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Rosch: FTC should give up merger duties

by Lisa Allen in Washington and Bill McConnell  |  Published March 7, 2012 at 9:56 AM
The Federal Trade Commission's lone Republican, J. Thomas Rosch, said Congress should cut the agency's budget and hand off some of its duties -- including perhaps some merger review -- to state attorneys general.

FTC Chairman Jon Leibowitz, meanwhile, warned that cuts could have significant impacts, delaying FTC reviews of second requests and potentially impacting the agency's ability to protect consumers.

The opposing views were offered as the two testified late Monday before a House Appropriations Committee subcommittee on financial services and general government, which is to recommend the FTC's budget for 2013.

President Obama's $300 million budget for the FTC called for a $11.6 million reduction from 2012.

The launch of the Consumer Financial Protection Bureau, which is supposed to take over some of the FTC's duties on bank financial issues, has some Republicans calling for a bigger cut in the FTC's budget.

The FTC, like a number of agencies, could also face further cuts if Congress is unable to agree on how to reduce the deficit, leading to automatic federal cuts -- called sequestration -- that would kick in next year.

Rosch, who has announced he will not seek another FTC term when his current one expires in September, not only endorsed a reduction reflecting the shift in duties to the CFPB, but said that the country's "period of real austerity" prescribes a need for the FTC to cut back further and start handing off duties where it can.

"We are now in the midst of an austere time, and the Fed says that we're going to be until at least 2014. So prosperity is not around the corner," he said.

He called identity theft a criminal act and suggested that investigating it should be something the states take over. Perhaps most surprisingly, he also called for giving states some antitrust duties, including possibly merger reviews.

"There is no question we are getting more second requests [for information regarding mergers] and that they are more voluminous than what we used to have," he said. "What we ought to be doing is handing off some of this to the states. There are state attorneys general well able to handle the task."

While unlikely to be acted on, Rosch's suggestions indicate how severely budget cuts could hamper the agency's ability to do its many jobs. Leibowitz warned any further reduction of FTC staff could leave consumers and businesses in a lurch.

During his tenure, Rosch has been unusually outspoken for a commissioner and willing to suggest ideas not likely to be embraced by his colleagues. At the same time, he is someone who has spent most of his life as an antitrust litigator, and has been a defender of antitrust enforcement generally, putting him at odds with some members of his own party. He elaborated on his ideas in an e-mail to The Daily Deal on Tuesday.

Rosch told The Daily Deal he would prefer that the FTC hand off some of its consumer protection activities rather than competition activities. However, if the FTC becomes deluged with competition investigations, some merger obligations might need to be relinquished as well, he said.

"Since we don't have criminal enforcement powers, it makes sense to me to have the states and local authorities who do have such powers take the laboring oar respecting identity theft, leaving to us only our current consumer educations programs and security breach law enforcement activities. Ditto respecting anything else that is really a crime."

Regarding mergers, "To the extent that we are really getting deluged with documents, I would be willing to hand them off to the states, too. I have seen the states too often 'free-ride' on the Department of Justice or the FTC in merger cases. I see no reason why the lack of a [merger review] statute should keep the states from doing merger work."

Rosch said states can challenge consummated deals as well as the federal antitrust agencies can. Similarly, they can also handle unconsummated deals by asking merging parties not to close during a period for investigation and try merger challenges in court if they determine it should be stopped.

While regrettable, Rosch said, the agency might have little choice but to cut back its activities if its budget situation is dire.

"I do think -- particularly if we end up under sequestration or with a reduction -- we're just not going to be able to do the things you want us to do," he told the lawmakers. "And that means it's going to be slower bringing up cases or reviewing documents.

"Most mergers actually don't go to second request," he noted, but when they do, "we have to look at on average 1.5 million documents. If you want us to be as effective as we've been -- and I think there's bipartisan consensus that we have been pretty effective -- it would be tough to do that with a smaller budget."

Leibowitz and Rosch were asked by congressmen about the FTC's review of Express Scripts Inc.'s $29.1 billion deal to acquire rival pharmacy benefit manager Medco Health Solutions Inc., but both generally declined comment other than saying that they were meeting with proponents and opponents of the deal.
Tags: Federal Trade Commission | FTC | J. Thomas Rosch | Jon Leibowitz

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