By Jeffrey May, J.D.
Proposed "SMARTER Act" would require the FTC to follow the same procedures and adhere to the same injunction standard as the Antitrust Division when suing to block a proposed merger.
Legislation intended to align the procedures used by the FTC and the Department of Justice Antitrust Division in challenging unconsummated acquisitions and mergers has been introduced in the Senate. Sens. Mike Lee (R., Utah), Thom Tillis (R., N.C.), and Chuck Grassley (R., Iowa) have introduced the proposed Standard Merger and Acquisition Reviews Through Equal Rules Act, or SMARTER Act.
The three Republican senators also were behind the effort to harmonize the antitrust agencies’ processes in the last Congress, when a House version of a slightly different bill was passed. At that time, Grassley was the chairman of Senate Judiciary Committee. Similar efforts in prior congresses also failed to win approval of both houses. Democratic leadership opposition to the reforms suggests that the measure is unlikely to become law this year as well.
According to the senators, the SMARTER Act would fix the differing procedures and corresponding business confusion and uncertainty by requiring the FTC to satisfy the same standards that the Justice Department must meet in order to block a merger. This would include requiring the FTC to litigate the merits of contested merger cases in federal court, like the Justice Department, rather than before its own administrative tribunals.
"Both businesses and consumers deserve clarity and certainty when it comes to federal antitrust law enforcement and the SMARTER Act would create a simpler and more equal system," said Lee in announcing the proposal. "As I’ve said before, the only people that benefit from uncertainty in antitrust law are antitrust lawyers," the antitrust subcommittee chair added.
Generally, the FTC process for challenging proposed mergers is to file a preliminary injunction motion in federal court and initiate administrative litigation. The measure is aimed at changing this approach.
The proposed SMARTER Act would amend the FTC Act to change the preliminary injunction standard in FTC court hearings. The "public interest" standard imposed on the FTC is considered to be a more lenient standard than the test imposed on the Justice Department in its efforts to enjoin a transaction on the grounds that the acquisition would substantially lessen competition. The same standard imposed on the Justice Department would apply to both agencies.
Further, the measure would remove the FTC’s ability to pursue administrative or Part 3 litigation to challenge a proposed combination. Like the Justice Department, the FTC would be required to litigate challenges in court.
Recent FTC win. The bill comes just one month after the FTC successfully blocked a proposed combination of the two largest coal-mining companies in the United States pending an administrative proceeding on the merits following this very process. The federal district court in St. Louis granted the agency’s request for a preliminary injunction on September 29. In response to the FTC’s court win, Arch Resources, Inc. and Peabody Energy, Inc. abandoned the deal.
Pending hospital merger challenge. In another high-profile FTC merger challenge, the federal district court in Philadelphia just yesterday heard arguments on whether to block the proposed merger of Jefferson Health and Albert Einstein Healthcare Network pending administrative review. The government contends in the filing of its proposed findings of fact and conclusions of law that the agency has met the public interest standard warranting a preliminary injunction pending administrative review of the Philadelphia-area hospital combination.
Federal Communications Commission review. For combinations requiring Federal Communications Commission (FCC) review, the proposal would require the FCC to issue a decision within 180 days of receiving a completed merger application. "The merger review process should not invite Congress or a regulatory agency to put a thumb on the scale of a particular transaction, but instead it should enable a fair and timely system that affords due process," according to the senators. In the last Congress, the House version did not contain this language.
Companies: Arch Resources, Inc.; Peabody Energy, Inc.; Thomas Jefferson University; Albert Einstein Healthcare Network
MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews FederalTradeCommissionNews GCNNews
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