US Federal Trade Commission Chairman Rina Khan defended her progressive approach to antitrust enforcement at an event Monday as the agency comes under fire from the business community.
“The role of the FTC is not to have our own philosophical beliefs about the virtues of big and small business,” Khan said during a question-and-answer session at the New York Economic Club.
“When Congress passed antitrust laws, it often set out policies that favored competition over monopoly,” Khan said. “That said, the law doesn’t prohibit being a monopoly. The law only prohibits becoming a monopoly through illegal tactics. And that’s the sort of thing we’re looking at.”
Khan later added that the FTC views mergers through a competitive paradigm, “but there are certainly times when you need a big company to provide the kind of service and scale that we need.”
The remarks come less than a week after the FTC and the Department of Justice’s Antitrust Division released new guidelines on mergers, suggesting a broader application of antitrust laws than the government has recently taken. For example, the new guidelines (still in draft form) include recognition that enforcers can consider the impact of competition for labor in specific cases, rather than considering a single merger in isolation, and also consider how a series of mergers may adversely affect competition.
Although not yet finalized as government agencies are open for public comment, the new guidelines have already provoked backlash from the business community.
Neil Bradley, executive vice president and chief policy officer of the U.S. Chamber of Commerce Business Group, said in a statement that the guidelines “are intended to chill merger activity, deny small businesses access to the capital and expertise they need to grow, and put U.S. companies at a disadvantage to their global competitors.”
Khan said he still refuses to act on most deals, despite increased attention to enforcement agencies’ moves to block mergers.
“Antitrust authorities receive between 1,500 and 3,000 merger applications each year, 98% of which pass without even being questioned a second time,” Khan said. “So about 2% of all transactions even receive a so-called second request, which is a series of questions that lead to a deeper investigation, and an even smaller percentage ultimately lead to a legal challenge.”
Khan said agencies recognize that when there are “last minute” deals, problems arise, which in retrospect lead to less competitiveness and prompt a “corrective course.”
Mr Khan also defended the agency’s records in court regarding the merger lawsuit. She said that out of 13 to 20 lawsuits filed by the FTC, it lost two in federal court, depending on the counting criteria.
“The way our merger enforcement program works, it doesn’t matter if we lose two cases,” Khan said, adding that the agency only brings cases that enforcement officers think they can win, and if they don’t win, they are looking at how they can improve going forward.
But even in the midst of these losses, Khan said there was a silver lining in terms of further clarifying the case law.she pointed out that government agencies were trying to stop metaAn example is the acquisition of virtual reality fitness developer Within Unlimited. The FTC lost an attempt to block the deal, but a judge dismissed some of Mehta’s arguments about how the law should or shouldn’t apply, Khan said.
Mr Khan also responded to criticism of the new merger guidelines, saying that the examples cited by the agency to support its draft policy are old and outdated. He said even cases from the 1960s and ’70s “are still routinely cited in modern merger decisions.” Part of the reason is that the Supreme Court hasn’t dealt with merger cases as often in recent decades, meaning “old law is still good law.”
He added that the updates to the merger application form were not intended to create additional burden on companies, but rather to speed up the FTC’s review process, eliminating the need to contact parties for more information.
Khan acknowledged that an initial public offering may not be realistic for many companies these days, and said the authorities have heard and are considering discussions about the commercial necessity of the acquisition. However, a lot depends on the circumstances of each case. As an example, “a drug deal that buys a very early-stage drug will likely end differently than a fully formed, very popular drug deal,” she said.
Finally, Mr Khan also noted the declining morale of government agencies under his leadership.
“When I got here, I’m sure many people thought, ‘Huh, what is she doing here?’ “I think it’s true that my career so far has been focused on criticizing the approach of the previous administration and the decisions that previous FTCs made. It’s clear how that critic will create friction in this position,” he said.
“I think I could have done better, and I think our team could have done better. We should have made it clear that such criticism was never intended to denounce integrity or question the talent and skills of career staff,” she said.
WATCH: How U.S. Antitrust Laws Work and What It Means for Big Tech
