Nonmerger Enforcement at the Ftc: An Aggressive Proconsumer Agenda

• Author: Joseph J. Simons,David Scheffman
• DOI: 10.1177/0003603X0404900302
• Published date: 01 September 2004
• Date: 01 September 2004
• Subject Matter: Article

The Antitrust Bul/etin/Fall 2004

Nonmerger enforcement at the FTC:

an aggressive proconsumer agenda

BY JOSEPH 1. SIMONS* and DAVID SCHEFFMAN**

1. Introduction

471

In a recent paper,

FfC

general counsel William Kovacic issued a

rigorous

critique

of

the

"pendulum

narrative"

of

U.S.

antitrust

enforcement experience, which posits that antitrust enforcement

swings through

distinct

phases

of

"too

much,"

"too

little,"

and

"properly moderate," depending largely on which administration is in

office. JSome antitrust commentators, who perhaps subscribe to the

*Paul, Weiss, Rifkind, Wharton &Garrison LLP, formerly Director

of the Bureau of Competition.

** LECG and the Owen Graduate School of Management, Vanderbilt

University. Formerly Director of the Bureau

of

Economics, Federal Trade

Commission 2001-2003.

AUTHORS' NOTE: This article reflects our views

of

the 2+ years that we

spent at the FTC

under

Chairman Timothy Muris. We thank Ernest

Nagata and Alden Abbott

for

their assistance. and comments from a ref-

eree. This article represents our views and not necessarily those

of

the

Commission or any Commissioner.

William E. Kovacic, The Modern Evolution

of

u.s.

Competition

Policy Enforcement Norms. 71 ANTITRUST L.J. 377 (2003). Borrowing

from Goldilocks. the famous

children's

story, Kovacic described the

pendulum narrative as positing that federal antitrust enforcement swings

from being too hot to too cold, to just right. He rejects the hypothesis as

simplistic and inaccurate.

©

~004

by Federal Legal Publications, Inc.

472

The antitrust bulletin

pendulum narrative, predicted that FTC antitrust enforcement under

the current administration would swing back toward the "too little"

end of the spectrum. At the outset of his current tenure at the FTC,

Chairman Timothy Muris stated that those critics would be proved

wrong-antitrust

enforcement under his leadership would continue

the essential continuity of antitrust enforcement over recent decades,

including the Pitofsky Commission, with differences at the margin.'

This article focuses on the nonmerger agenda, and demonstrates a

very aggressive proconsumer enforcement program that has, in a very

short

period of time,

borne

much fruit in terms of

enforcement

actions, amicus briefs, studies, and hearings.'

By the

numbers

alone,

the

FTC

under

Chairman

Muris

has

pursued the most vigorous nonmerger agenda in almost aquarter

century. In fiscal year 2001, the FTC opened 56 new nonmerger

investigations, and it opened another 59 nonmerger investigations in

2002. This case generation effort bore fruit in fiscal year 2003 as the

Commission instituted 21 enforcement actions, which represents the

highest level since

1980.-t

Over the two full fiscal years that Chairman

Muris has been in office, the Commission instituted 32 nonmerger

enforcement actions for an average of 16 per year, compared to an

average

of

approximately

nine

per

year

during

the

Clinton

administration and seven during the first Bush presidency.'

~

Timothy

J.

Muris,

Chairman,

Federal

Trade

Commission,

Antitrust Enforcement at the Federal Trade Commission: In a

Word-

Continuity,

Prepared

Remarks

Before

American

Bar

Association

Antitrust Section Annual Meeting, Chicago, Illinois (Aug. 7, 2001),

available at http://www.ftc.gov/speeches/muris/murisaba.htm.

The Fl'C's merger enforcement program (which we do not address

in this article) has also been quite vigorous and in line with previous policy.

See Joseph J. Simons, Director, Bureau of Competition, FTC, Merger

Enforcement at the

FfC,

Keynote Address to the Tenth Annual Golden

State Antitrust and Unfair Competition Law Institute, Antitrust and Unfair

Competition Law Section, State Bar of California (Oct. 24, 2003), available

at http://www.ftc.gov/speechesiother/021024mergeenforcement.htm.

4

FfC,

Fulfilling the Original Vision: The FTC at 90, at 9 (Apr.

2004), available at http://www.ftc.gov/os/2004/04/040402abafinal.pdf.

Data

for the

Clinton

and

Bush

presidencies

compiled

from

Kovacic, supra note I, at tables 3, 4 &5.

Nonmerger enforcement 473

An enforcement program obviously should be judged by more

than mere numbers. The record shows that the

FTC's

nonmerger

program is substantively strong as well as numerically active. The

program

builds

on

principles

of

competition

policy

outlined

by

Chairman Muris in his "Handler" speech." First, the overarching goal

is to promote competition as the basic norm in the functioning

of

markets. This means that the agency's work covers a broad spectrum

of

competition

issues.

Second,

consumer

welfare

and

economic

efficiency

are

the

fundamental

guideposts

in

targeting

FTC

enforcement. Third, the enforcement program should make full use of

the capabilities

of

the

agency's

distinctive institutional attributes,

including abroad charter to conduct studies and perform research

about the economy, authority to use administrative adjudication to

resolve

competition

issues,

and,

in

the

Chairman's

words,

the

resources

of

"one

of

the

world's

preeminent

teams

of

industrial

organization economists in our Bureau of Economics."?

The FTC's distinctive institutional capabilities enable the agency

to tackle

some

of

the most difficult and challenging competition

issues, as we will illustrate. Studies and research complement and

inform our investigations. The FTC's administrative litigation process

allows a detailed record to be built and analyzed by an expert agency,

and FTC cases can result in the establishment

of

key competition

principles through subsequent judicial rulings that benefit consumers

broadly over time,

In

applying

the

principles

of

competition

policy

outlined

by

Chairman Muris, a number

of

criteria are used to direct investigational

resources to specific matters:

whether the conduct allegedly involved is of a type (such as agree-

ments among competitors about price or other elements of competi-

tion) that poses the greatest threat to consumer welfare;

6Timothy J. Muris, Chairman, Federal Trade Commission, Looking

Forward: The Federal Trade Commission and the Future Development of

U.S. Competition Policy, Remarks Before the Milton Handler Annual

Antitrust Review, New York, New York (Dec. 10, 2002), available at

http://www.ftc.gov/speeches/muris/handler.htm.

published

at 2003

COLUM.

Bus. L.R. 359.

[d.