
temporary restraining order or a preliminary injunction may be
granted without bond: Provided, however, That if a complaint is
not filed within such period (not exceeding 20 days) as may be
specified by the court after issuance of the temporary
restraining order or preliminary injunction, the order or
injunction shall be dissolved by the court and be of no further
force and effect: Provided further, That in proper cases the
Commission may seek, and after proper proof, the court may
issue, a permanent injunction. Any suit may be brought where
such person, partnership, or corporation resides or transacts
business, or wherever venue is proper under section 1391 of
title 28, United States Code. In addition, the court may, if
the court determines that the interests of justice require that
any other person, partnership, or corporation should be a party
in such suit, cause such other person, partnership, or
corporation to be added as a party without regard to whether
venue is otherwise proper in the district in which the suit is
brought. In any suit under this section, process may be served
on any person, partnership, or corporation wherever it may be
found.
(c) Any process of the Commission under this section may be
served by any person duly authorized by the Commission--
(1) by delivering a copy of such process to the
person to be served, to a member of the partnership to
be served, or to the president, secretary, or other
executive officer or a director of the corporation to
be served;
(2) by leaving a copy of such process at the
residence or the principal office or place of business
of such person, partnership, or corporation; or
(3) by mailing a copy of such process by registered
mail or certified mail addressed to such person,
partnership, or corporation at his, or her, or its
residence, principal office, or principal place or
business.
The verified return by the person serving such process setting
forth the manner of such service shall be proof of the same.
(d) Whenever it appears to the satisfaction of the court in
the case of a newspaper, magazine, periodical, or other
publication, published at regular intervals--
(1) that restraining the dissemination of a false
advertisement in any particular issue of such
publication would delay the delivery of such issue
after the regular time therefor, and
(2) that such delay would be due to the method by
which the manufacture and distribution of such
publication is customarily conducted by the publisher
in accordance with sound business practice, and not to
any method or device adopted for the evasion of this
section or to prevent or delay the issuance of an
injunction or restraining order with respect to such
false advertisement or any other advertisement,
the court shall exclude such issue from the operation of the
restraining order or injunction.
* * * * * * *
Sec. 20. (a) For purposes of this section:
(1) The terms ``civil investigative demand'' and
``demand'' mean any demand issued by the Commission
under subsection (c)(1).
(2) The term ``Commission investigation'' means any
inquiry conducted by a Commission investigator for the
purpose of ascertaining whether any person is or has
been engaged in any unfair or deceptive acts or
practices in or affecting commerce (within the meaning
of section 5(a)(1)) or in any antitrust violations.
(3) The term ``Commission investigator'' means any
attorney or investigator employed by the Commission who
is charged with the duty of enforcing or carrying into
effect any provisions relating to unfair or deceptive
acts or practices in or affecting commerce (within the
meaning of section 5(a)(1)) or any provisions relating
to antitrust violations.
(4) The term ``custodian'' means the custodian or
any deputy custodian designated under section
21(b)(2)(A).
(5) The term ``documentary material'' includes the
original or any copy of any book, record, report,
memorandum, paper, communication, tabulation, chart, or
other document.
(6) The term ``person'' means any natural person,
partnership, corporation, association, or other legal
entity, including any person acting under color or
authority of State law.
(7) The term ``violation'' means any act or
omission constituting an unfair or deceptive act or
practice in or affecting commerce (within the meaning
of section 5(a)(1)) or any antitrust violation.
(8) The term ``antitrust violation'' means--
(A) any unfair method of competition
(within the meaning of section 5(a)(1));
(B) any violation of the Clayton Act or of
any other Federal statute that prohibits, or
makes available to the Commission a civil
remedy with respect to, any restraint upon or
monopolization of interstate or foreign trade
or commerce;
(C) with respect to the International
Antitrust Enforcement Assistance Act of 1994,
any violation of any of the foreign antitrust
laws (as defined in section 12 of such Act)
with respect to which a request is made under
section 3 of such Act; or
(D) any activity in preparation for a
merger, acquisition, joint venture, or similar
transaction, which if consummated, may result
in any such unfair method of competition or in
any such violation.
(b) For the purpose of investigations performed pursuant to
this section with respect to unfair or deceptive acts or
practices in or affecting commerce (within the meaning of
section 5(a)(1)), all actions of the Commission taken under
section 6 and section 9 shall be conducted pursuant to
subsection (c).
(c)(1) Whenever the Commission has reason to believe that
any person may be in possession, custody, or control of any
documentary material or tangible things, or may have any
information, relevant to unfair or deceptive acts or practices
in or affecting commerce (within the meaning of section
5(a)(1)), or to antitrust violations, the Commission may,
before the institution of any proceedings under this Act, or
under section 7 of the Clayton Act (15 U.S.C. 18), where
applicable, issue in writing, and cause to be served upon such
person, a civil investigative demand requiring such person to
produce such documentary material for inspection and copying or
reproduction, to submit such tangible things, to file written
reports or answers to questions, to give oral testimony
concerning documentary material or other information, or to
furnish any combination of such material, answers, or
testimony.
(2) Each civil investigative demand shall state the nature
of the conduct constituting the alleged violation which is
under investigation and the provision of law applicable to such
violation.
(3) Each civil investigative demand for the production of
documentary material shall--
(A) describe each class of documentary material to
be produced under the demand with such definiteness and
certainty as to permit such material to be fairly
identified;
(B) prescribe a return date or dates which will
provide a reasonable period of time within which the
material so demanded may be assembled and made
available for inspection and copying or reproduction;
and
(C) identify the custodian to whom such material
shall be made available.
(4) Each civil investigative demand for the submission of
tangible things shall--
(A) describe each class of tangible things to be
submitted under the demand with such definiteness and
certainty as to permit such things to be fairly
identified;
(B) prescribe a return date or dates which will
provide a reasonable period of time within which the
things so demanded may be assembled and submitted; and
(C) identify the custodian to whom such things
shall be submitted.
(5) Each civil investigative demand for written reports or
answers to questions shall--
(A) propound with definiteness and certainty the
reports to be produced or the questions to be answered;
(B) prescribe a date or dates at which time written
reports or answers to questions shall be submitted; and
(C) identify the custodian to whom such reports or
answers shall be submitted.
(6) Each civil investigative demand for the giving of oral
testimony shall--
(A) prescribe a date, time, and place at which oral
testimony shall be commenced; and
(B) identify a Commission investigator who shall
conduct the investigation and the custodian to whom the
transcript of such investigation shall be submitted.
(7)(A) Any civil investigative demand may be served by any
Commission investigator at any place within the territorial
jurisdiction of any court of the United States.
(B) Any such demand or any enforcement petition filed under
this section may be served upon any person who is not found
within the territorial jurisdiction of any court of the United
States, in such manner as the Federal Rules of Civil Procedure
prescribe for service in a foreign nation.
(C) To the extent that the courts of the United States have
authority to assert jurisdiction over such person consistent
with due process, the United States District Court for the
District of Columbia shall have the same jurisdiction to take
any action respecting compliance with this section by such
person that such district court would have if such person were
personally within the jurisdiction of such district court.
(8) Service of any civil investigative demand or any
enforcement petition filed under this section may be made upon
a partnership, corporation, association, or other legal entity
by--
(A) delivering a duly executed copy of such demand
or petition to any partner, executive officer, managing
agent, or general agent of such partnership,
corporation, association, or other legal entity, or to
any agent of such partnership, corporation,
association, or other legal entity authorized by
appointment or by law to receive service of process on
behalf of such partnership, corporation, association,
or other legal entity;
(B) delivering a duly executed copy of such demand
or petition to the principal office or place of
business of the partnership, corporation, association,
or other legal entity to be served; or
(C) depositing a duly executed copy in the United
States mails, by registered or certified mail, return
receipt requested, duly addressed to such partnership,
corporation, association, or other legal entity at its
principal office or place of business.
(9) Service of any civil investigative demand or of any
enforcement petition filed under this section may be made upon
any natural person by--
(A) delivering a duly executed copy of such demand
or petition to the person to be served; or
(B) depositing a duly executed copy in the United
States mails by registered or certified mail, return
receipt requested, duly addressed to such person at his
residence or principal office or place of business.
(10) A verified return by the individual serving any civil
investigative demand or any enforcement petition filed under
this section setting forth the manner of such service shall be
proof of such service. In the case of service by registered or
certified mail, such return shall be accompanied by the return
post office receipt of delivery of such demand or enforcement
petition.
(11) The production of documentary material in response to
a civil investigative demand shall be made under a sworn
certificate, in such form as the demand designates, by the
person, if a natural person, to whom the demand is directed or,
if not a natural person, by any person having knowledge of the
facts and circumstances relating to such production, to the
effect that all of the documentary material required by the
demand and in the possession, custody, or control of the person
to whom the demand is directed has been produced and made
available to the custodian.
(12) The submission of tangible things in response to a
civil investigative demand shall be made under a sworn
certificate, in such form as the demand designates, by the
person to whom the demand is directed or, if not a natural
person, by any person having knowledge of the facts and
circumstances relating to such production, to the effect that
all of the tangible things required by the demand and in the
possession, custody, or control of the person to whom the
demand is directed have been submitted to the custodian.
(13) Each reporting requirement or question in a civil
investigative demand shall be answered separately and fully in
writing under oath, unless it is objected to, in which event
the reasons for the objection shall be stated in lieu of an
answer, and it shall be submitted under a sworn certificate, in
such form as the demand designates, by the person, if a natural
person, to whom the demand is directed or, if not a natural
person, by any person responsible for answering each reporting
requirement or question, to the effect that all information
required by the demand and in the possession, custody, control,
or knowledge of the person to whom the demand is directed has
been submitted.
(14)(A) Any Commission investigator before whom oral
testimony is to be taken shall put the witness on oath or
affirmation and shall personally, or by any individual acting
under his direction and in his presence, record the testimony
of the witness. The testimony shall be taken stenographically
and transcribed. After the testimony is fully transcribed, the
Commission investigator before whom the testimony is taken
shall promptly transmit a copy of the transcript of the
testimony to the custodian.
(B) Any Commission investigator before whom oral testimony
is to be taken shall exclude from the place where the testimony
is to be taken all other persons except the person giving the
testimony, his attorney, the officer before whom the testimony
is to be taken, and any stenographer taking such testimony.
(C) The oral testimony of any person taken pursuant to a
civil investigative demand shall be taken in the judicial
district of the United States in which such person resides, is
found, or transacts business, or in such other place as may be
agreed upon by the Commission investigator before whom the oral
testimony of such person is to be taken and such person.
(D)(i) Any person compelled to appear under a civil
investigative demand for oral testimony pursuant to this
section may be accompanied, represented, and advised by an
attorney. The attorney may advise such person, in confidence,
either upon the request of such person or upon the initiative
of the attorney, with respect to any question asked of such
person.
(ii) Such person or attorney may object on the record to
any question, in whole or in part, and shall briefly state for
the record the reason for the objection. An objection may
properly be made, received, and entered upon the record when it
is claimed that such person is entitled to refuse to answer the
question on grounds of any constitutional or other legal right
or privilege, including the privilege against self-
incrimination. Such person shall not otherwise object to or
refuse to answer any question, and shall not himself or through
his attorney otherwise interrupt the oral examination. If such
person refuses to answer any question, the Commission may
petition the district court of the United States pursuant to
this section for an order compelling such person to answer such
question.
(iii) If such person refuses to answer any question on
grounds of the privilege against self-incrimination, the
testimony of such person may be compelled in accordance with
the provisions of section 6004 of title 18, United States Code.
(E)(i) After the testimony of any witness is fully
transcribed, the Commission investigator shall afford the
witness (who may be accompanied by an attorney) a reasonable
opportunity to examine the transcript. The transcript shall be
read to or by the witness, unless such examination and reading
are waived by the witness. Any changes in form or substance
which the witness desires to make shall be entered and
identified upon the transcript by the Commission investigator
with a statement of the reasons given by the witness for making
such changes. The transcript shall then be signed by the
witness, unless the witness in writing waives the signing, is
ill, cannot be found, or refuses to sign.
(ii) If the transcript is not signed by the witness during
the 30-day period following the date upon which the witness is
first afforded a reasonable opportunity to examine it, the
Commission investigator shall sign the transcript and state on
the record the fact of the waiver, illness, absence of the
witness, or the refusal to sign, together with any reasons
given for the failure to sign.
(F) The Commission investigator shall certify on the
transcript that the witness was duly sworn by him and that the
transcript is a true record of the testimony given by the
witness, and the Commission investigator shall promptly deliver
the transcript or send it by registered or certified mail to
the custodian.
(G) The Commission investigator shall furnish a copy of the
transcript (upon payment of reasonable charges for the
transcript) to the witness only, except that the Commission may
for good cause limit such witness to inspection of the official
transcript of his testimony.
(H) Any witness appearing for the taking of oral testimony
pursuant to a civil investigative demand shall be entitled to
the same fees and mileage which are paid to witnesses in the
district courts of the United States.
(d) Materials received as a result of a civil investigative
demand shall be subject to the procedures established in
section 21.
(e) Whenever any person fails to comply with any civil
investigative demand duly served upon him under this section,
or whenever satisfactory copying or reproduction of material
requested pursuant to the demand cannot be accomplished and
such person refuses to surrender such material, the Commission,
through such officers or attorneys as it may designate, may
file, in the district court of the United States for any
judicial district in which such person resides, is found, or
transacts business, and serve upon such person, a petition for
an order of such court for the enforcement of this section. All
process of any court to which application may be made as
provided in this subsection may be served in any judicial
district.
(f)(1) Not later than 20 days after the service of any
civil investigative demand upon any person under subsection
(c), or at any time before the return date specified in the
demand, whichever period is shorter, or within such period
exceeding 20 days after service or in excess of such return
date as may be prescribed in writing, subsequent to service, by
any Commission investigator named in the demand, such person
may file with the Commission a petition for an order by the
Commission modifying or setting aside the demand.
(2) The time permitted for compliance with the demand in
whole or in part, as deemed proper and ordered by the
Commission, shall not run during the pendency of such petition
at the Commission, except that such person shall comply with
any portions of the demand not sought to be modified or set
aside. Such petition shall specify each ground upon which the
petitioner relies in seeking such relief, and may be based upon
any failure of the demand to comply with the provisions of this
section, or upon any constitutional or other legal right or
privilege of such person.
(g) At any time during which any custodian is in custody or
control of any documentary material, tangible things, reports,
answers to questions, or transcripts of oral testimony given by
any person in compliance with any civil investigative demand,
such person may file, in the district court of the United
States for the judicial district within which the office of
such custodian is situated, and serve upon such custodian, a
petition for an order of such court requiring the performance
by such custodian of any duty imposed upon him by this section
or section 21.
(h) Whenever any petition is filed in any district court of
the United States under this section, such court shall have
jurisdiction to hear and determine the matter so presented, and
to enter such order or orders as may be required to carry into
effect the provisions of this section. Any final order so
entered shall be subject to appeal pursuant to section 1291 of
title 28, United States Code. Any disobedience of any final
order entered under this section by any court shall be punished
as a contempt of such court.
(i) Notwithstanding any other provision of law, the
Commission shall have no authority to issue a subpoena or make
a demand for information, under authority of this Act or any
other provision of law, unless such subpoena or demand for
information is signed by a Commissioner acting pursuant to a
Commission resolution. The Commission shall not delegate the
power conferred by this section to sign subpoenas or demands
for information to any other person.
(j) The provisions of this section shall not--
(1) apply to any proceeding under section 5(b), any
proceeding under section 11(b) of the Clayton Act (15
U.S.C. 21(b)), or any adjudicative proceeding under any
other provision of law; or
(2) apply to or affect the jurisdiction, duties, or
powers of any agency of the Federal Government, other
than the Commission.
* * * * * * *
Dissenting Views
H.R. 2745, the ``Standard Merger and Acquisition Reviews
Through Equal Rules Act of 2015'' or ``SMARTER Act,'' would
undermine the independence of the Federal Trade Commission
(FTC) and contravene the agency's unique role in developing
antitrust policy. H.R. 2745 does this by eliminating the FTC's
ability to use the procedures established under the Federal
Trade Commission Act (FTC Act)\1\ to enforce antitrust law in
merger cases, including its ability to use administrative
adjudication. Moreover, while this proposal purports to
implement recommendations of the Antitrust Modernization
Commission (AMC), it goes far beyond the AMC's recommendations
by undermining the FTC's ability to address non-merger
activity. Finally, in seeking to harmonize the process for
proposed mergers or acquisitions, H.R. 2745 addresses a non-
existent problem while applying a less consumer-friendly
standard.
---------------------------------------------------------------------------
\1\Federal Trade Commission Act of 1914, Pub. L. No. 63-203, 38
Stat. 717 (1914), codified at 15 U.S.C. Sec. Sec. 41-58 (2016).
---------------------------------------------------------------------------
H.R. 2745 is not a modest measure. It represents a major
change to the status quo by changing the FTC's fundamental
nature as an independent administrative agency charged with
enforcing antitrust laws and developing antitrust policy in a
stable, long-term manner using bipartisan expertise. Reducing
the FTC's independence directly conflicts with Congress's
intent in creating this antitrust enforcement agency and
policymaking body to be relatively shielded from political, and
particularly Executive Branch, interference. More generally,
the elimination of distinctions between the FTC and the DOJ in
merger enforcement actions potentially opens the door to the
elimination of the FTC itself by chipping away at the various
differences that justify its separate existence.
We share the views expressed by FTC Chairwoman Edith
Ramirez, who testified earlier this Congress that the identical
Senate companion bill ``would fundamentally alter a critical
aspect of the agency's institutional role and risks impeding
its ability to protect American consumers and the public
interest.''\2\ In addition, the American Antitrust Institute, a
consumer-oriented antitrust organization, strongly opposes the
legislation, particularly with respect to its elimination of
the FTC's ability to use administrative adjudication in merger
cases.\3\ Consumers Union, the policy and advocacy arm of
Consumer Reports, has echoed these concerns, observing that
that ``we do not believe the case has been made . . . that
there is a material problem here that warrants making
alterations to the FTC's fundamental enforcement
structure.''\4\
---------------------------------------------------------------------------
\2\The Standard Merger and Acquisition Reviews Through Equal Rules
Act of 2015: Hearing on S. 2102 Before the Subcomm. on Antitrust,
Competition Policy and Consumer Rights of the S. Comm on the Judiciary,
114th Cong. 47 (2015) (statement of Edith Ramirez, Chairwoman, Federal
Trade Commission), https://www.judiciary.senate.gov/imo/media/doc/10-
07-15%20
Ramirez%20Testimony.pdf [hereinafter Senate Hearing]. Chairwoman
Ramirez expressed similar concerns with an earlier, but substantially
similar, draft of the SMARTER Act, that she said would have ``far-
reaching immediate effects'' and the ``potential for significant
unintended consequences.'' Letter from the Honorable Edith Ramirez,
Chairwoman, Federal Trade Commission, to Representatives Spencer Bachus
(R-AL), Chair, and Henry C. Johnson, Jr. (D-GA), Ranking Member, of the
Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H.
Comm. on the Judiciary (Apr. 2, 2014) (on file with Democratic staff of
the H. Comm. on the Judiciary) [hereinafter Ramirez Letter].
\3\Letter from Albert A. Foer, President, American Antitrust
Institute, to Representatives Spencer Bachus (R-AL), Chair, and Henry
C. Johnson, Jr. (D-GA), Ranking Member, of the Subcomm. on Regulatory
Reform, Commercial and Antitrust Law of the H. Comm. on the Judiciary
(Apr. 9, 2014) (on file with Democratic staff of the H. Comm. on the
Judiciary) [hereinafter ``Foer Letter'']; The Standard Merger and
Acquisition Reviews Through Equal Rules Act of 2015: Hearing on H.R.
2745 Before the Subcomm. on Regulatory Reform, Commercial and Antitrust
Law of the H. Comm. on the Judiciary, 114th Cong. 47 (2015), http://
judiciary.house.gov/_cache/files/9f77f8c3-6b40-4b22-b337-51ddbedab9b6/
114-32-95119.pdf (statement of Bert Foer, senior fellow, American
Antitrust Institute).
\4\Letter from George P. Slover, Senior Policy Counsel, Consumers
Union, to Representatives Bob Goodlatte (R-VA), Chairman, H. Comm. on
the Judiciary, et al. (June 25, 2015) (on file with Democratic staff of
the H. Comm. on the Judiciary).
---------------------------------------------------------------------------
For these reasons, and those described below, we urge our
colleagues to oppose H.R. 2745.
DESCRIPTION AND BACKGROUND
DESCRIPTION
H.R. 2745 eliminates the ability of the FTC to use the
procedures of the FTC Act in merger enforcement cases and with
respect to certain types of non-merger activity. In its stead,
the bill requires the FTC to use the procedures available to
the DOJ under the Clayton Antitrust Act (Clayton Act) in such
circumstances.\5\ The following is a description of the bill's
substantive provisions.
---------------------------------------------------------------------------
\5\Clayton Antitrust Act of 1914, Pub. L. No. 63-212, 38 Stat. 730
(1914), codified at 15 U.S.C. Sec. Sec. 12-27, 29 U.S.C. Sec. Sec. 52-
53 (2016).
---------------------------------------------------------------------------
Section 2 of H.R. 2745 amends the Clayton Act in order to
bring the FTC's merger enforcement authority under the Act.
Under current law, the DOJ's Antitrust Division and the FTC's
Bureau of Competition enforce the Nation's antitrust laws
jointly. Nevertheless, while the DOJ enforces the antitrust
laws through civil actions under the Clayton Act and Sherman
Act, the FTC enforces the antitrust laws through section 5 of
the FTC Act, which prohibits unfair methods of competition. As
amended, H.R. 2745 would align the merger-enforcement
requirements of the DOJ and FTC under the Clayton Act.
Section 2(1) amends section 4F of the Clayton Act, which
currently requires the U.S. Attorney General to notify any
state attorney general when initiating an action under the
antitrust laws if the U.S. Attorney General has reason to
believe that the state would be entitled to bring an action
under the Clayton Act based on substantially the same alleged
violation. It also requires the U.S. Attorney General to
provide assistance upon request of any state attorney general
in any actual or potential cause of action by the state in
these circumstances. As amended, new section 4F would make
these requirements applicable to the FTC's enforcement actions
under section 7 of the Clayton Act.
Section 2(2) of the bill amends section 5 of the Clayton
Act, which specifies the evidentiary weight of judgments and
consent decrees in any criminal or civil proceeding brought by
the government under the antitrust laws in any action by a
third party. Section 5 also specifies procedures for public
notice and comment on proposed consent decrees; requires that
the government file a competitive impact statement; requires a
court to make a public interest determination prior to entering
a consent judgment; outlines procedures for making such a
public interest determination; requires a defendant to file
with the court written or oral communications with the
government; makes inadmissible as evidence competitive impact
statements or public interest determinations in any action
brought against a defendant by a third party; and suspends the
statute of limitations for every private or state right of
action under the antitrust laws when the Federal Government
institutes a proceeding. Section 2(2) of the bill adds
references specifying that the term ``United States'' as used
throughout this provision includes the FTC with respect to
merger cases. As amended, new section 5 would make these
requirements applicable to the FTC's enforcement actions under
section 7 of the Clayton Act.
Section 2(3) of H.R. 2745 amends section 11(a) of the
Clayton Act, which reserves enforcement authority for certain
provisions of the Clayton Act for agencies other than the DOJ.
Among the other agencies listed is the FTC ``where applicable
to all other character of commerce.'' Section 2(3) of the bill
would add at the end a new provision specifying that when
engaged in merger enforcement, the FTC must follow the same
procedures that the DOJ would follow, except with respect to
the enforcement of a consent order.
Section 2(4) of the bill amends section 13 of the Clayton
Act, which provides that in any government suit, a subpoena for
a witness who is required to attend a Federal court in any
judicial district in an antitrust case may have effect in any
other district when the witness lives within 100 miles of the
trial court, unless the trial court permits the subpoena to
extend beyond the 100-mile reach. Section 2(4) of the bill
would make this provision also applicable to the FTC in merger
cases.
Section 2(5) of the bill amends section 15 of the Clayton
Act, which grants Federal district courts jurisdiction to
consider violations of the Act. It also makes it the duty of
the U.S. Attorney General and U.S. Attorneys to institute court
proceedings to restrain violations of the Act. In addition,
section 15 specifies that the court may provide injunctive
relief, issue temporary restraining orders, and summon other
parties through subpoena if necessary when the ends of justice
require in such cases. Section 2(5) would, in addition, assign
the FTC the same duties as the U.S. Attorney General and U.S.
Attorneys.
Section 3 of the bill makes several amendments to the FTC
Act that, broadly speaking, eliminate the FTC's authority to
act pursuant to the Act's provisions. Section 3(1) amends
section 5(b) of the FTC Act, which provides the FTC with the
authority to institute administrative proceedings against a
person, partnership, or corporation whenever the FTC determines
that such a party has been or is using ``any unfair method of
competition,'' among other things. If the FTC determines after
a notice and hearing that the target of the complaint has
engaged in the ``unfair method of competition'' and prepares a
report to that effect, the FTC may issue a cease and desist
order. A party may appeal an FTC decision to a Federal court of
appeals.
Section 3(1) of the bill would exclude from the definition
of ``unfair method of competition'' any ``unfair method of
competition that would result from the consummation of a
merger, acquisition, joint venture, or similar transaction.''
Notably, section 3(1) excludes mergers from the FTC's
administrative process as well as pre-merger activity,
acquisitions, joint ventures, or other similar transactions
from the definition of ``method of competition'' as used in the
portion of section 5(b) of the FTC Act giving the FTC the
authority to issue reports and cease-and-desist orders. The
inclusion of pre-merger activity suggests that the bill's
elimination of the FTC's administrative authority extends
beyond mergers to include arguably non-merger anticompetitive
conduct.
Section 3(2) of the bill amends section 9 of the FTC Act,
which specifies, among other things, that the FTC may request,
through the U.S. Attorney General, that a Federal district
court issue a writ of mandamus to any person, partnership, or
corporation to comply with any of the FTC's orders pursuant to
the FTC Act. Section 3(2) of the bill allows the FTC to
directly seek a writ of mandamus from a Federal district court
with respect to any activity in preparation for a merger,
acquisition, joint venture, or similar transaction which if
consummated, may result in any unfair method of competition.
Section 3(3) of the bill amends section 13(b)(1) of the FTC
Act, which sets forth the FTC's authority to bring suit in a
Federal district court to enjoin any conduct that violates any
provision of law enforced by the FTC. Section 13(b) also
articulates the standard for granting a preliminary injunction,
which requires a showing that, ``weighing the equities and
considering the [FTC's] likelihood of ultimate success, such
action would be in the public interest.'' It further provides
that if the FTC does not file a complaint within a time period
specified by the court not to exceed 20 days, the preliminary
injunction is dissolved. Section 3(3) of the bill excludes from
section 13(b) any actions that violate section 7 of the Clayton
Act and section 5(a)(1) of the FTC Act--which declares, in
part, that unfair methods of competition are unlawful--with
respect to an unfair method of competition that would result
from the consummation of a merger, acquisition, joint venture,
or similar transaction.
Section 3(4) amends section 20(c)(1) of the FTC Act, which
grants the FTC the authority to issue civil investigative
demands requiring the production of documents or other
discovery. Section 3(4) of the bill specifies that the FTC
retains this authority in any enforcement proceeding under the
Clayton Act.
BACKGROUND
A. The Federal Trade Commission
1. History and Reasons for Creation
In 1890, the Sherman Antitrust Act was enacted to stop the
anti-consumer abuses resulting from an unchecked wave of
corporate mergers.\6\ Thereafter, the position of Assistant
Attorney General for Antitrust in the DOJ was created in
1903.\7\ Neither effort, however, was sufficiently effective to
stem these abuses. President Woodrow Wilson subsequently signed
the FTC Act in 1914,\8\ establishing the FTC and making
unlawful, inter alia, ``unfair methods of competition.''\9\
That same year, President Wilson also signed into law the
Clayton Antitrust Act.\10\ Congress created the FTC to
encourage development of antitrust policy by antitrust experts
through an independent administrative agency that would share
enforcement authority with the DOJ\11\ and have the exclusive
authority to enforce the FTC Act.\12\ Additionally, Congress
gave the FTC broad investigative and reporting powers and
authorized its Commissioners to use an administrative
adjudication process to enforce the antitrust laws rather than
try cases before a Federal judge, though the FTC's decisions
may be appealed to a Federal court of appeals.\13\
---------------------------------------------------------------------------
\6\15 U.S.C. Sec. Sec. 1-7 (2016).
\7\The Antitrust Division became a separate operating unit within
DOJ in 1933. Antitrust Modernization Commission, Report and
Recommendations, at 129 (Apr. 2007), http://govinfo.library.unt.edu/
amc/report_recommendation/amc_final_report.pdf [hereinafter ``AMC
Report''].
\8\15 U.S.C. Sec. Sec. 41-58 (2016).
\9\15 U.S.C. Sec. 45(a) (2016); Marc Winerman, A Brief History of
the Federal Trade Commission: Federal Trade Commission 90th Anniversary
Symposium, 6 (Sept. 22, 2004), http://www.ftc.gov/sites/default/files/
attachments/ftc-90-symposium/90thanniv_program.pdf [hereinafter FTC
History].
\10\FTC History, supra note 9, at 6; 15 U.S.C. Sec. Sec. 12-27, 29
U.S.C. Sec. Sec. 52-53 (2016).
\11\An ``independent'' agency is one that has some measure of
independence from the President. The principal evidence of such
independence is that the President cannot remove the head of such an
agency without cause. Independent agencies are often styled
``commissions'' or ``boards.'' Stephen G. Breyer, et al.,
Administrative Law and Regulatory Policy, at 100 (4th ed. 1999).
\12\While the FTC has no authority to enforce the Sherman Act, the
Supreme Court has held that any conduct that violates section 1 of the
Sherman Act would also violate section 5(a) of the FTC Act. Federal
Trade Comm'n v. California Dental Ass'n, 526 U.S. 756, 763 n.3 (1999)
(``The FTC Act's prohibition of unfair competition and deceptive acts
or practices . . . overlaps the scope of Sec. 1 of the Sherman Act.'').
\13\15 U.S.C. Sec. 45(b) (2016).
---------------------------------------------------------------------------
According to one study of the origins of the FTC, the
congressional advocates for its creation were dissatisfied with
what, in their view, was the failure of the Sherman Antitrust
Act to stop the merger wave and corporate abuses that occurred
in the 24 years between its enactment and the passage of the
FTC Act in 1914.\14\ Advocates for the creation of the FTC
disclaimed any intent to amend the Sherman Act or to undermine
DOJ's enforcement role.\15\ Rather, they sought to enhance
existing antitrust law and enforcement, and in particular, to
establish ``a new agency that would prosecute if the [DOJ]
faltered, enforcing a flexible new standard where the Sherman
Act might not.''\16\
---------------------------------------------------------------------------
\14\Marc Winerman, The Origins of the FTC: Concentration,
Cooperation, Control, and Competition, 71 Antitrust L. J. 74 (2003),
http://www.ftc.gov/sites/default/files/attachments/federal-trade-
commission-history/origins.pdf.
\15\Id.
\16\Id.
---------------------------------------------------------------------------
Congress has historically granted the FTC broad authority
to prohibit unfair methods of competition. Indeed, every time
the Supreme Court has restricted the FTC's statutory authority
through a ruling, Congress has responded by amending the FTC
Act to expand the FTC's authority.\17\ Notwithstanding this
support, a congressional backlash against the FTC's authority
materialized in 1980 through what one commentator describes as
``a tidal wave of response and restricting legislation.''\18\
Most recently, for example, the U.S. Chamber of Commerce has
been highly critical of the FTC for its use of its authority
under section 5 of the FTC Act to prohibit ``unfair methods of
competition.''\19\
---------------------------------------------------------------------------
\17\FTC History, supra note 9, at 7-9 (outlining instances in the
1920's and 1930's in which Congress expanded the FTC's authority in
response to restrictive Supreme Court decisions, and also highlighting
further expansions of the FTC's authority by Congress in the 1950's and
1970's).
\18\Id. at 9.
\19\U.S. Chamber of Commerce, Unfair Methods of Competition Under
Section 5 of the FTC Act: Does the U.S. Need Rules ``Above and Beyond
Antitrust''?, GCP: The Antitrust Chronicle, (Sept. 2009), http://
www.uschamber.com/sites/default/files/reports/0909antrust_0.pdf.
---------------------------------------------------------------------------
2. LFTC and the Broader Antitrust Merger Enforcement Regime
The DOJ's Antitrust Division and the FTC's Bureau of
Competition enforce the Nation's antitrust laws jointly. Both
agencies enforce section 7 of the Clayton Act, which prohibits
anticompetitive mergers and other types of acquisitions.\20\
Pursuant to this responsibility, both have the authority to
conduct antitrust reviews of proposed mergers and acquisitions.
To facilitate coordination between them, the DOJ and FTC
developed joint standards known as ``Merger Guidelines'' that
outline the type of inquiry to be followed in reviewing a
proposed merger.\21\ According to the Guidelines, ``mergers
should not be permitted to create, enhance, or entrench market
power or to facilitate its exercise.''\22\
---------------------------------------------------------------------------
\20\15 U.S.C. Sec. 21(a) (2016).
\21\U.S. Dep't of Justice and Federal Trade Comm'n, Horizontal
Merger Guidelines (2010).
\22\Id. at 2.
---------------------------------------------------------------------------
With respect to the review of a proposed merger, once
parties make the requisite filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (HSR Act),\23\ it is up to
the agencies to decide during that initial 30-day review period
which agency will review the transaction. The agencies have
developed an informal process that relies primarily upon
historical experience in the relevant industry to determine
which agency has a better claim to a particular transaction.
---------------------------------------------------------------------------
\23\Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub. L.
No. 94-435, 90 Stat. 1383 (1976), codified at 15 U.S.C. Sec. 18a (2016)
(establishing a pre-merger review process for transactions that meet
certain dollar thresholds).
---------------------------------------------------------------------------
If the reviewing agency ultimately determines that the
transaction is illegal, the DOJ will file a complaint in
Federal court, while the FTC will institute an administrative
proceeding to stop the parties from consummating the
transaction. Oftentimes, such suits are resolved with the entry
of a consent decree in which the merger parties agree to take
certain steps--usually the divestiture of certain assets,
sometimes commitments by the merging parties to take certain
other actions--to address the reviewing agency's antitrust
concerns. As a practical matter, the pre-merger review process
under the HSR Act has dramatically reduced the amount of
antitrust litigation since its enactment.
3. LPreliminary Injunctions in Merger Cases
In the exceedingly rare instances where the government and
the merging parties do not reach a consent agreement at the
moment the government has filed suit, the government may seek a
temporary restraining order and a preliminary injunction to
stop consummation of the merger while the government pursues
its complaint. Nominally, FTC and DOJ are subject to different
standards for the grant of preliminary injunctions. While the
dominant view is that in practice both standards essentially
are the same, there are some who believe that the FTC standard
is more favorable to the enforcement agency.\24\
---------------------------------------------------------------------------
\24\See, e.g., AMC Report, supra note 7, at 142 (``[A]gencies face
nominally different standards governing whether a Federal district
court will issue a preliminary injunction,'' but ``the magnitude of the
difference between the two standards is not clear.'').
---------------------------------------------------------------------------
B. LAntitrust Modernization Commission
Congress created the Antitrust Modernization Commission
(AMC) in 2002 to examine whether antitrust laws, policies, and
procedures should be amended in light of changes to the
economy, and particularly the impact of the rise of the high-
technology sector and its implications for antitrust and
competition policy.\25\ In 2007, the AMC issued a 449-page
report outlining 80 recommendations for revisions to antitrust
law and policy.\26\ Only two of these 80 recommendations--
advocating the elimination of FTC's administrative adjudication
authority for merger cases and the adoption of a uniform
preliminary injunction standard--are relevant to consideration
of the SMARTER Act. To date, Congress has not considered the
remainder of the AMC's recommendations.
---------------------------------------------------------------------------
\25\Antitrust Modernization Commission Act of 2002, Pub. L. No.
107-273, Sec. 11054(h), 116 Stat. 1856, 1857 (2002).
\26\AMC Report, supra note 7, at 1.
---------------------------------------------------------------------------
CONCERNS WITH H.R. 2745
I. H.R. 2745 WOULD ELIMINATE THE FTC'S ADMINISTRATIVE ADJUDICATION
AUTHORITY IN MERGER CASES, UNDERMINING THE FTC'S INDEPENDENCE AND
CONTRAVENING CONGRESS' PURPOSE IN CREATING THE AGENCY.
H.R. 2745 would effectuate a fundamental change to the
FTC's century-old organizational structure and lessen the
agency's independence. By eliminating its authority to pursue
administrative litigation in merger cases and other
circumstances, the bill would serve to alter the FTC's
character as an independent administrative agency and turn it
into another executive enforcement agency in HSR merger cases.
This fundamental change would undermine Congress's purpose in
establishing the FTC in the first place.
As the AMC Report recognized, Congress created the FTC as
an independent agency--that is, one with a considerable measure
of independence from the President. Congress' intent in
establishing the FTC as an independent agency was not only to
supplement the DOJ's enforcement activity where it may be
lacking, but to also develop antitrust policy with a body of
antitrust experts not subject to swings in political ideology
that the DOJ, as an arm of the Executive Branch, may
experience.\27\ As FTC Chairwoman Ramirez noted, ``Congress
created the Commission in 1914 as an independent, bipartisan
agency to augment then-existing antitrust enforcement
efforts.''\28\ In doing so, Congress recognized that ``American
consumers would benefit from an expert agency with the means to
develop competition law and policy over time,'' Chairwoman
Ramirez added.\29\ Committee reports from both houses of
Congress during the establishment of the FTC bolster this
view.\30\ By weakening the FTC's independence, H.R. 2745
undermines these benefits for American consumers.
---------------------------------------------------------------------------
\27\Id. at 129 (noting that Congress ``also believed that an
administrative agency--conducting administrative adjudication of
antitrust cases, and vested with broad information-gather powers--would
be a better vehicle for developing more flexible standards of antitrust
law than were the courts.'').
\28\Senate Hearing, supra note 2, at 2 (statement of Edith Ramirez,
Chairwoman, Federal Trade Commission).
\29\Id.
\30\Humphrey's Ex'r v. United States, 295 U.S. 602, 624 (1935)
(quoting S. Rep. No. 63-597, at 10-11 (1914)).
---------------------------------------------------------------------------
Beyond the specific changes proposed by H.R. 2745, we are
wary of any measure to alter, and possibly diminish, the FTC's
authority. Opponents of the FTC's enforcement activities have
engaged in a longstanding campaign to undermine the agency,
both because of its role as an antitrust enforcer and also
because of its work in the consumer protection arena. Any
proposal to alter the FTC's authority, and particularly one
that would eliminate its distinctiveness from the DOJ, should
be viewed with skepticism.\31\ Although H.R. 2745 is ostensibly
limited to HSR merger cases, eliminating distinctions between
the DOJ and the FTC is a possible way to justify ultimately
eliminating the FTC as an antitrust enforcement and
policymaking agency.
---------------------------------------------------------------------------
\31\See, e.g., U.S. Chamber of Commerce, Unfair Methods of
Competition Under Section 5 of the FTC Act: Does the U.S. Need Rules
``Above and Beyond Antitrust''?, GCP: The Antitrust Chronicle, (Sept.
2009), http://www.uschamber.com/sites/default/files/reports/0909
antrust_0.pdf.
---------------------------------------------------------------------------
We are therefore particularly troubled by H.R. 2745's
elimination of the FTC's authority to use administrative
adjudication in merger enforcement matters. As Chairwoman
Ramirez noted:
The FTC plays an essential role in protecting consumers
from anticompetitive mergers. By seeking to alter the
Commission's adjudicative function, the proposed
legislation risks eroding a fundamental institutional
attribute of the FTC. This quasi-judicial role is a
defining characteristic of the agency--authority
Congress very deliberately granted to the FTC when the
agency was created to serve as a complement to
enforcement by DOJ. The current system has worked well
for over one hundred years, and all indications are
that it will continue to do so to the benefit of
competition and consumers.\32\
---------------------------------------------------------------------------
\32\Senate Hearing, supra note 2, at 14 (statement of Edith
Ramirez, Chairwoman, Federal Trade Commission).
In discussing the value of administrative adjudication,
Bert Foer, President of the American Antitrust Institute,
---------------------------------------------------------------------------
stated in his letter to the Committee:
[P]rudence compels caution in any tinkering with a
system of dual enforcement including administrative
adjudication that emerged out of robust debate in the
course of the 1912 Presidential election campaign and
that Congress adopted 2 years later in the face of
grave concern over the fate of antitrust enforcement
generally when left exclusively in the hands of
generalist judges. . . . AAI believes that eliminating
FTC administrative adjudication would almost surely be
counterproductive. We would thereby (a) lose the
considerable benefits of expert agency policy
evolution, the original Wilson/Brandeis vision giving
rise to the FTC's creation a hundred years ago and more
important than ever for sound evolution of merger
policy in the 21st Century; and (b) exacerbate any
inefficiency of dual enforcement generally since we
would then have two enforcement agencies applying the
same merger law standards and procedures to different
companies in different industries in cases brought
exclusively to generalist courts. A more logical course
would be channeling all merger enforcement to the FTC
and its expert administrative processes.\33\
---------------------------------------------------------------------------
\33\Foer Letter, supra note 3, at para.para. 3, 5.
Similarly, at a hearing before the Subcommittee on
Regulatory Reform, Commercial, and Antitrust Law examining
draft legislation that was substantially similar to H.R. 2745,
Professor John Kirkwood of the Seattle University School of
Law, expressed great concern about the removal of the FTC's
administrative adjudication authority.\34\ He testified that
the purpose of having this authority was to allow the FTC to
develop antitrust law in a less partisan, more expert way than
generalist courts and a DOJ under the control of one political
party may be able to do.\35\ Professor Kirkwood's concern was
twofold. First, removing the FTC's administrative adjudication
authority in merger cases might lead to a ``slippery slope''
whereby such authority would eventually be removed in other
areas of antitrust enforcement.\36\ Second, administrative
adjudication supports the FTC's congressionally-mandated
mission of developing administrative expertise through
sustained attention, information-gathering, and vigorous
enforcement.\37\ Professor Kirkwood acknowledged that the
unique benefits of administrative adjudication were not as
strong in all cases. In those instances when an industry is
changing rapidly or when an agency has not developed much
expertise in it, an administrative proceeding would be quite
helpful, such as the FTC's use of administrative proceedings in
hospital merger enforcement as an example of such benefits.\38\
Jonathan Jacobson, a former AMC commissioner, echoed many of
these concerns. He observed:
---------------------------------------------------------------------------
\34\Hearing on the Standard Merger and Acquisition Reviews Through
Equal Rules Act of 2014 Before the S. Comm. On Regulatory Reform,
Commercial and Antitrust Law, 113th Cong. 13 (2014) (statement of John
B. Kirkwood, Professor of Law and Associate Dean for Strategic Planning
and Mission, Seattle University School of Law), http://
judiciary.house.gov/_cache/files/4b07b175-6ca6-400e-b218-2e42b3ffa0d0/
113-83-87424.pdf [hereinafter Kirkwood Statement].
\35\Id.
\36\Id. at 5.
\37\Id.
\38\Id.
Part III administrative litigation--both for
anticompetitive conduct matters and mergers--is core to
the FTC's basic mission. Prior to 1976 (when Hart-
Scott-Rodino was passed), administrative litigation of
FTC merger matters was the only type of FTC merger
review, and retaining discretion to pursue
administrative litigation where appropriate is
consistent with the FTC's assignment to develop and
apply expertise on competition law issues in an
administrative context. If the FTC finds it appropriate
to develop the law through follow-on administrative
proceedings where it could, for example, perform a more
rigorous analysis of new economic theories and evidence
than a generalist district court might be able to
perform, it should have discretion to do so. That is
precisely what Congress intended when creating the FTC
101 years ago.\39\
---------------------------------------------------------------------------
\39\Senate Hearing, supra note 2, at 7 (statement of Jonathan
Jacobson, former commissioner of the Antitrust Modernization
Commission), https://www.judiciary.senate.gov/imo/media/doc/10-07-
15%20Jacobson%20Testimony.pdf.
Ranking Member John Conyers, Jr., in agreeing with the
views of Chairwoman Ramirez, Mr. Jacobson, Mr. Foer, and
Professor Kirkwood, stated that H.R. 2745 does not strengthen
the Commission's authority, and ``unfortunately does just the
opposite.''\40\ Rep. Henry C. ``Hank'' Johnson, Jr., Ranking
Member of the Subcommittee on Regulatory Reform, Commercial,
and Antitrust Law, echoed this concern while noting that
``[l]eading authorities in antitrust across party lines have
expressed serious reservations with eliminating the
Commission's administrative litigation authority.''\41\
Notwithstanding these concerns, the bill was reported out of
Committee unamended by a vote of 18 to 10.\42\
---------------------------------------------------------------------------
\40\Unofficial Tr. of the Markup of: H.R. 2745, the ``Standard
Merger and Acquisition Reviews Through Equal Rules (SMARTER) Act of
2015'' by the H. Comm. on the Judiciary, 114th Cong. (2015), at 24,
http://judiciary.house.gov/_cache/files/832fcdef-e01f-4cef-a40f-
b5c3c869a4bf/09.30.15-markup-transcript.pdf.
\41\Id. at 33.
\42\Id. at 56.
---------------------------------------------------------------------------
II. H.R. 2745'S SCOPE IS BROADER THAN THE AMC RECOMMENDATIONS
H.R. 2745 exceeds what the AMC contemplated in its
recommendations. Specifically, the AMC recommended that
Congress should eliminate the FTC's authority to pursue
administrative litigation in HSR cases and that it should
ensure the same standard that DOJ is subject to when seeking a
preliminary injunction in an HSR case.\43\ First, rather than
limiting its provisions to these two recommendations, the bill
would make the FTC functionally equivalent to the DOJ in large
merger cases, which, arguably, is a step towards eliminating
the dual enforcement regime, a recommendation that the AMC
specifically rejected.\44\ Second, the bill's carve-out for the
FTC's administrative adjudication authority would reach beyond
merger cases to also include ``joint ventures'' and ``similar
transactions'' as well as pre-merger activity, meaning that the
loss of the FTC administrative adjudication authority would
extend beyond the scope of section 7 of the Clayton Act to
potentially include non-merger activity.
---------------------------------------------------------------------------
\43\AMC Report, supra note 7, at 140-41.
\44\Id. at 129 (recommending ``no comprehensive change to the
existing system in which both the FTC and the DOJ enforce the antitrust
laws'').
---------------------------------------------------------------------------
Additionally, the FTC's loss of administrative litigation
authority could reach consummated mergers as well as non-
consummated ones. Mr. Jacobson noted in his testimony in
opposition to the SMARTER Act that ``to the extent that the
legislation is intended to implement the AMC's recommendation,
it is drafted too broadly.'' He explained:
The AMC recommended that Congress implement legislation
``to prohibit the Federal Trade Commission from
pursuing administrative litigation in Hart-Scott-Rodino
Act merger cases.'' Its proposal ``would not preclude
the FTC from pursuing an administrative complaint after
the consummation of a merger, based on evidence that
the merger has had actual, as opposed to predicted,
anticompetitive effects.'' But the proposed legislation
could be construed as prohibiting a challenge to the
``consummation'' of any merger in administrative
proceedings, even a post-merger challenge,
notwithstanding the term ``proposed.'' If enacted at
all, I strongly recommend clarifying that the exclusion
would only apply to ``the consummation of a proposed
merger, acquisition, joint venture, or similar
transaction that is subject to section 7 of the Clayton
Act (15 U.S.C. 18) where the merger, acquisition, joint
venture, or similar transaction has not yet been
consummated'' for avoidance of doubt. There is no
justification for eliminating administrative litigation
in post-consummation challenges, for those are not
undertaken with the time sensitivity attendant on a
challenge to a merger occurring prior to the closing of
the transaction.\45\
---------------------------------------------------------------------------
\45\Senate Hearing, supra note 2, at 3-4 (statement of Jonathan
Jacobson, former commissioner of the Antitrust Modernization
Commission), (emphasis in original) (footnotes omitted) https://
www.judiciary.senate.gov/imo/media/doc/10-07-
15%20Jacobson%20Testimony.pdf.
Mr. Jacobson further noted that the FTC's success in post-
consummation merger challenges is held in high regard by the
antitrust bar and has been upheld on appeal.\46\
---------------------------------------------------------------------------
\46\Id.
---------------------------------------------------------------------------
III. H.R. 2745 ADDRESSES A NON-EXISTENT PROBLEM WHILE APPLYING A LESS
CONSUMER-FRIENDLY STANDARD
To the extent that H.R. 2745 seeks to harmonize the
preliminary injunction standard applicable in both DOJ merger
cases\47\ and FTC merger cases,\48\ doing so does not appear to
solve a real problem. The dominant opinion among courts,
academics, and the antitrust bar is that the standards, while
nominally different, are the same in practice.\49\ Both FTC
Chairwoman Ramirez and Assistant Attorney General William Baer
have underscored this point, arguing that regardless of which
agency seeks a preliminary injunction in merger cases, both are
required ``to make a robust evidentiary and legal showing that
the transaction would likely be anticompetitive.''\50\ Far from
providing differential treatment, Federal district courts
``closely scrutinize cases brought by both agencies,''\51\ with
one court recently observing that the FTC's preliminary
injunction standard ``demands rigorous proof to block a
proposed merger or acquisition.''\52\
---------------------------------------------------------------------------
\47\When DOJ seeks a preliminary injunction, it acts pursuant to
section 15 of the Clayton Act, which provides, in part, that a court
hearing a case under the Act ``may at any time make such temporary
restraining order or prohibition as shall be deemed just in the
premises.'' 15 U.S.C. Sec. 25 (2016). Section 15, however, does not
specify a standard for determining when to grant a preliminary
injunction. Therefore, a modified version of the general test for
preliminary injunctions applies. The test is usually articulated as
requiring that the government show a reasonable likelihood of success
on the merits and that the balance of equities tips in its favor. U.S.
v. Siemens Corp., 621 F.2d 499, 505 (2d Cir. 1980).
\48\FTC Act section 13(b) requires a court to grant a preliminary
injunction to the FTC upon ``a proper showing that, weighing the
equities and considering the Commission's likelihood of ultimate
success, such action would be in the public interest.'' 15 U.S.C.
Sec. 53(b) (2016). Courts have interpreted this standard to mean that
the FTC must raise questions that are ``so serious, substantial,
difficult and doubtful as to make them fair ground for thorough
investigation.'' FTC v. H.J. Heinz Co., 246 F.3d 708, 714-15 (D.C. Cir.
2001).
\49\See, e.g., AMC Report, supra note 7, at 141 (noting the view of
Commissioners Garza, Jacobson, and Kempf that the standard is the same
and that such legislation is not truly necessary).
\50\Senate Hearing, supra note 2, at 13 (statement of Edith
Ramirez, Chairwoman, Federal Trade Commission),
https://www.judiciary.senate.gov/imo/media/doc/10-07-
15%20Ramirez%20Testimony.pdf.
\51\Id.
\52\Fed. Trade Comm'n v. Sysco Corp., 113 F. Supp. 3d 1, 23 (D.D.C.
2015).
---------------------------------------------------------------------------
Assuming there is a substantive difference between the
injunction standards, however, attempting to unify them raises
the concern that the bill simply seeks to undermine the FTC's
independence and distinctiveness, contrary to Congress's intent
in creating an independent antitrust enforcement agency in the
first place. Instead, Congress should default to a standard
that is deferential to agency expertise, as Mr. Foer of AAI
suggests:
SMARTER Act supporters prematurely jump to the
conclusion that the correct solution to this
``unfairness'' is to subject FTC challenges to the
tougher standard applicable to DOJ. Why is it not
better from a public policy standpoint to address the
anomaly by extending the benefit of the Section 13(b)
standard to DOJ challenges? A deferential standard for
both agencies is warranted by the expertise and
sophistication of the merger review process at both
agencies.\53\
---------------------------------------------------------------------------
\53\The Standard Merger and Acquisition Reviews Through Equal Rules
Act of 2015: Hearing on H.R. 2745 Before the Subcomm. on Regulatory
Reform, Commercial and Antitrust Law of the H. Comm. on the Judiciary,
114th Cong. 47 (2015), http://judiciary.house.gov/_cache/files/
9f77f8c3-6b40-4b22-b337-51ddbedab9b6/114-32-95119.pdf.
Similarly, Professor Kirkwood testified that equalizing the
FTC and DOJ preliminary injunction standards was not necessary
because both standards function the same way as a practical
matter.\54\ He did, however, express the concern that changing
the preliminary injunction standard applicable to the FTC in
merger cases could have unintended consequences, like causing
courts to apply the non-FTC standard in non-merger cases as
well. He also testified that the FTC Act standard, to the
extent that it really was substantively more favorable to the
government than the one applicable to the DOJ, was designed to
allow the FTC to use its administrative proceedings.\55\
---------------------------------------------------------------------------
\54\Kirkwood Statement, supra note 34, at 3.
\55\Id at 4-5.
---------------------------------------------------------------------------
In addition, H.R. 2745 does not appear to address any
pressing or widespread problem. The changes that H.R. 2745
contemplates would apply in the exceedingly rare instances
where: (1) a transaction is large enough to merit HSR review;
(2) after the review, the reviewing agency determines that it
would challenge the transaction through litigation; (3) the
parties do not agree to any settlement, including divestures
and other commitments; and (4) the parties choose to continue
with their transaction despite the filing of a complaint by the
reviewing agency rather than abandoning the transaction.
Instances where the FTC would seek a preliminary injunction and
use its administrative process are rare, and instances when the
FTC seeks to use its administrative process after losing a
preliminary injunction proceeding in court are even rarer.
In response to the claim that H.R. 2745 would reduce costs
and uncertainty by promoting uniformity in merger reviews, it
should be noted that FTC and DOJ already analyze mergers in
exactly the same way, following the same substantive policy in
conducting pre-merger reviews (i.e., the joint Merger
Guidelines). Jonathan Jacobson, a former AMC Commissioner,
underscored this similarity, arguing that in his experience the
outcome of a merger has never turned on the perceived
differences in merger enforcement addressed by H.R. 2745:
In my 39 years of practice, the firms in which I have
been a partner have sheparded many dozens of mergers
through the agencies. In each one, the planning process
has included a prediction as to which agency would be
cleared to evaluate the transaction. In none has there
been any consideration of abandoning or revising the
transaction because of the possibility that, after
prevailing in an FTC-brought preliminary injunction
proceeding, the Commission might later unwind the
merger through an administrative proceeding. The
potential for such an outcome occasionally appears as a
single sub-bullet point in a long PowerPoint, but never
affects planning or evaluation of the transaction's
prospects.\56\
---------------------------------------------------------------------------
\56\Senate Hearing, supra note 2, at 1 (response to questions for
the record from Jonathan Jacobson, former commissioner, Antitrust
Modernization Commission) (emphasis in original), https://
www.judiciary.senate.gov/imo/media/doc/
Jacobson%20Responses%20to%20Klobuchar.pdf.
Additionally, the FTC's internal procedures already make it
highly unusual that the agency would ever seek such a ``second
bite at the apple.''\57\ In 2015, the FTC set forth new
procedures for the administrative adjudication process
following a Federal court's denial of a preliminary injunction
under section 13(b) of the FTC Act.\58\ Under the revised rule,
parties have two options to end administrative adjudication
following a preliminary injunction.\59\ First, a party may move
to have an administrative adjudication withdrawn, which will
automatically occur within 2 days of the filing unless there is
an objection by the complaint counsel.\60\ Previously,
administrative cases were only withdrawn from adjudication
pursuant to the Commission's direction.\61\ Second, a party may
file a motion to dismiss the administrative complaint on the
basis that the public interest does not warrant further
litigation,'' which results in an automatic stay of the
proceeding for 7 days until Commission rules on the motion.\62\
Formerly, absent the Commission's direction, filing a motion to
dismiss did not result in an automatic stay of the
proceeding.\63\ Deborah Feinstein, the Director of the FTC's
Bureau of Competition noted that this change creates ``a new
and improved process that aims to be quicker, more predictable,
and more transparent.''\64\
---------------------------------------------------------------------------
\57\H.R. 2745's proponents may cite the actions of the FTC in the
Whole Foods-Wild Oats merger as an example of the FTC's problematic use
of administrative proceedings after losing a preliminary injunction
matter in court. In that case, however, the U.S. Court of Appeals for
the D.C. Circuit ultimately vindicated the FTC's pursuit of
administrative litigation after losing the preliminary injunction
proceeding in court when the appeals court reversed the district
court's denial of the FTC's request for a preliminary injunction. FTC
v. Whole Foods Market, Inc., 548 F.3d 1028 (D.C. Cir. 2008).
Additionally, as both the AMC and AAI have pointed out, the FTC's own
internal practice and procedures make the ``second bite'' scenario
unlikely. AMC Report, supra note 7, at 141; Foer Letter, supra note 3.
\58\15 U.S.C. Sec. 53(b) (2016); Fed. Trade Commission, Commission
Approves Revisions to Its Rules of Practice (Mar. 13, 2015), https://
www.ftc.gov/news-events/press-releases/2015/03/
commission-approves-revisions-its-rules-practice.
\59\A party may also utilize this process following the denial of
the Commission's motion for relief pending appeal by a Federal court of
appeals. 16 C.F.R. Sec. 3.26(b)(2) (2016).
\60\16 C.F.R. Sec. 3.26(c) (2016) (``The Secretary shall issue an
order withdrawing the matter from adjudication 2 days after such a
motion is filed, except that, if complaint counsel file an objection
asserting that the conditions of paragraph (b) of this section have not
been met, the Commission shall decide the motion within 10 days after
the objection is filed.'').
\61\16 C.F.R. Sec. 3.26(c) (2016) (``The matter will not be
withdrawn from adjudication unless the Commission so directs.'').
\62\16 C.F.R. Sec. 3.26(d)(2), (4) (2016).
\63\16 C.F.R. Sec. 3.26(d) (2016) (``The filing of a motion to
dismiss shall not stay the proceeding unless the Commission so
directs.'').
\64\Deborah Feinstein, Changes to Commission Rule 3.26 Re: Part 3
Proceedings following Federal Court Denial of a Preliminary Injunction,
Fed. Trade Commission (Mar. 16, 2015), https://www.ftc.gov/news-events/
blogs/competition-matters/2015/03/changes-commission-rule-326-re-part-
3-proceedings.
---------------------------------------------------------------------------
The FTC's revision to Rule 3.26 does not, however, displace
the Commission's longstanding policies of determining whether
to forego administrative adjudication solely because a Federal
court does not grant a preliminary injunction.\65\ In 1995, the
FTC clarified that this determination is made on a case-by-case
basis, guided by five factors to determine whether continuing
administrative adjudication is in the public interest. These
factors include:
---------------------------------------------------------------------------
\65\Administrative Litigation Following the Denial of a Preliminary
Injunction: Policy Statement, 60 Fed. Reg. 39742 (Aug. 3, 1995),
https://www.ftc.gov/sites/default/files/attachments/merger-review/
950803administrativelitigation.pdf.
(1) Lthe factual findings and legal conclusions of the
---------------------------------------------------------------------------
district court or any appellate court;
(2) Lany new evidence developed during the preliminary
injunction proceeding;
(3) Lwhether the transaction raises important issues of
fact, law, or merger policy that need resolution in
administrative litigation;
(4) Lan overall assessment of the costs and benefits of
further proceedings; and
(5) Lany other matter that bears on whether it would be
in the public interest to proceed with the merger
challenge.\66\
---------------------------------------------------------------------------
\66\Id.
While there may be rare instances where there may be a ``second
bite'' scenario, Mr. Jacobson notes that the FTC has refrained
from using this authority since 1995, but that its use has
historically served the public interest.\67\
---------------------------------------------------------------------------
\67\Senate Hearing, supra note 2, at 2 (response to questions for
the record from Jonathan Jacobson, former commissioner of the Antitrust
Modernization Commission) (``[T]here has not been a single merger since
then challenged in Part 3 after a preliminary injunction has been
denied.''), https://www.judiciary.senate.gov/imo/media/doc/
Jacobson%20Responses%20to%20
Klobuchar.pdf.
---------------------------------------------------------------------------
CONCLUSION
For over a century, the FTC has strengthened the
enforcement of antitrust laws to protect American consumers.
Congress intended the agency to be a vigorous enforcer of the
law and to develop antitrust policy in a bipartisan and expert
manner while being comparatively insulated from the changing
political and economic priorities that occur with each new
presidential administration. A hallmark of this independence is
the FTC's ability to pursue administrative adjudication,
including in merger enforcement cases. By prohibiting the
agency from exercising this authority in merger cases, H.R.
2745 ultimately strikes at the very heart of the rationale for
the FTC's existence and directly contravenes Congress' intent
in establishing the FTC over a century ago. Whatever the
benefits for business in terms of lowered costs and
uncertainty, undermining the FTC's independence and
distinctiveness is simply too high a price to pay.
We are additionally concerned that H.R. 2745 goes well-
beyond the recommendations of the AMC. In particular, the
elimination of administrative adjudication authority would also
apply to certain non-merger conduct, including joint ventures
and pre-merger activity, as well as consummated transaction.
Finally, the bill's uniform preliminary injunction standard
for merger cases appears to be a solution in search of a
problem. Nonetheless, to the extent that there is a material
difference, and to the extent that the FTC Act standard is, in
fact, more favorable to enforcement authorities, as the bill's
proponents contend, H.R. 2745 chooses the less consumer-
protective standard.
For the foregoing reasons, we urge our colleagues to oppose
H.R. 2745.
Mr. Conyers, Jr.
Mr. Nadler.
Ms. Jackson Lee.
Mr. Cohen.
Mr. Johnson, Jr.
Mr. Gutierrez.
Mr. Richmond.
Mr. Jeffries.
Mr. Cicilline.
[all]