Standard Merger and Acquisition Reviews Through Equal Rules Act of 2018

Floor Speech

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Mr. GOODLATTE. Mr. Speaker, pursuant to House Resolution 872, I call up the bill (H.R. 5645) 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, and ask for its immediate consideration.

The Clerk read the title of the bill.

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Mr. GOODLATTE. 5645 may be subject to postponement as though under clause 8 of rule XX.

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Mr. GOODLATTE. 5645.

In 1914, Congress passed the Federal Trade Commission Act, marking the beginning of a dual antitrust enforcement regime in the United States.

Because both Department of Justice and the Federal Trade Commission enforce our Nation's antitrust laws, companies may, and often do, have different experiences when interacting with one agency relative to the other. One area in which the disparity can be the most striking and troubling is in the merger review process.

When a company wishes to merge with or purchase another company, it must notify both antitrust enforcement agencies of the proposed transaction. The Department of Justice and the Federal Trade Commission then determine which agency will be responsible for reviewing the transaction. As there are no fixed rules for making this determination, it can appear that the decision is made on the basis of a flip of a coin.

There are two substantial differences that companies face based on the identity of the antitrust enforcement agency that reviews the companies' proposed transaction.

The first difference arises if the agency seeks to prevent the transaction by pursuing a preliminary injunction in Federal court. A different legal standard is applied to a preliminary injunction request based solely on the identity of the requesting antitrust enforcement agency.

The second difference lies in the process available to each antitrust enforcement agency to prevent a transaction from proceeding. The FTC may pursue administrative litigation against a proposed transaction, even after a court denies its preliminary injunction request. In contrast, DOJ cannot pursue administrative litigation.

There is no justification for these disparities in the merger review processes and standards. The bipartisan Antitrust Modernization Commission recommended that Congress remove these disparities, and the bill before us today, the Standard Merger and Acquisition Reviews Through Equal Rules Act, or the SMARTER Act, does just that. I applaud Representative Handel for introducing this important legislation that will enhance the transparency, predictability, and credibility of the antitrust merger review process.

By enacting the SMARTER Act into law, Congress will ensure that companies no longer will be subjected to fundamentally different processes and standards based on the flip of a coin. Notably, the legislation has garnered the support of former and current FTC commissioners, including former Chairman David Clanton, former Commissioner Josh Wright, and current Commissioner Maureen Ohlhausen.

The SMARTER Act is an important step toward assuring that our Nation's antitrust laws are enforced in a manner that is fair, consistent, and predictable.

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Mr. GOODLATTE. Mr. Speaker, this is a good bill, I urge my colleagues to support it, and I yield back the balance of my time.

Ms. JACKSON LEE. Mr. Speaker, I rise in opposition to H.R. 5645, the Standard Merger and Acquisition Reviews Through Equal Rules Act-- otherwise known as the SMARTER Act.

Mr. Speaker, this bill is not about creating equal rules or implementing ``smarter'' legislation.

Rather, it is about attacking the administrative authority of the Federal Trade Commission (FTC).

H.R. 5645 is an unnecessary measure that would fundamentally undermine the FTC's independent enforcement authority and ability to prevent anti-competitive mergers.

As we all know, the FTC was created by Congress with the specific intent of creating an independent antitrust enforcement agency and supplemental authority to the Department of Justice (DOJ).

Specifically, if enacted, the SMARTER Act would strip the FTC of its power by eliminating the agency's authority to enforce antitrust laws in larger merger cases, and by blocking its ability to use its administrative proceedings to stop a harmful merger transaction.

The bill seeks to do so by requiring that the FTC use the same enforcement process as the DOJ.

This proposed sweeping change undercuts the FTC's administrative litigation process for contested mergers or acquisitions and effectively removes the very core and functioning character of this agency.

Moreover, reducing the FTC's independence directly conflicts with Congress's intent in creating this antitrust enforcement agency and policymaking body as a distinct and independent shield from political and executive interference.

As enforcers of Section 7 of the Clayton Act, both the FTC and the DOJ have the authority and responsibility to prohibit mergers and acquisitions that would ``substantially lessen competition'' or ``tend to create a monopoly''.

Under this enforcement authority, these agencies serve to complement each other, and have developed over the years to specialize in particular industries and markets.

Based upon historical experience and coordinated developments, the FTC serves to protect consumers and consumer spending. For example, healthcare, pharmaceuticals, professional services, food, energy, and certain high-tech industries like computer technology and internet services.

Whereas, the DOJ typically assumes a specialized focus on larger corporate industries like telecommunications, banks, railroads, and airlines.

Thus, while the FTC and the DOJ have operated with a shared responsibility of enforcing federal antitrust laws, these two federal agencies are unique and each retain exclusive authority of certain conduct.

Serving as joint enforcement agencies for over 100 years, the FTC and DOJ rely upon each other to coordinate agency jurisdiction and harmonized standards and practices.

The SMARTER Act is simply unnecessary as it fails to put forth any meaningful effort to enhance or rectify any expressed concerns governing these longstanding agency operations.

In particular, in 2002 Congress sought to review and amend antitrust laws and policies in light of the changing economy and rise in technological advances.

In 2007 a report issued by the Antitrust Modernization Commission (AMC) set forth specific recommendations for the FTC to eliminate real or perceived disparities in the review process for merger transactions.

According to the AMC, Congress should seek to ensure that the same or comparable standard is used when seeking a preliminary injunction against a potentially anticompetitive transaction.

However, the SMARTER Act goes beyond this recommendation and seeks to chip away and carve out the entire administrative adjudication authority of the FTC.

In order to identify potential violations of the Clayton Act, the FTC and the DOJ review proposed merger transactions pursuant to the Hart- Scott-Rodino Antitrust Improvements Act (the HSR Act), which provides advance notice and sets forth guidelines on large merger and acquisition transactions.

The heart of this concern is the alternate means by which the FTC and DOJ carry out their enforcement roles during this HSR pre-merger process.

Namely, H.R. 5645 is curiously motivated by the preliminary injunction process utilized by the FTC and the DOJ to halt proposed transactions that would violate the Clayton Act if completed.

Additionally, the DOJ typically consolidates the preliminary and permanent injunction proceedings, while the FTC typically only pursues preliminary injunctions.

While some argue that proposed transactions reviewed through the FTC would be treated more leniently than those reviewed through the DOJ, this assertion has not been fully substantiated by the AMC.

The pre-merger review process and the injunction standards utilized by the FTC and DOJ are the very procedural steps that characterize and distinguish the respective enforcement roles of these agencies.

This supposed area of concern addresses only a small fraction of proposed transactions, as the vast majority of merger and acquisition proposals are found to not be in violation of the Clayton Act upon undergoing the review process.

The FTC and DOJ review over a thousand merger filings every year.

Yet 95 percent of those merger filings present no competitive issues or challenged transactions.

As reported by the American Antitrust Institute (AAI), the overall concerns purported by the bill's sponsors are simply without foundation.

In contrast, the overall work of the FTC has an incredible impact on American consumers, communities and corporations and will be severely impacted if disrupted.

As highlighted by the FTC Chairwoman Edith Ramirez in her testimony before the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law, the FTC prioritizes the protection of consumers and the prevention of anticompetitive market practices.

In fact, the FTC exists to ensure fair competition and to prevent enormous concentrations of economic power that hurts consumers and small businesses.

For example:

In the past year, the FTC has challenged over 28 mergers, (although in most it was able to negotiate a remedy to allow the merger to proceed).

At the consumer level in my home state of Texas, the FTC secured an $82,000 settlement against an auto-dealer found in violation of the Fair Credit Reporting Act in September 2017.

Also last year, the FTC ordered the largest divestiture ever in a supermarket merger, requiring Albertsons and Safeway to sell 168 supermarkets in 130 local markets throughout several states, ensuring that communities continue to benefit from competition among their local supermarkets.

The FTC has also taken an aggressive stance on stopping anticompetitive mergers and conduct in the healthcare market by halting such practices through administrative litigation.

In September 2017, the FTC secured a $1.1 million settlement to consumers who lost money to a health insurance telemarketing scam.

And in the last two years, the FTC took action in 13 pharmaceutical mergers, ordering divestitures to preserve competition for drugs that treat diabetes, hypertension, and cancer, as well as widely used generic medications like oral contraceptives and antibiotics.

Last year, on March 18, 2016, after a thoroughly vetted investigation, the FTC approved a final order preserving competition among outpatient dialysis clinics in Laredo, Texas.

That is, the FTC cleared U.S. Renal Care, Inc.'s (the country's third largest outpatient dialysis provider) $640 million purchase of dialysis competitor DSI Renal, on the condition that three of DSI's outpatient clinics in Laredo, Texas be handed over to a third party.

Absent this agreed divestiture, the acquisition would have led to a significant increase in market concentration and anti-competitive effects.

The likely result, according to the FTC, would have included the elimination of direct competition between U.S. Renal Care and DSI Renal, reduced incentives to improve services or quality for dialysis patients, and increased ability for the merged company to unilaterally increase prices.

Notably, the DOJ has also been successful in securing investigations and halting suspected harmful merger practices on a much larger scale (in the health care and airline industry as of late).

In June 2016, the DOJ put pressure on several multibillion dollar health insurers seeking to engage in large merger transactions with near certain suppression of market competition in the healthcare industry.

In August 2016, the DOJ issued civil investigative demands on several major US airlines seeking to halt any potential unlawful mergers.

These cases demonstrate the need for continued protection of the FTC and its ability to effectively carry out injunctions on harmful merger and acquisition activities, as well as, anticompetitive business conduct that harms consumers and restrains market activity.

The ability of the FTC to function independently is necessary to the success of both the FTC and DOJ.

The far-reaching and elusive SMARTER Act fails to keep the foundational integrity of these agencies and should be opposed.

I urge my colleagues to vote against this serious threat to our fundamental protections of consumers and fair economic competition.
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Mr. GOODLATTE. Mr. Speaker, this amendment makes a series of useful technical and clarifying changes suggested by the Federal Trade Commission.

At the FTC's request, the amendment adds language stating explicitly that the agency retains independent litigating authority in merger cases brought under the Clayton Act. This makes clear that the FTC is not forced to rely on the Department of Justice in these cases.

The amendment also strikes language referring to the FTC's authority to issue civil investigative demands in merger cases. This is because the reference is unnecessary and could create a negative inference that the FTC does not enjoy such authority in other contexts.

The amendment makes further technical improvements in several places in the bill that refer to the FTC bringing an action under section 7 of the Clayton Act. The FTC's authority to bring an action in court actually derives from section 15 of the act, so the amendment updates that citation.

Furthermore, the amendment changes the phrase ``including'' FTC proceedings to ``or'' FTC proceedings in several places in the underlying bill. This is to underscore that FTC settlements are distinct from DOJ antitrust settlements and, thus, are not subject to the judicial review provisions of the Tunney Act.

The amendment also refines language in the underlying bill that ensures the same legal standards are applied to FTC and DOJ injunctions, and that preserves FTC authority to use administrative adjudication as part of a settlement agreement.

Specifically, the changes more clearly define the circumstances in which the FTC may seek an injunction and more clearly state that the FTC must proceed in Federal court, not administratively. The amended language also more accurately reflects the FTC's practices for administrative settlements, more clearly states that the district courts must apply the same standard in those cases as it would apply when the Department of Justice seeks injunctions, and more clearly provides that the new rules change only administrative adjudications, not investigative procedures.

Finally, the amendment clarifies that the FTC's duty to use the courts, rather than administrative procedures, to block anticompetitive behavior, extends only to the merger-type actions that this bill is intended to cover.

Again, these changes are of a technical nature and were all recommended by the FTC itself. Accordingly, I urge my colleagues to support this amendment.

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Mr. GOODLATTE. Mr. Speaker, I continue to reserve the balance of my time.

The arguments we have heard against this bill are without merit.

It has charged that the SMARTER Act would make it more difficult for the FTC to fulfill its consumer protection mandate. This is incorrect.

The FTC's consumer protection powers are completely independent from the antitrust laws. The SMARTER Act deals only with the antitrust piece, so, by its terms, does not impact the FTC's ability to prosecute ``unfair or deceptive acts or practices.''

As for harm to consumers from proposed mergers, the SMARTER Act does not, in any way, affect substantive antitrust law; it does not amend, in any form or fashion, section 7 of the Clayton Antitrust Act or any of the FTC's consumer protection powers.

Opponents also claim that the SMARTER Act removes an important tool from the FTC by eliminating its ability to pursue administrative litigation. This, too, is a red herring.

The SMARTER Act only removes the FTC's administrative litigation authority in the very narrow context of proposed transactions. A report from the bipartisan Antitrust Modernization Commission determined that any benefit from such authority was marginal and ``significantly outweighed by the costs.''

The FTC can still pursue administrative litigation in conduct cases and in actions against consummated mergers. Indeed, the AMC report stated specifically that: ``Elimination of administrative litigation in . . . merger''--review--``cases will not deprive the FTC of an important enforcement option.''

Opponents also charge that enacting the SMARTER Act will make it more difficult for the antitrust enforcement agencies to stop a merger, but the SMARTER Act only changes the process; it does not have any substantive impact on merger reviews.

But don't take my word for it. A letter from 15 leading antitrust professors states: ``The SMARTER Act does nothing to undermine the FTC's authority; it simply ensures that the merger review processes and standards are equally applied to merger parties regardless of which agency reviews the transaction.''

But perhaps the most ironic argument brought against the bill is that it is unnecessary because the FTC rarely initiates administrative litigation after a court denies a preliminary injunction request. Administrative adjudications may be rare, not because regulators use the powers sparingly, but because the mere prospect of this protracted, costly process may prompt companies to abandon the merger even though they prevailed in court. That hardly seems fair.

Parties to a merger should receive the same treatment and have the same process regardless of the reviewing antitrust agency, and the SMARTER Act accomplishes that goal.

This legislation will help America continue to serve as a leader and innovator in competition law, and I urge my colleagues to support it.

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Mr. GOODLATTE. Mr. Speaker, I claim the time in opposition to the motion.

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Mr. GOODLATTE. Mr. Speaker, this motion is unnecessary because this bill does nothing to undermine substantive antitrust enforcement. It might even hold up mergers that the court already found procompetitive and could help lower drug prices.

This is simply a dilatory tactic used by my friends on the other side of the aisle to hold up this important legislation.

For decades, American antitrust laws have been a shining example of how to protect against anticompetitive activities in a consistent, predictable, and fair manner.

Other countries have looked to our laws as the template for the creation of their own competition laws. Let us continue to be a model of proper antitrust enforcement.

The SMARTER Act is a commonsense process reform that ensures fairness and parity in the narrow field of merger reviews. The bill was recommended to Congress by a bipartisan commission and is supported by former top antitrust enforcement officials and past and present FTC Commissioners of both political parties.

Mr. Speaker, accordingly, I urge my colleagues to do the smart thing by opposing this bill and supporting the underlying bill.

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