Chapter 2. U.S. Enforcement Policy and Procedure

• Pages: 13-34

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CHAPTER 2

U.S. ENFORCEMENT POLICY

AND PROCEDURE

A. The Concurrent Enforcement Authority of the U.S. Department

of Justice and the Federal Trade Commission

The Antitrust Division of the U.S. Department of Justice (DOJ or the

Division) and the Federal Trade Commission (FTC or the Commission)

share jurisdiction for challenging mergers, acquisitions, and joint

ventures under Section 7 of the Clayton Act.1 The agencies’ concurrent

enforcement authority has evolved since the passage of the Federal Trade

Commission Act in 1914.

Between the enactment of the Sherman Act in 1890 and the

enactment of the Clayton and Federal Trade Commission Acts twenty-

four years later, the DOJ was the sole federal government agency

charged with antitrust enforcement responsibility. During that time, the

Sherman Act was the only statutory weapon the Division had for

challenging mergers on the basis of their effect on competition.

In 1914, Congress passed the Clayton Act to deal more directly and

effectively with mergers and the Federal Trade Commission Act to

establish the FTC as a separate agency to enforce certain of the nation’s

competition laws, including the merger laws. The FTC did not supplant

the DOJ as the federal government’s antitrust enforcer, but became an

additional source of antitrust enforcement authority and expertise. As

the U.S. Supreme Court later explained, it was “the congressional intent

to create a body of experts who shall gain experience by length of

service; a body which shall be independent of executive authority, except

in its selection, and free to exercise its judgment without the leave or

hindrance of any other official or any department of the government.”2

In 1948, the DOJ and the FTC signed a formal liaison agreement

creating a mechanism for resolving conflicts that arise from the agencies’

1.15 U.S.C. § 18. For a discussion of the strengths and weaknesses of the

current dual system, see Report of the American Bar Association Section

of Antitrust Law, Special Committee to Study the Role of the Federal

Trade Commission (1989).

2.Humphrey’s Ex’r v. United States, 295 U.S. 602, 625-26 (1935).

14 MERGERS AND ACQUISITIONS

concurrent jurisdiction over Section 7 enforcement.3 Though the 1948

liaison agreement does not “in any way limit either agency in making an

independent decision as to what investigation it will undertake,”4 it

nonetheless seeks to avoid duplicative investigations. The process

established by the 1948 agreement has been revised and refined over the

years, but the basic framework remains.

The determination of which agency will handle a particular

prospective investigation is known as “clearance.” Before initiating a

new investigation, each agency briefly describes the scope of the

investigation to the other agency and provides the other agency with the

names of the potential targets of the investigation and the relevant

product and geographic markets involved.5 Generally, the prospective

investigation will be “cleared” to the agency with the greater expertise in

the relevant product.6

In this regard, the DOJ has historically taken the lead in investigating

mergers and acquisitions involving telecommunications, banking and

finance, steel, electric power, air transport services, beer, and

newspapers. The FTC has historically taken the lead in investigating

mergers and acquisitions involving chemicals, oil and gas pipelines, food

and food distribution, cable television, pharmaceuticals, retailing, and

textiles. The agencies have shared jurisdiction in computer software and

3.See Liaison Agreement of the FTC and the Antitrust Division,

reprinted in 4 Trade Reg. Rep. (CCH) ¶ 9,565.05 and

www.usdoj.gov/atr/foia/divisionmanual/ch7.pdf (collectively discussing

concurrent jurisdiction).

4.Id.

5.Under the 1948 liaison agreement, the agencies exchanged index cards

with information regarding any new proposed investigations. If the other

agency did not have an investigation of the matter pending, the agency

sending the notification could proceed without further liaison. This

exchange of information is now computerized.

6.FEDERAL TRADE COMM’N & U.S. DEP’T OF JUSTICE, FTC/DOJ

CLEARANCE PROCEDURES FOR INVESTIGATIONS (1993), reprinted in 65

Antitrust & Trade Reg. Rep. (BNA) 746 (1993). The 1993 memorandum

elaborates that “product” means, in order of significance, the same

product, a substitute, an input or output, and a product used in the subject

product in a single manufacturing process. The agency’s expertise is

evaluated in terms of its having engaged in a “substantial antitrust

investigation” in the relevant industry within the preceding five years. A

“substantial antitrust investigation,” in turn, means one in which requests

for additional information under the Hart-Scott-Rodino Antitrust

Improvements Act of 1976, 15 U.S.C. § 18a, civil investigative demands,

or subpoenas were issued and documents submitted and reviewed.