Antitrust Alert: FTC Issues Interim Final Rules for FTC Administrative Litigation

On December 23, the Federal Trade Commission published a set of interim final rules governing trials held before the Commission. The interim final rules incorporate most, but not all, of the rules changes first proposed by the FTC in October 2008. (See Jones Day Client Commentary, "Proposed FTC Rule Changes Would Squeeze Litigants in Merger and Conduct Cases," October 2008.) The interim final rules are likely to have a significant effect on both merger and non-merger litigation at the FTC. As we previously noted, they should be of particular interest to companies in industries that are traditionally subject to review by the FTC, including companies in the pharmaceutical, medical devices, health care, computer, semiconductor, chemical, energy and retail sectors.

The announced purpose of the changes, now incorporated into the interim final rules, is to address concerns that the FTC’s internal litigation procedure is too slow. The new rules are intended to shorten the time period from the filing of a complaint to a final Commission decision to less than 13 months in a non-consummated merger case and 18½ months in a conduct case. However, it appears that many of the changes to the discovery process, motions practice, and trial procedures are likely to make it more difficult for respondents in both merger and non-merger cases to litigate effectively in these "Part 3" proceedings (referring to the part of the FTC regulations governing its administrative trials).

Criticism of the proposed rules was directed mostly at the negative effect of the proposed rules on the due process rights of respondents (see the October 2008 Jones Day Client Commentary  and comments referenced in the new Federal Register notice). Nevertheless, the FTC rejected most of those comments, with the result that the interim final rules adopt most of the changes proposed by the FTC in September 2008. In particular, the interim final rules:

  • require respondents to file an answer within 14 (instead of 20) days,
  • provide that the Commission (rather than the ALJ) will decide dispositive motions,
  • provide for a standard protective order that prohibits in-house counsel access to third-party confidential information,
  • limit the number of experts to five per side (regardless of the number of respondents in a case),
  • permit greater use of hearsay evidence,
  • limit the length of trial to approximately 30 days,
  • require video recording of trial testimony,
  • set a deadline of 70 days for the ALJ's initial decision, and
  • require appeal briefs to be filed within 20 days in merger cases and 30 days in non-merger cases.

In response to criticism, the FTC decided to impose deadlines on itself for issuance of a final Commission decision on appeal. The FTC also dropped a proposal that would have authorized a Commissioner to preside over cases and decide non-determinative motions. The FTC clarified that the five-month schedule from complaint to trial would apply only to those mergers in which the FTC is seeking a preliminary injunction. No real explanation was offered to explain either how the schedule would assure the due process rights of respondents or why a thirteen-month schedule would be quick enough for a pending merger to be tried without forcing the parties to abandon the transaction because of the delay. The FTC also added a provision permitting respondents in such cases to file a motion to dismiss the Part 3 complaint if the FTC loses both a motion for a preliminary injunction in district court and a motion for injunction or a stay in the court of appeals, but reaffirmed that the decision of whether to proceed with the Part 3 litigation is discretionary and is to be decided in accordance with the FTC’s own principles (set forth in its 1995 Policy Statement and Procedures Relating to Part 3 Proceedings Following Denial of a Preliminary Injunction).

The FTC will accept comments on its interim final rules from interested parties before deciding whether to make any further changes. The deadline for public comments is 30 days from the date of publication in the Federal Register. In the meantime, the interim final rules will apply to all Part 3 matters initiated after the Federal Register publication date.

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