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Lina Khan’s FTC Outlines Priorities and Changes to Second Claim Process – Antitrust / Competition Law

United States: Lina Khan’s FTC outlines her priorities and changes to the second application process

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Since Lina Khan’s appointment as President of the Federal Trade Commission, antitrust practitioners and the business community have read the tea leaves, looking for clues as to what to expect from President Khan’s tenure. Ms. Khan’s views on Amazon and Big Tech are of course well known, but beyond that, as practitioners expected the application to be aggressive, the focus areas (beyond platform technology companies) and the specifics of its application priorities had not yet been articulated. . Then, on September 22, 2021, the FTC released a memo from President Khan to the other commissioners and staff of the commission titled “Vision and Priorities for the FTC”. 1 This was quickly followed, on September 28, 2021, by a blog post from Holly Vedova, the new head of the Competition Bureau, on a “more streamlined and rigorous” second application review process. 2These statements provide a glimpse of a more aggressive future leadership for the FTC under Khan’s presidency.

Memo from President Khan

In her note, President Khan outlined her thinking on a strategic approach for the agency and several political priorities. The strategic approach was to take a “holistic approach to identifying harms” affecting workers and “independent businesses” as well as consumers, aimed at addressing power asymmetries and illegal practices, including those that harm ” marginalized communities ”. The agency should, in President Khan’s opinion, orient its enforcement efforts towards “targeting the root causes”, using an interdisciplinary method to invest in a more “empiricist” approach, and be oriented towards the future by anticipating problems and taking quick action. Finally, the FTC should further “democratize” to ensure it is in touch with the “real issues facing Americans”, recognizing that the agency plays a key role in “shaping”[ing] the distribution of power ”in the economy.

President Khan has identified three political priorities. First of all, it wants to “tackle the rampant consolidation and the domination it has allowed in the markets”. As market power was, in her view, an increasingly systemic problem, the agency needed to focus its resources on the most important players and discourage illegal transactions which she believed should never have been done. proposed. In this context, she noted that a key task will be to revise the merger guidelines. Its second priority was aimed at “dominant intermediaries” and other “gatekeepers” in the economy, emphasizing the growing role of private equity in fostering business models that can facilitate unfair competition methods. The third priority is to focus on how contractual clauses, in particular those in “take it or leave it” contracts, represented unfair competition methods, citing non-competition, restraint restrictions and clauses exclusion.

Changes to the second application process

In her blog post, Bureau Director Vedova described the recent increase in merger filings – doubling between 2010 and 2020 with 2021 on pace for a record number – and how this has strained the FTC’s ability to challenge all anti-competitive agreements. Thus, it is “incumbent on [the FTC] streamline [its]process so that we can better enable us to review, detect and challenge illegal transactions. ”She presented five changes to the FTC’s second merger review application process:

  • Second, requests that will target a wider range of relevant market realities, in order to rectify what she saw as an “unduly narrow approach to merger review” in the past;
  • The changes in the second request will only be discussed by FTC staff after the parties have submitted basic information such as identification of affected employees and agents and their roles, and information on how the companies store. the data;
  • The second requests will now require parties to provide information in advance on how they intend to use eDiscovery tools before applying these tools to identify sensitive items;
  • The second requests will no longer allow parties to submit partial privilege logs as a means of alleviating the burden of recording privileged production material; and
  • Second and other requests for information will now be securely accessible to all Commissioners and to the offices of the relevant agencies. Previously, under President Khan, second requests were generally not available to all Commissioners and were provided only at the discretion of the President, a departure from past practice.

Analysis

Taken together, these statements paint a much more aggressive stance for the FTC, both substantively and procedurally. On the merits, it is clear from her memo that President Khan accepts as evidence that market power is a systemic problem across the economy and that she sees the role of the FTC as a fight against trend of market consolidation that has occurred. Any company with a high market share in anything that could be defined as a relevant antitrust market will need to be increasingly cautious in the future, knowing that it will come under intense scrutiny by the FTC. While it is not clear what Ms. Khan means by “key gatekeepers” and “dominant intermediaries” in the economy – categories that could range from platform technology companies to traditional wholesalers – companies that might belong to the economy. these categories will need to be cautious in the future. His statement on deterring seemingly illegal transactions – combined with his previous statements about how divestments have sometimes failed as a way to address structural problems – should give pause for thought to any company with a significant market share evaluating the acquisition of a competitor.

By emphasizing a ‘holistic’ approach to ‘root causes’ – in combination with Ms Verona’s statement that merger reviews will take a broader view of market effects – we can expect this to happen. that the second claims be used on the basis of new theories of competitive injury. . These can include exclusionary practices such as predatory clustering and HR practices, as well as areas where there is a past subapplication issue, such as monopsony issues. It remains to be seen, of course, how all of this will play out in individual cases.

Procedurally, the second claim process, already a tedious exercise for any party to the merger, appears to be getting heavier at the FTC. Some of the changes correspond to the current practice of the Department of Justice. Typically, the antitrust division requires parties to provide advance information about their use of e-discovery tools such as technology-assisted review. The antitrust division also never allowed the parties to submit a partial lien log. Providing key insight into employee roles and data systems at an early stage in second claim negotiations is also generally the currently accepted practice in both the FTC and the Antitrust Division. However, the blog post, while claiming to offer a “streamlined” approach, only seems to add a burden to the parties without any real streamlining that would reduce the burden on the merging companies.

Footnotes

1 President Lina M. Khan, Memorandum Re: Vision and Priorities for the FTC, September 22, 2021, available here

2 Holly Vedova, “Making the second claim process both more streamlined and rigorous during this unprecedented wave of mergers,” September 28, 2021, available here

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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