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— Rules of the Road —
There is one important difference within the dual-track system, however: the FTC's unique ability to fight a merger simultaneously in the federal courts and in a special, in-house agency trial, known as a Part 3 process. The in-house system has long incensed FTC opponents. Now, thanks to the FTC's challenge to Whole Foods Market Inc.'s $700 million purchase of rival Wild Oats Markets Inc., that long-simmering debate has now burst into the open.
In October, the FTC began amending the rules controlling the process. That's set off a whole new round of debate, and not just from Whole Foods, now tangled in the FTC's net. Even the U.S. Chamber of Commerce has weighed in with a reaction. The FTC may rue the day it ever started the fight. When lawyers at the DOJ believe a proposed merger is going to harm consumers, they generally ask a federal judge for both a preliminary and permanent injunction, so a court holds an expedited trial on the merits of the case. A full trial gives the judge the opportunity to evaluate the evidence and arguments on both sides before deciding whether or not the agency has proved its case. The FTC, however, asks only for a preliminary injunction, arguably so it can hold a full-fledged trial on the merits before an FTC administrative law judge. If the ALJ decides the merger is likely to harm consumers, his ruling is then reviewed by the commission before the companies are allowed to appeal to an appeals court panel. The process is long -- it can easily take four years -- and generally has been used only for completed mergers, because companies who lose a preliminary injunction usually throw in the towel. Financing issues and general uncertainty surrounding a proposed merger mean companies can't hold deals together for years. So when Whole Foods' merger lawyers at Dechert LLP, led by partner Paul Denis, convinced U.S. District Court Judge Paul Friedman that the deal wasn't going to boost arugula prices, the company closed the merger. When the FTC won an appeal 11 months later and reconstituted its in-house merger challenge, Whole Foods was up in arms about the unfairness of it all. CEO John Mackey, along with lawyers and public relations experts, descended on Capitol Hill to ask lawmakers to review the differences between the FTC and DOJ's processes. While several senators asked the FTC to explain itself in a letter, the House Judiciary Committee went further, threatening to hold hearings on the disparate processes the two agencies use. "We are concerned that this disparity may not be in the best interests of promoting sound antitrust enforcement and its broad support among the business community and American citizens," Chairman John Conyers, D-Mich., and Lamar Smith, R-Texas, wrote the FTC Dec. 18. In its Dec. 23 reply, the FTC said it is directly influenced by the federal courts, and that its in-house process is not an effort to flout independent judicial review. Moreover, the FTC said the agency was created by Congress in 1914 to bring its antitrust experience to bear on refining merger law. "With its expertise and unique institutional tools, the Commission was created to be -- and continues to function as -- a forum for expert adjudication," the letter states. Whether that 95-year-old law should control merger enforcement policy at one agency will likely face congressional scrutiny. After all, what Congress gives, it can take away. Cecile Kohrs Lindell covers antitrust for The Deal. |
For years, antitrust lawyers have counseled clients that some industries face different processes at the Federal Trade Commission and its sister agency, the Justice Department's antitrust division. While the agencies share merger enforcement authority and divide the nation's industries between them, they generally apply the same standard for what constitutes an illegal merger. 
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