| Randy Stutz, Laura Alexander
FTC, Mergers, Section 7 of the Clayton Act, Public Enforcement
AAI has filed an amicus brief in the U.S. Supreme Court pushing back against unfounded defense claims offered to bolster Due Process and Separation of Powers critiques of FTC administrative process.
In Axon v. FTC, the FTC brought an administrative case challenging a consummated merger between Axon and its closest competitor. Axon countered by bringing suit in federal district court seeking to enjoin the FTC’s administrative case on grounds that FTC administrative process is unconstitutional. Both the district court and the Ninth Circuit dismissed Axon’s constitutional claims for lack of jurisdiction, and Axon petitioned for certiorari both on the question of whether federal district courts have jurisdiction to hear constitutional challenges to administrative proceedings and on the merits of its constitutional claims. The Supreme Court granted cert on the jurisdictional question but not the merits.
On certiorari, Axon argues that the merits of its constitutional claims support its jurisdictional arguments. It therefore introduces numerous merits issues. Among other things, Axon asserts that merging parties are better off if their deals are cleared to the DOJ for review rather than to the FTC; that the FTC and DOJ inappropriately apply different standards and procedures in merger review; and that the FTC is biased in favor of complaint counsel, as evidenced by a 25-year “winning streak” during which the Commission has always ruled for complaint counsel on appeal of decisions from the Commission’s in-house Administrative Law Judge.
The AAI brief shows that these allegations, which are echoed by numerous amici supporting Axon, are unfounded. First, the brief explains that, empirically, merging parties are not better off if their deal is reviewed by the DOJ rather than the FTC. Most mergers are cleared without a Second Request or challenge, but among those that are not, the DOJ, during the last two decades, issued Second Requests and challenges to a significantly higher percentage of merger transactions cleared to it than did the FTC.
Second, Axon’s argument about different procedures and standards ignores the empirical reality that the overwhelming majority of the FTC’s litigated merger challenges are litigated in federal court, not administrative proceedings. The FTC typically litigates only consummated mergers in administrative proceedings, which is appropriate given that consummated mergers pose unique remedial challenges well suited to resolution in administrative proceedings.
Third, the “winning-streak” argument was thoroughly debunked in a peer-reviewed study conducted by Commissioner Ohlhausen in 2016. Not only is the winning-streak argument inaccurate for failing to count several dismissals of complaint counsel during the relevant time period, but it ignores the fact that the FTC’s win rate on appeal of its in-house administrative proceedings in federal circuit court is even higher than its win rate in the in-house proceedings themselves, which strongly suggests its decisions reflect the merits of the small subset of cases that reach the final-adjudication stage of administrative proceedings rather than proof of bias. The argument also ignores several relevant aspects of administrative process that tend to ensure only meritorious cases reach the final-adjudication stage, including the role of pre-complaint investigatory tools that generate substantial discovery, which often leads to either settlements or investigation closures before cases can be counted in “streaks.”
The brief was written by AAI Vice President of Legal Advocacy Randy Stutz, with assistance from AAI Vice President of Policy Laura Alexander and AAI Intern Zechun Pei, who is a student at Vanderbilt Law School. Several AAI Advisory Board members also provided assistance.
