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

Section7 of the Clayton Act (Section 7).1The agencies’ concurrent

enforcement authority has evolved since the passage of the Federal Trade

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

Between the enactment of the Sherman Act in 18903and 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 COMM’N,REPORT

AND RECOMMENDATIONS129-32 (2007) [hereinafter AMCREPORT],

available athttp://govinfo.library.unt.edu/amc/report_recommendation/

amc_final_report.pdf.

2. 15 U.S.C. §§41-48.

3. Id. § 1.

4. SeeFED.TRADE COMM’N, FTCGUIDE TO THE ANTITRUST LAWS,

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

17

18Mergers 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.6The 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.7Generally, the investigation will be “cleared” to the

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

clearance process enables the agencies to avoid duplicative

investigations.9Disputes 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 FTCAND THE ANTITRUST DIVISION,

reprinted in4 Trade Reg. Rep. (CCH) ¶9,565.05, andANTITRUST

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

http://www.justice.gov/atr/public/divisionmanual/chapter7.pdf

(collectively discussing concurrent jurisdiction).

7. “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 continues today, although it is now

computerized.” MERGERS AND ACQUISITIONS:UNDERSTANDING THE

ANTITRUST ISSUES16 n.5 (Robert S. Schlossberg ed., 3d ed. 2008).

8. FED.TRADE COMM’N &U.S.DEP’T OF JUSTICE, DOJ/FTCCLEARANCE

PROCEDURES FOR INVESTIGATIONS(1993), reprinted in65 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 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 HSR Act, civil investigative

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 Div., U.S.

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

U.S. Enforcement Policy and Procedure19

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

disputes are typically resolvedby 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).11As part of these improvements, the agencies

committed to resolve clearance disputes within nine business days after

receipt of notification under the HSR Act.12However, 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.13In 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 Competitive Problem:

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

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

10. See AMCREPORT, supranote 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 IMPROVEMENTS(1995), reprinted in6 Trade Reg.

Rep. (CCH) ¶42,522.

13. SeeAMCREPORT, supranote 1, at 134.

14. See AMCREPORT,supranote 1, at 134; see alsoAm. 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.

AMCREPORT,supranote 1, at 155.

15. MEMORANDUM OF AGREEMENT BETWEEN THE FEDERAL TRADE

COMMISSION AND THE ANTITRUST DIVISION OF THE UNITED STATES

DEPARTMENT OF JUSTICE CONCERNING CLEAR ANCE PROCEDURES FOR

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

10170.htm.