I’m not sure I’ve quoted Gerald Ford here before, but never mind that. The big news at the agencies—not least the antitrust agencies, but in this case, all of them—is that we the people of the United States of America are once more, as a polity, back in “business.” The federal government is now funded through Jan. 30.
The home pages at the Federal Trade Commission (FTC) and the U.S. Justice Department (DOJ) Antitrust Division have been cleared of their “sorry, we’re closed” banners. As of Nov. 12, the top banner on the FTC home page still reported that “The FTC is closed due to the lapse in funding.” The Antitrust Division had been more expansive, reporting once more, and with no shortage of partisan feeling, that:
Democrats have shut down the government. Department of Justice websites are not currently regularly updated. Please refer to the Department of Justice’s contingency plan for more information.
No more.
As to the finger pointing, well, perhaps. But if it takes two to tango, then equally if more accessibly, it takes two to step on each other’s feet.
I don’t have any great insights into government shutdowns, although I experienced several as a furloughed federal employee (2013, early 2018, and the 35-day shutdown that began in 2018 and ended in 2019). They were considerably less fun than many might imagine: a pain for staff, and ineffective as levers for any serious regulatory reform. Mostly, they heaped significant but temporary discontinuity and inefficiency on top of good and bad programs (offices, cases, etc.) alike before a return to “business” as usual.
Staff are returning to work, no doubt, but just as there are required winding-down processes at the beginning of a shutdown, there’s winding back up to do once there’s funding again and people are back in the office.
For me, the most surprising intra-shutdown news out of the antitrust agencies came in the form of an Oct. 25 tweet from FTC Commissioner Mark Meador, who reported that he’d recently returned “home from a successful emergency heart valve operation.” Meador and I have some significant points of agreement when it comes to antitrust, and some significant points of disagreement, too. And all of that’s irrelevant to the fact that he’s a human being and that neither he nor his family deserved such a scare. That the procedure was successful is good news. I wish him well, and I’m sure we all do.
Of course, the antitrust agencies were not really in a complete state of stasis. Many staff were furloughed, and much of the work ground to a halt. But the commissioners at the FTC get to keep on doing what they do (separate funding provisions).
So the fact that Chairman Andrew Ferguson was at the NYU Law School Program on Corporate Compliance and Enforcement’s (PCCE) fall antitrust program should raise no eyebrows. Former FTC Office of Policy Planning Director Bilal Sayyed remarked that Ferguson “indicated an interest in the original meaning of the FTC Act, when asked about the existing Section 5 UMC Statement.” I have no idea whether there was any follow up, but perhaps a more extensive discussion will follow.
That would be of interest, not because I expect an “original meaning” analysis to resolve much about Section 5 UMC policy, but because the FTC’s November 2022 UMC policy statement is an exceedingly creative and overreaching bit of vagary. Hence, the title of an International Center for Law & Economics (ICLE) white paper I co-authored with Gus Hurwitz: “The FTC’s UMC Policy Statement: Untethered from Consumer Welfare and the Rule of Reason.”
The policy statement was adopted on a purely partisan vote. In dissent, Christine Wilson–then, the commission’s lone Republican–wrote that the statement “resembles the work of an academic or a think tank fellow” with dreams of “remaking the economy,” reflecting not so much clear guidance about grounded enforcement principles (and limits thereto) but an “I know it when I see it” approach “premised on a list of nefarious-sounding adjectives” without antitrust or economic meaning or any clear methodology.
That was a harsh assessment, no doubt, but it seemed to me entirely fair. To those interested, I recommend her dissent (and, of course, our white paper). Mostly, I’m hopeful that the commission will revisit the UMC policy statement, which cries out for revision. To that end, Ferguson’s remark is encouraging.
The question of the “original meaning of the FTC Act” plays an interesting role in an amicus brief by a group of administrative-law professors in Trump v. Slaughter. It’s an interesting brief, if in parts telegraphic. At its core is the fact that the FTC Act has been amended several times. Of particular relevance to Trump v. Slaughter, the amici argue, is a distinction between pre-1935 and post-1935 amendments to the law:
The choice for the Court here is between severing the removal protections or severing the post-1935 authorities that unconstitutionally interfere with the President’s exclusive power. If the FTC Act as of 1935 was constitutional, despite its removal protections, because the agency performed principally reporting and adjudicatory functions, then the Court should excise the post-1935 amendments that invade powers the Constitution assigns to the President alone.
On balance, they do argue against the proposition that Humphrey’s Executor be overturned, but that’s in no small part because of the more limited roles played by the FTC at the time that case was decided: 1935. They provide, that is, an argument against the president’s at-will removal power, at least with regard to the FTC and at least as it was constituted and primarily functioned in 1935. But they then suggest that key post-1935 powers or functions may be struck down nonetheless.
That would not be an entirely happy result for Rebecca Slaughter or, I suspect, the current commission.
Also continuing were matters already before the courts—at least, matters where the courts did not grant continuances due to the shutdown. Ben Remaly of Global Competition Review reported Nov. 10 that the “FTC has lost its challenge to the GTCR/Surmodics merger.” I haven’t seen an opinion, and Remaly reports that one doesn’t appear to be forthcoming. Rather, Judge Jeffrey Cummings of the U.S. District Court for the Northern District of Illinois reportedly delivered extensive remarks from the bench, finding that the “[m]erging parties rebutted a presumption of antitrust harm by agreeing to divest key assets.”
So that’s a loss, apparently, although I really don’t know the details of the ruling, the judge’s reasoning, or how the FTC viewed the divestitures. Those things would be of interest, because there’s continuing evidence that the antitrust agencies are willing to settle cases—at least sometimes—and are not hell bent on litigating every complaint to its conclusion as the agencies at least claimed to want to do under their Biden-era leadership.
For example, there was an Oct. 17 announcement that the FTC had “finalized a consent order that requires Synopsys, Inc. and Ansys, Inc. to divest certain assets to resolve antitrust concerns surrounding their $35 billion merger.” Here’s the decision and order.
We do have the complaint that the FTC filed in the GTCR/Surmodics matter (posted on the FTC website, although I’ll skip ahead to the second amended complaint filed May 14 for the purposes of this discussion). It appears to be a plausible complaint, which is not to say a slam dunk or to suggest that the judge got it wrong. For one thing, it’s a heavily redacted complaint. Redactions are par for the course, as agency complaints might contain privileged or sensitive information of relevance to the case, but not to be shared with the general public.
Still, such redactions can often seem excessive. For example, market-share calculations may be done differently, and may be contested by the parties, but there’s no obvious reason why those numerical values would have to be redacted from the publicly available version of a complaint. And for all of the limitations of structural arguments generally, such numbers would be of interest for several reasons. Not least is the stress the FTC placed on “the relevant antitrust market, market structure, and the proposed acquisition’s presumptive illegality.” Without suggesting that the FTC was wrong to bring this complaint–really, I’m not arguing that–there are several reasons to wonder about this bit.
First, there’s that phrase “presumptive illegality,” which takes us back to the 2023 Merger Guidelines. These were, one recalls, controversial in various regards, but maintained by current leadership at both the FTC and DOJ (here’s one relevant statement to that effect from Ferguson).
As I noted back in January 2024, the 2023 guidelines said that “mergers raise a presumption of illegality when they significantly increase concentration in a highly concentrated market.” As I noted at the time, no prior edition of the merger guidelines (or of the horizontal or vertical guidelines) had used that phrase, “presumption of illegality.” There were structural markers of concern before. So, for example, the 2010 horizontal merger guidelines stated that:
Mergers resulting in highly concentrated markets that involve an increase in the HHI of between 100 and 200 points potentially raise significant competitive concerns and often warrant scrutiny. Mergers resulting in highly concentrated markets that involve an increase in the HHI of more than 200 points will be presumed to be likely to enhance market power. The presumption may be rebutted by persuasive evidence showing that the merger is unlikely to enhance market power.
That’s “potentially raise competitive concerns and often warrant scrutiny” versus a “presumption of illegality.”
Second, that change in terminology was bundled with the agencies moving the numerical goalposts. For example, “highly concentrated markets” under the 2010 guidelines were those with an HHI (y’all know that this is the Herfindahl-Hirschman Index, with HHI being a sum of the squares of the market shares of firms in the market, right?) above 2,500. Under the 2023 guidelines, markets with an HHI above 1,800 are deemed highly concentrated.
Third, there’s the long and well-supported trend to downplay simple structural analyses. I won’t recapitulate it here, but I was glad to help with ICLE’s 2023 comments on the draft merger guidelines, which provide an extensive discussion of that generally salutary trend and the large body of literature supporting it.
And, of course, market-share assessments may be contestable, and not just because they rest on market definitions, which may also be contestable. But, but, but all of these very good reasons to wonder about structural cases (and the generality of structural thresholds) are not to say that concentration measures cannot serve as useful preliminary signals of competitive concerns. Moreover, the FTC’s amended complaint alleges that:
Preliminary information indicates that the outsourced hydrophilic coatings market is already highly concentrated, with an HHI in excess of 1,800. The Proposed Acquisition would result in a merged entity with control of over 50 percent of the relevant market, a post-merger HHI exceeding 3,500 and a change in HHI of over 1,000—levels that substantially surpass the threshold for presumptive illegality. The Proposed Acquisition is therefore presumptively illegal under the Merger Guidelines and controlling case law.
So while I would not argue for a presumption of illegality (and would rewrite the merger guidelines if I could), it’s at least true that a market with an HHI of 3,500 would have been deemed “highly concentrated” under the 2010 guidelines, and not just under the 2023 guidelines. That—and a change in HHI of more than 1,000—would have raised concerns in years past, and under prior editions of the guidelines.
Moreover, the complaint includes a discussion of entry barriers in the alleged market for “outsourced hydrophilic coatings,” which are used in the production of regulated interventional medical devices. The allegation that competitively significant entry would not be timely is at least plausible.
In brief, there’s rather a lot that I (and most of us) don’t know about this case. Partly because complaints are never the whole story; partly because of the many and substantial (and perhaps excessive) redactions; and partly because of what’s unknown (to us—not necessarily to the FTC or its staff), I cannot tell whether the FTC got it right or wrong. It’s entirely plausible that they did make out a prima facie case against the merger. And it’s entirely plausible that the judge was right about “the fix.”
Food for thought, after a slow month and a half in U.S. antitrust land. As Emerson, Lake, and Palmer put it at a concert I attended while in high school, welcome back my friends to the show that never ends.
