Shortly after taking the reins of the Biden administration’s antitrust agencies, FTC Chair Lina Khan and DOJ Assistant Attorney General Jonathan Kanter made clear that they would take a harder line on corporate consolidation. “We're going to be focusing our resources on litigating, rather than on settling,” Khan told Axios.
Tough talk makes for good copy, but it’s a strategy in search of an objective. Corporate mergers are not always beneficial nor inherently harmful as many deals present both benefits and risks. Antitrust enforcement agencies serve taxpayers best when they focus on finding nuanced solutions to complex problems.
We should know. We are two former state Attorneys General, from different political parties and opposite coasts, each with decades of experience. Our firsthand experience working to protect consumers has given us a perspective on how antitrust enforcers can address real competition problems to provide immediate and long-term benefits to consumers.
For Chair Khan, litigation itself is the objective. She claims to be “quite happy” with the FTC’s merger litigation record during her stewardship of the agency. Paradoxically, she seems to count court losses as wins based on the deterrence value of litigation.
This flips principled antitrust enforcement on its head. As a tool, litigation should be used when merited by the facts and the law. When misused, it can chill pro-competitive market developments. And if Chair Khan believes that trial losses will move Congress to change the law to comport with her vision of antitrust, litigation certainly isn’t the right tool for communicating a policy idea to Congress.
The FTC’s ongoing efforts to block Microsoft’s completed acquisition of Activision illustrate the problem. After announcing the deal, Microsoft took several steps to allay regulatory concerns about the transaction by proactively licensing gaming content to industry peers, inking a labor neutrality agreement with the Communications Workers of America, and restructuring the deal to divest certain gaming assets. Sixteen jurisdictions around the world, including the U.K. and the EU, allowed the deal to proceed.
Quixotically, the FTC continues to oppose the deal. After a district court denied the FTC’s request to enjoin the merger, the FTC appealed to the Ninth Circuit Court of Appeals. In a hearing on Dec. 6, the FTC argued, among other things, that the district court erred by taking account of the ways consumers will benefit from Microsoft’s proposed solutions.
This is a misguided argument. If the Ninth Circuit adopts the FTC’s position in the Microsoft case, the legal precedent would strongly discourage companies from trying to solve perceived problems with proposed transactions. Why bother if the FTC only wants to litigate and the courts can’t offer an independent check on the reasonableness of the FTC’s position? Even though many deals mix positive and negative attributes, the FTC’s argument needlessly ignores the benefits of settlements, driving companies and governments toward an all-or-nothing merger review process. This will strain resources at enforcement agencies, especially cash-strapped AG offices.
Remarkably, in August and September, the FTC itself demonstrated the advantages of a policy that encourages problem-solving. After suing to block Amgen’s acquisition of Horizon Therapeutics and ICE’s acquisition of Black Knight, the FTC later accepted settlements built on offers made by the merging parties before the FTC filed its lawsuits. Those offers were likely crafted with an eye toward demonstrating to the federal judge that there were viable solutions the FTC was ignoring. If the FTC convinces the Ninth Circuit that courts should not evaluate settlement offers, negotiated resolutions like those in the Amgen/Horizon and ICE/Black Knight will diminish.
The FTC and Attorneys General alike go to work every day to protect competition and consumers. While lawsuits and brinksmanship win headlines, it’s often negotiations and compromises that actually achieve real results for consumers on pocketbook issues. Let’s get back to problem-solving.
Martha Coakley is a former Massachusetts Attorney General. Rob McKenna is a former Washington Attorney General. Martha Coakley and Rob McKenna both serve as advisors to Microsoft, but they do not represent the company on this transaction.
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