Antitrust Alert: FTC Merger Settlement Exposes Rift Over Antitrust Merger Enforcement
The case involved Staples' acquisition of office supply wholesaler Essendant. The five-member Commission issued four statements, including two dissents urging more aggressive antitrust enforcement, revealing a fracture in the bipartisan consensus that generally has characterized the FTC over many years. This public disagreement reflects a debate over enforcement aggressiveness against vertical transactions, veracity of claimed deal efficiencies, motives of private equity buyers, and sufficiency of behavioral remedies.
The three-Republican majority concluded that the likely harm was limited to potential misuse of competitively sensitive information and that the firewall remedy addressed that concern. Although the Republicans, voting to allow the merger with conditions, were following the FTC staff's recommendation, the two Democrats issued critical dissents. As characterized by the majority, the dissenting statements claimed a "a decades-long, bipartisan pattern of faulty analysis, improper assumptions, unreliable predictions, underweighting evidence of anticompetitive effect, and overweighting evidence of efficiencies." According to the majority, the dissents' concerns either were "ruled out by staff or speak to potential injuries that fall outside the scope of antitrust law." Although the five Commissioners agreed on the need for more retrospective merger reviews, they differed over how to proceed given limited agency resources.
- The current debate about the role of antitrust likely will be reflected in future FTC decisions on appropriate merger enforcement. Merging parties can expect these dissenting Commissioners to urge court challenges or stronger settlements, especially in vertical transactions.
- This schism will result in incrementally longer investigations, but probably no change in outcome for the majority of cases. The dissents will assume a stronger voice if a member of the majority is recused, generating potential 2-2 splits. Nevertheless, the FTC is unable to challenge a transaction without the vote of a majority of Commissioners.
- Behavioral remedies, including firewalls, remain a source of controversy, but are a viable option to address competitive issues in vertical transactions. Outside of these few cases, the FTC is likely to require divestitures to resolve competitive concerns.
For more information, please contact your principal Jones Day representative or any of the lawyers listed below.
Kathryn M. Fenton
J. Bruce McDonald
+1.832.239.3822 / +1.202.879.5570
Ryan C. Thomas
Lauren Miller Forbes
Michael A. Gleason