U.S. Enforcement Policy and Procedure

• Pages: 17-53

CHAPTER II

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 over mergers, acquisitions, and joint ventures under

Section 7 of the Clayton Act (Section 7).1 The agencies’ concurrent

enforcement authority has evolved since the passage of the Federal Trade

Commission Act (FTC Act)2 nearly a century ago .

Between the enactment of the Sherman Act in 18903 and the

enactment of the Clayton Act and FTC Act in 1914, the DOJ was the

sole federal agency charged with enforcing the nation’s antitrust laws.

During this twenty-four year period, the Sherman Act was the only

statutory authority the Division had to challenge anticompetitive

mergers.

In 1914, Congress passed the Clayton Act and the FTC Act. The

Clayton Act concentrated on certain practices that the Sherman Act did

not explicitly proscribe, such as mergers and interlocking directorates.4

The FTC Act established the Commission and charged the Commission

with enforcing the nation’s antitrust laws, but did not give it criminal

jurisdiction. The FTC did not supplant the DOJ, but became an

additional antitrust enforcer. As the Supreme Court later explained, it

was “the [c]ongressional 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

1. 15 U.S.C. §18. For a discussion of the strengths and weaknesses of the

current dual system, see ANTITRUST MODERNIZATION COM M’N, REPORT

AND RECOMMENDATIONS 129-32 (2007) [hereinafter AMC REPORT],

available at http://govinfo.library.unt.edu/amc/report_recommendation/

amc_final_report.pdf.

2. 15 U.S.C. §§ 41-48.

3. Id. § 1.

4. See FED. TRADE COMM’N, FT C GUIDE TO THE ANTITRUST LAWS,

available at http://www.ftc.gov/bc/antitrust/antitrust_laws.shtm.

17

18 Mergers and Acquisitions

judgment without the leave or hindrance of any other official or any

department of the government.”5

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

creating a mechanism for resolving conflicts that might arise from the

agencies’ concurrent jurisdiction.6 The process established by this

agreement serves as the basis for agency cooperation today.

The determination of which agency will handle a potential

investigation of a transaction is known as “clearance.” Before initiating a

new investigation, if either agency wants clearance to investigate the

proposed transaction, it briefly describes the scope of the investigation to

the other agency, including company names and the relevant product and

geographic markets.7 Generally, the investigation will be “cleared” to the

agency that has the greater expertise with the relevant product.8 This

clearance process enables the agencies to avoid duplicative

investigations.9 Disputes occasionally arise, however, over which agency

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

6. See LIAISON AGREEMENT OF THE FTC AND THE ANTITRUST DIVIS ION,

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

DIVISION MANUAL, Ch. VII (5th ed. 2014), available at

http://www.justice.gov/atr/public/divisionmanual/c hapter7.pdf

(collectively discussing concurrent jurisdiction).

7. “Under the 1948 liaiso n agreement, the agenc ies exchanged inde x cards

with information re garding any new pro posed investigatio ns. If the other

agency did not ha ve an investigation o f the matter pend ing, the agency

sending the notification could proceed without further lia ison. This

exchange of information continues today, although it is now

computerized.” MERGERS AND ACQU ISITIONS: UNDERST ANDING THE

ANTITRUST ISSUES 16 n.5 (Robert S. Schlossberg ed., 3d ed. 2008).

8. FED. TRADE COMM’N & U.S. DEP’T OF JUSTIC E, DOJ/FTC CLEARANCE

PROCEDURES FOR INVESTIGATIONS (1993), reprinted in 65 Antitrust &

Trade Reg. Rep. (BNA) 746 (Dec. 9, 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 with the

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

is evaluated in terms of its having engaged in a “substantial antitr ust

investigation” in the relevant industr y within the preceding five years. A

“substantial antitr ust investigation,” in turn, means one in which requests

for additional information under the HSR Act, civil in vestigative

demands, or subpoenas were issued and documents submitted and

reviewed. Id. at 746-47.

9. Deborah Platt Majoras, Deputy Ass’t Att’ y Gen., Antitrust Di v., U.S.

Dep’t of Justice, Address Before the Houston Bar Ass ’n Antitrust and

U.S. Enforcement Policy and Procedure 19

has expertise that is more directly applicable to a particular matter. These

disputes are typically resolved by agency staff assigned to liaise with

each other, but may require review at higher levels of authority—

ultimately the Chairman of the FTC and the Assistant Attorney General

of the Division, if necessary.10

In March 1995, the antitrust agencies jointly announced the

implementation of additional procedures to improve the clearance

process to effectuate the Hart-Scott-Rodino Antitrust Improvements Act

of 1976 (HSR Act).11 As part of these improvements, the agencies

committed to resolve clearance disputes within nine business days after

receipt of notification under the HSR Act.12 However, despite the

adoption of these new procedures, clearance disputes have continued,

and in a relatively small number of more serious cases, disputes can

consume much of the thirty-day initial HSR waiting period.13 In these

situations, the parties may pull and refile the premerger notification,

restarting the thirty-day review period.14

On March 5, 2002, the agencies announced that they had entered into

a Memorandum of Agreement15 (2002 Agreement) establishing revised

clearance procedures for merger reviews. The Agreement attempted to

reduce the number of clearance disputes by delineating the industries that

each agency would cover based on historical expertise. The revised

Trade Regulation Section: Houston, We Have a Co mpetitive Problem:

How Can We Remedy It? (Apr. 17, 2002), available at http://www.

justice.gov/atr/public/speeches/11112.htm.

10. See AMC REPORT, supra note 1, a t 132-33.

11. 15 U.S.C. § 18a.

12. U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N, HART-SCOTT-RODINO

PREMERGER PROGRAM IMPROVEME NTS (1995), reprinted in 6 Trade Reg.

Rep. (CCH) ¶ 42,522.

13. See AMC REPORT, supra note 1, at 134.

14. See AMC REPORT, supra note 1, at 134; see also Am. Bar Ass’n,

Comments Regarding Dual Federal Merger Enforcement, Submitted to

the Antitrust Modernization Commission (Oct. 28, 2005). The “pull and

refile” approach can also take place during a fifteen-day waiting period

incident to an all-cash tender offer, although that is far less common.

AMC REPORT, supra note 1, at 155.

15. MEMORANDUM OF AGREEMENT BETWEEN THE FEDERAL TRADE

COMMISSION AND THE ANTITRUST DIVISION OF TH E UNITED STATES

DEPARTMENT OF JUSTICE CONCERNING CLEAR ANCE PROCEDURES FOR

INVESTIGATIONS (2002), available at http://www.justice.gov/atr/public/

10170.htm.