Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Commissioner Ohlhausen highlights importance of competition advocacy and premerger notification in Chile speech, (Nov 5, 2013)

By Linda O’Brien, J.D., LL.M.

FTC Commissioner Maureen Ohlhausen discussed the benefits of competition advocacy and premerger notification systems, and the role of each program in a competition enforcement system in a November 5 speech before the Fiscalia Nacional Economica (Fiscalia) at the Eleventh Annual Competition Day in Santiago, Chile.

Ohlhausen opened her speech, entitled “An Ounce of Antitrust Prevention Is Worth a Pound of Consumer Welfare: The Importance of Competition Advocacy and Premerger Notification,” by setting forth two areas of focus of the FTC, competition advocacy and premerger notification, as opportunities to prevent enduring harms to consumer welfare before it is too late to undo or remedy those harms.

She described that competition advocacy can help persuade government entities not to enact anticompetitive laws or regulations which may be difficult or impossible to repeal if they are passed. A premerger notification system, in turn, allows the competition authority to block or restructure anticompetitive transactions before they are completed and become difficult or impossible to undo. Both programs allow competition agencies to take preventative measures that protect competition and consumers and yield benefits greater than the costs involved, she stated.

Competition advocacy. Ohlhausen discussed the FTC’s advocacy program, which uses expertise in competition, consumer protection, and economics to persuade other policymakers and other federal agencies to pursue policies that promote competition and consumer welfare. The main objective of the FTC’s advocacy effort is to provide policymakers with a framework to analyze competition issues and take full account of the adverse impact on competition and consumer welfare that may result from proposed laws and regulations. The FTC’s advocacy also includes opposition to antitrust immunity for certain types of anticompetitive conduct. A third theme in the FTC’s advocacy is that the courts narrowly construe existing antitrust exemptions and immunities and a litigation program was developed to address the doctrine in the courts.

The Commissioner cited an example of a unanimous U.S. Supreme Court decision in the FTC’s challenge to a hospital merger that resulted in a near-monopoly in a state in which the court found that the state had not clearly articulated a policy displacing competition in hospital markets through acquisitions by local hospital authorities.

Ohlhausen outlined the benefits of an active competition advocacy program. She stated that competition advocacy can be a cost-effective way to prevent harm to consumers. Advocacy by competition officials can serve as the voice of consumers. Advocacy also can serve an important function in the political process by highlighting the costs to consumers of an anticompetitive law or regulation under consideration. Finally, an active competition advocacy program may have spillover effects beyond the particular matters on which the agency is advocating.

Three factors contribute to a successful advocacy program, according to the Commissioner: (1) a firm grounding for an agency’s advocacy efforts based on competition principles, a comprehensive understanding of the industry at issue, economic theory and analysis, and empirical evidence, when available; (2) careful selection of issues on which to advocate, targeting efforts on proposed laws and regulations that can have a significant impact on consumers and conduct research in support of an agency’s advocacy positions; and (3) conduct regular assessments of an agency’s advocacy efforts and evaluate the criteria for selecting which advocacies to pursue.

Premerger notification systems. Ohlhausen next discussed premerger notification, a system which qualifying transactions must be notified to, and reviewed by, the relevant competition authority. Merger review is an integral part of an overall competition enforcement system and its benefits are fairly well established, she noted. A premerger notification system provides a competition authority the opportunity to investigate and either challenge or restructure transactions that are likely to harm competition and consumers before the competitive injury can arise. Premerger notification also may result in the disclosure of more information regarding the competition authority’s merger enforcement policy and deter anticompetitive transactions from being proposed through increased transparency, Ohlhausen observed.

Although many benefits flow from premerger notification systems, it is crucial to consider the additional costs that such systems impose. She recommended that legislators and other policymakers contemplating enacting a premerger notification system would benefit from the extensive work product issued by the International Competition Network (ICN), which has members from over 120 competition agencies, including FIscalia.

The official listed three issues to consider when implementing a premerger notification. The first is the selection of appropriate thresholds for requiring a merger filing. These thresholds should be set high enough as not to impose unnecessary burdens on business or the reviewing agency. Typically, notification thresholds are based on the merging firms’ assets and sales, which are objective measures. The second consideration in selecting notification thresholds is the nexus to the reviewing jurisdiction of the transactions that must be notified. The third issue in designing a premerger notification system is the timeframe for the merger review. Merger reviews should be conducted in a reasonable and determinable timeframe. The premerger notification systems should be designed to permit notified transactions that do not raise material competitive concerns to proceed expeditiously, Ohlhausen stated.

Ohlhausen concluded by recommending that an agency enforcing a premerger notification program should engage in continual self-assessment of the program’s impact and effectiveness. Specifically, the agency should continually assess how it may speed up the review process and reduce the burden on filing parties without compromising the agency’s ability to investigate and challenge proposed transactions that will lessen competition.

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