Issue in Focus
Oct 09 2015
More than thirty years before Parker Brothers sold their first “Monopoly” board game, the federal government began laying the foundation for our modern anti-trust regulatory regime in order to prevent real monopolies from emerging in the marketplace. While this regulatory framework has largely succeeded in protecting the fair and open competition upon which our free-enterprise economy depends, a relatively minor design flaw has caused the enforcement of our nation’s antitrust laws to be inconsistent and uneven.
In 1903 the position of Assistant Attorney General for Antitrust was created within the Department of Justice (DOJ), which would later become the Antitrust Division, and in 1914 Congress created the Federal Trade Commission (FTC), an independent agency that was designed to share antitrust enforcement authority with the DOJ.
The FTC and the DOJ’s Antitrust Division are both tasked with enforcing Section 7 of the Clayton Act, which prohibits any mergers and acquisitions that would “substantially lessen competition” or “tend to create a monopoly.”
In order for two or more private entities to complete a merger or acquisition, they must notify the FTC and the Antitrust Division, at which point one of the two antitrust enforcement agencies will have a period of time to analyze the potential effects of the transaction.
If the agency determines that the completion of a proposed transaction would violate Section 7, it pursues an injunction of the transaction in federal court. Typically, when the court grants the injunction, the parties of the potential transaction abandon the merger, whereas when the court denies the injunction, the parties execute the transaction shortly thereafter.
But the problem is that the two agencies are held to different standards when seeking a preliminary injunction of a proposed transaction in court.
Some commentators argue that the standards facing the FTC are more lenient than those confronting the DOJ, which would mean that, all else being equal, proposed mergers and acquisitions reviewed by the FTC are more likely to be blocked by the government than transactions that are reviewed by the DOJ.
But regardless of whether, and to what extent, the disparate preliminary injunction standards yield different results, there’s no good reason for two agencies to be governed by different rules when applying the same laws.
The “Standard Merger and Acquisition Reviews Through Equal Rules Act of 2015” – or the SMARTER Act – would solve this discrepancy by harmonizing the standards applied to the DOJ and the FTC when each agency seeks a preliminary injunction to a proposed merger or acquisition. It would also harmonize existing disparities between the procedures the two agencies use in merger litigation, by stripping the FTC of its power to administratively litigate proposed mergers that courts have refused to block.
Protecting the American people and economy from the harmful effects of monopolies need not come at the expense of equality before the law. This is the premise behind the SMARTER Act, which would ensure that companies don’t confront two different sets of rules when preparing to undergo a merger review process with the federal government.