It is expected that 2023 is going to be a busy year in the world of Antitrust. The Federal Trade Commission and Department of Justice are getting set to release a draft of their new merger guidelines. These new guidelines will replace the current guidelines for horizontal mergers, which have been in place since 2010. The current guidelines for vertical mergers were implemented in 2020. However, those guidelines were withdrawn in September 2021, with no new guidelines introduced.
It has been a busy time at the FTC. This past November, the FTC announced a new policy statement for how it views its own authority under Section 5 of the FTC Act, which was passed in 1914. Section 5 gives the FTC ability to act in two types of cases. The first is on cases based on unfair or deceptive acts. The other is related to antitrust and unfair methods of competition.
The FTC’s policy statement broadens its scope related to the antitrust aspect of its power. The FTC, in their statement, announced they would no longer use the “Rule of Reason” standard which had been set in the case of Standard Oil vs. the United States. “Rule of Reason” means that a business practice is illegal if it unreasonably restricts trade. The new policy statement expands their scope by focusing “on stopping unfair methods of competition in their incipiency based on their tendency to harm competitive conditions.”
The new statement specifically says, “in their incipiency.” With this phrase, the FTC’s own interpretation of its powers gives it the right to investigate companies even before any anticompetitive practices have taken place or any harm has been done to the overall market. This is a major departure from how Section 5 has been interpreted under all previous administrations, including President Obama, for whom now-President Biden served as Vice President.
Another area in which the FTC has considered new rules is the area of Data Privacy. The FTC is looking into how companies gather, secure, use, and sell consumer data they collect. The proposed rules will go well beyond the current rule of asking users for consent.
The dissenting opinion among Republican Commissioners is that such a drastic change to how data privacy is handled can have a serious economic impact on both companies and consumers. They also called out the FTC for effectively creating new legislation. While the FTC is an independent agency, not part of the Executive Branch, but rather attached to the Legislative Branch, they are not empowered to create laws. Rather, it is intended to be responsive to congressional preferences. As Congress has not expressed its preference in the area of Data Privacy, significant changes to the policy may be seen as agency overreach.
2022 was not a great year for the DOJ or FTC in the courts, with the federal agencies losing a string of cases for being unable to prove their cases, or in at least two cases, US Sugar-Imperial Sugar and Booz Allen-EverWatch, having the court finding fault with the DOJ’s proposed market definition and whether it was even a proper antitrust market.
As an independent agency supposed to act on Congressional preferences, the FTC watched as the 2022 Congressional session ended with no action on antitrust after years of hearings and reports that did not lead to any legislation. Now with the 2023 Congress split between the two parties, the chance of legislative action seems even lower.
With all of the proposed changes, the lack of Congressional action, and a statement by Assistant Attorney General Jonathan Kanter, who leads the DOJ’s Antitrust division, saying they will be less likely to settle and more likely to litigate, the feeling is that the federal agencies are gearing up for a busy 2023.
Changes to guidelines in mergers and data privacy areas can directly and significantly impact how business is conducted. However, how they are enforced will depend on how the courts interpret the new guidelines. As 2023 proceeds, we will be watching the cases brought by the FTC and DOJ and how the courts interpret the new guidelines.