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Is Antitrust Agnostic? Enforcement in Markets With Outsized Implications for Society, Health, and Vulnerable Groups

In this podcast episode, AAI President Diana Moss and enforcement experts, Stephen Calkins and Benjamin Elga, unpack antitrust enforcement in markets involving products that have outsized implications for society, human health, and vulnerable groups. We call these markets with high social impact. Antitrust enforcement is designed to deter and remedy harmful, anti-competitive mergers and conduct while remaining agnostic to the markets in which competitive concerns arise. But there are some markets where higher prices might beneficially reduce demand for products or services that have adverse effects on society or human health, such as cigarettes, sugar, or violent video games. Similarly, antitrust could be more aggressive, in some cases, to protect vulnerable consumer groups. Lifeline wireless service and prison inmate calling services are leading examples. This episode approaches the issue from both the public and private enforcement perspective. We ask how enforcers think about cases involving such markets, examine the policy implications of enforcement choices, and discuss other competition policy tools that are available to address them.

 

MODERATOR:

Diana Moss, President, American Antitrust Institute

 

GUESTS:

Stephen Calkins is Professor Law at Wayne State University. A former General Counsel of the Federal Trade Commission and member of The Competition Authority of Ireland, Calkins has testified before Congress and federal and state agencies; is a prolific author of books and articles in leading academic and specialty journals; and recipient of numerous awards.

Benjamin Elga is Executive Director of Justice Catalyst and Justice Catalyst Law. His focus is on impact litigation and innovation in legal practice. Previously, Ben worked to bring antitrust and consumer class actions at Cuneo Gilbert & LaDuca, resulting in the recall of thousands of defective cars and the return of unfairly depressed nurse wages.

 

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AAI Supports California Insurance Customers in Monopolization Case Against Dominant California Hospital System (Sidibe v. Sutter Health)

AAI has joined with the Committee to Support the Antitrust Laws (COSAL) to submit an amicus brief in the Ninth Circuit Court of Appeals arguing that a district court erred by refusing to permit a class of insurance customers who lost a monopolization case against a dominant hospital system to introduce contemporaneous evidence of the hospital system’s intent to restrain trade and by failing to account for well-established industry dynamics when defining health insurance markets.  

In Sidibe v. Sutter Health, a class of businesses and individuals claimed to have paid inflated health insurance premiums after a dominant hospital system in California, Sutter Health, began to insist on systemwide contracts with insurers. Until 2002, insurers negotiated with Sutter hospitals individually when they assembled their provider networks, but after 2002 Sutter began insisting on systemwide contracting, under which an insurer could not contract with Sutter hospitals in concentrated, “must-have” geographic markets unless they also contracted with Sutter hospitals in competitive markets. The plaintiffs alleged that the move to systemwide contracting, and certain provisions in the contracts, violated Section 1 of the Sherman Act as well as the State of California’s antitrust law, the Cartwright Act.

Although Sutter settled a similar case brought by a different class of plaintiffs and the California Attorney General, it litigated the Sidibe case to a jury verdict and won. On appeal, the plaintiffs argue, among other things, that the district court erred by prohibiting the plaintiffs from introducing contemporaneous evidence of Sutter Health’s intent when it developed and formed the challenged contracting practices in the late 1990s and early 2000s. The court prohibited the introduction of any evidence prior to 2006.

The plaintiffs also argue that the district court erred by allowing the jury to determine on its own whether to consider the likely response of insured patients to price increases, and the role of Kaiser Permanente, which provides services only to its own members and not to independent insurers, in assessing Sutter’s market power.

The COSAL/AAI amicus brief argues that the district court erred as a matter of law in refusing to permit the jury to hear or see any contemporaneous evidence about “the history of the restraint and the reasons for its adoption,” which the Supreme Court has recognized as relevant factors in determining whether a restraint is unreasonable under the Sherman Act. Moreover, such evidence carries even more weight under the Cartwright Act, because the Cartwright Act applies a different legal standard. It recognizes a contract as illegal if it “has as its purpose oreffect an unreasonable restraint of trade.” An anticompetitive purpose is a stand-alone basis for liability.

The brief also argues that applicable Circuit precedent, including the St. Luke’s case, recognizes a two-stage model of competition in the healthcare industry. First, providers such as Sutter Health compete for inclusion in health insurance plans. Second, providers seek to attract patients, primarily on a non-price basis because insured patients are largely insensitive to price. The district court therefore should have focused the market-definition inquiry on the likely response of insurers to a price increase by a hypothetical monopolist. The court should not have permitted the jury to consider evidence about the response of insured patients, nor hypothetical competition from Kaiser Permanente, which does not sell provider services to independent insurers.  

The brief was written by Kristen Marttila and Joseph Bourne of Lockridge Grindal Nauen PLLP, which served as counsel to COSAL. AAI Vice President of Legal Advocacy Randy Stutz and AAI Extern Mathew Simkovits assisted.



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AAI Urges 9th Circuit to Give Direct Evidence of Anticompetitive Effects Due Credit on Summary Judgment (Innovative Health v. Biosense)

AAI has filed an amicus brief asking the Ninth Circuit Court of Appeals to overturn an award of summary judgment to a defendant on market-definition grounds despite direct and unambiguous evidence of anticompetitive effects.  

In Innovative Health v. Biosense, the defendant, Biosense, manufactured a leading cardiac mapping system used by hospital cardiologists to create a visual map of the human heart. In addition to making and selling the system, called the “CARTO 3,” Biosense also provides clinical support services (including trained technicians) to operate the system, and it sells single-use, sensor-enabled catheters that the system uses to perform the heart-mapping procedure.  

The plaintiff, Innovative, is a “reprocessor.”  After Biosense’s new, disposable catheters have been used in a procedure, Innovative reprocesses the catheters and offers them for sale to hospitals at a discount, in competition with Biosense. Innovative’s reprocessed catheters are FDA-approved as substantially equivalent to new catheters.

For years, Biosense provided clinical support services to its CARTO 3 customers without regard to where they purchased their CARTO 3 catheters, but in 2014 it initiated a new policy whereby it refused to provide clinical support services to hospitals unless they purchased their catheters from Biosense. Innovative brought an aftermarket tying claim, alleging a violation of Section 2 of the Sherman Act. It presented direct evidence that, before the policy change, competition between Biosense and reprocessors established a benchmark price for CARTO 3 catheters, and after the policy, hospitals ceased purchasing from reprocessors. All reprocessors were eliminated from the market and the price of catheters increased substantially and sustainably above the price that had prevailed under competition. Although alternative cardiac heart-mapping systems are available for sale, Biosense did not lose catheter sales despite the price increase. 

Notwithstanding Innovative’s direct evidence, the district court granted summary judgment to Biosense on grounds that Innovative failed to adequately establish a legally cognizable relevant market. It held that Innovative alleged a “single-brand market,” and that such markets are disfavored. While it allowed that single-brand markets are permissible in “rare and unforeseen circumstances,” it would not recognize one here because Innovative did not establish that competition in the foremarket for mapping systems does not discipline competition in the aftermarket for catheters.

The AAI brief argues that direct evidence of anticompetitive effects suffices to create a triable question on the issues of both market power and a relevant market. If a plaintiff can show anticompetitive effects, there is at least a question whether it can show market power, because anticompetitive effects cannot be caused other than by a firm exercising market power. And if a firm has market power, there is necessarily some identifiable relevant market in which the power exists. Summary judgment on market definition grounds is therefore categorically inappropriate in direct-evidence cases, or at least in cases where, as here, the evidence is unambiguous and retrospective in nature.  

The brief also argues that the district court erred by (1) giving the burden of proof to the plaintiff to disprove the disciplining effect of foremarket competition, and (2) defining the aftermarket as a “single-brand” market despite the presence of interbrand competition.  The Supreme Court’s Kodak decision makes clear that, under Matsushita, direct evidence establishes at least a reasonable inference of market power and therefore shifts the burden of proof to the defendant to show that competition in the foremarket disciplines competition in the aftermarket. Kodak also makes clear that horizontal competition occurring among independent firms selling differentiated products and that generates beneficial consumer welfare effects is interbrand competition, notwithstanding that it is aftermarket competition.

The brief was written by AAI Vice President of Legal Advocacy Randy Stutz, with assistance from AAI Extern Mathew Simkovits, who is a student at Stanford Law School. Several AAI Advisory Board members also provided assistance.

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AAI Highlights Analysis of Billion-Dollar Mergers in Support of Filing Fee Proposal in the Merger Filing Fee Modernization Act of 2022 (H.R. 3843)

Today, AAI sent a letter to Speaker Pelosi and Minority Leader McCarthy regarding H.R. 3843, the Merger Filing Fee Modernization Act of 2022. The letter notes AAI’s support for the proposal to delineate new categories of merger filing fees for billion-dollar mergers that are outlined in Title 1, Section 101(1)(D)(4-6), “Modification of Premerger Notification Filing Fees.” AAI recently released the white paper, What Does the Billion-Dollar Deal Mean for Stronger Merger Enforcement? The findings in the AAI paper strongly support the proposal in H.R. 3843 for more specificity in filing fees for billion-dollar mergers and additional agency resources. Additional resources are needed to enable the U.S. Department of Justice Antitrust Division and the Federal Trade Commission to review and investigate billion-dollar deals, which have an outsized impact on enforcement and associated implications for the allocation of scarce agency resources.

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Countervailing Power: Why It Cannot Save Local Newspapers or Competition

In this episode, former AAI Vice President of Policy Laura Alexander discusses the concept of countervailing power and the controversial role it plays in antitrust and competition law with NYU Associate Professor Daniel Francis, one of the leading voices on this subject. The idea that otherwise unlawful cartels, mergers, and collaborations should be allowed between companies facing a monopolists or monopsonists across the bargaining table is a tantalizing perceived solution to counteract the very real problem of persistent market power. Deploying such countervailing power, however, is also fraught with serious risks for competition and consumers. As Francis explains, such collaborations rarely improve competition or minimize the impact of market power on consumers, but do often lock-in or increase existing market power and slow innovation. The conversation starts with an overview of the concept of countervailing power as an antitrust and competition tool, and then goes on to discuss the Journalism Competition and Preservation Act, a bill being considered by the Senate that would apply countervailing power principles to create an exception to the antitrust laws for news organizations bargaining with large tech companies. Finally, the episode concludes with a discussion of why countervailing power remains a persistent idea in antitrust circles, despite its tension with antitrust’s longstanding commitment to competition.

 

MODERATOR:

Laura Alexander, Former Vice President, American Antitrust Institute 

GUESTS:

Daniel Francis is an Assistant Professor of Law at NYU. He writes and teaches about regulation and competition — including antitrust, constitutional, and other rules that affect competition — with a particular interest in dynamic and high-tech markets. Francis previously served in the antitrust arm of the Federal Trade Commission as Senior Counsel, Associate Director for Digital Markets, and ultimately Deputy Director. 

 

 

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New AAI Analysis Unpacks What Billion-Dollar Deals Mean for Stronger Merger Enforcement

Today, AAI released the new white paper: What Does the Billion-Dollar Deal Mean for Stronger Merger Enforcement? The Biden Administration’s antitrust chiefs have committed to invigorating merger enforcement. The white paper makes a strong case for why the remarkable growth in the size of mergers over time should be a major factor in the agencies’ calculus for managing risk and allocating scarce resources as they develop and implement a program of more vigorous enforcement. The white paper explains why the billion-dollar merger plays a unique, major role in both early- and late-stage enforcement. Billion-dollar deals feature prominently in the universe of mergers that the agencies challenge, supporting the notion that large mergers generally pose a greater likelihood of raising competitive concerns. Moreover, billion-dollar transactions account for an outsized proportion of illegal mergers that are settled, versus resolved through other means such as forced abandonments, restructurings, and injunctions. The white paper examines the implications of these, and other findings, for agency decision-making, with major takeaways and recommendations for addressing the impact of the billion-dollar merger on a program of stronger merger enforcement.

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FERC v. the Biden Executive Order: Reversing Course on Competition in the Energy Sector?

A number of executive agencies have made visible progress toward promoting the goals of competition under the mandate of the July 2021 Executive Order (EO), Competition in the American Economy.[1] While it is important to recognize successes under the Biden EO to date, it is also vital to flag areas of concern. One is recent federal policy that directly affects competition in wholesale electricity and natural gas pipeline markets, the effects of which are felt keenly by U.S. energy consumers. This commentary highlights Federal Energy Regulatory Commission (FERC) policies that appear to have de-prioritized competition principles. For an agency that has focused closely and successfully on competition for decades, these developments should be a flag for the Biden Administration to continue to encourage sector regulators, antitrust authorities, and other agencies to work together to promote competition.

I.   Federal Energy Market Regulation and the Biden Executive Order

The 1990s and 2000s were watershed decades for competition in the U.S. energy sector. Fundamental changes in economics and technology opened a window for the Federal Energy Regulatory Commission (FERC) to re-think regulatory oversight of wholesale energy markets. This era brought forth major regulatory rulemakings and inquiries designed to promote competition in electricity generation and transmission, and natural gas transportation. Such initiatives benefitted consumers and spurred innovation while helping promote the reliability and security of critical energy supplies and infrastructure.

Since the 1990s and 2000s, there have been significant changes in the structure and organization of energy markets that emphasize the importance of an ongoing FERC commitment to competition principles. For example, consolidation has increased concentration in many critical energy markets. It has also resulted in vertical integration between a broader array of market participants, including natural gas pipelines, electricity generation and transmission, and electricity and gas distribution. Moreover, the role of private equity, which flies below the competition enforcement and policy “radar,” has increased significantly in the energy sector. These changes all affect strategic competitive incentives for building new transmission and pipeline infrastructure.

After 25 years of careful and largely successful efforts to weave competition principles into the oversight of energy markets, FERC’s commitment to promoting competition appears to be wavering. Troubling developments signal that the Commission may be moving away from, or abstaining from opining on, issues where competition principles are critical. For example, a FERC proposal in a major rulemaking on electricity transmission swerves away from competition. And the agency continues to delay decisions on important competition issues surrounding certification of new natural gas pipeline facilities.

These developments create a tension, if not outright conflict, with the Biden Administration’s prioritization of competition as a top line policy issue. The Biden EO recognizes that industries have consolidated and competition “has weakened in too many markets.” The EO sets forth a whole-of-government approach that is “necessary to address overconcentration, monopolization, and unfair competition in the American economy.”[2] The Biden EO names FERC, among other federal agencies, as holding the authority to protect conditions of fair competition, for example, by “…promulgating rules that promote competition…”[3] In implementing a whole of government approach, the EO envisions cooperation and coordination between FERC, the U.S. Department of Justice and Federal Trade Commission, and other agencies with energy policy and competition mandates. In what follows, we discuss FERC’s historical commitment to competition and two major FERC initiatives where, as a matter of policy, it appears to have been deprioritized, in direct opposition to the mandate in the Biden EO.

II.  FERC’s History of Promoting Competition in Energy Markets

During the era of energy market restructuring, FERC promulgated a number of landmark orders and inquiries recognizing changes that supported opening markets to more competition. These include, among others, an open access framework for electricity transmission (Order No. 888), Regional Transmission Organizations (Order No. 2000), allocation of transmission costs and generator interconnection (Order No. 1000), open access to natural gas pipeline transportation (Order No. 636), and certification of new natural gas pipelines (Docket No. PL99-3).[4] In addition to these major initiatives, FERC worked to promote competition “rules of the road” through policies on standards of conduct, information transparency and access, federal reporting requirements, and market monitoring.

The Commission thus spent decades promoting competition, at the same time it responded to changes in energy technology, energy price volatility, climate change and energy efficiency priorities, and state-level regulation affecting regional and local markets. Most of the Commission’s major pro-competition efforts survived judicial review, relatively intact. It is against this backdrop that more recent developments have competition advocates questioning the current direction of the Commission’s stance on competition.

For example, FERC has taken up two recent regulatory initiatives under the Biden Administration that appear to subjugate or even reverse course on competition, and the Commission’s statutory mandate to promote it. To be clear, both initiatives tussle with the interface between competition, expanding and modernizing energy infrastructure, ensuring reliability, and addressing climate change. These are heavy lifts, to be sure, but competition remains central to achieving these goals.

III.  FERC’s Proposal to Eliminate Competition Principles for Deciding on New Transmission Facilities

One recent initiative that raises concerns about the Commission’s commitment to promoting competition is a proposal to update rules for regional transmission planning and cost allocation and generator interconnection. That is FERC’s notice of proposed rulemaking (NOPR), Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generator Interconnection (RM21-17), issued in April 2022.[5] The NOPR acknowledges that the difficult and controversial nature of allocating costs of new transmission facilities serves as a barrier to development. This is especially true of regional transmission facilities. To overcome the problem, FERC proposes to re-instate a federal “right of first refusal” for building new transmission facilities for purposes of cost allocation. Moreover, this right of first refusal would be conditioned on an incumbent transmission provider establishing joint ownership of proposed transmission facilities.

FERC’s NOPR would change policy on new transmission that has been in place for over a decade. In 2011, the Commission eliminated the federal right of first refusal for new transmission in its landmark Order No. 1000. This was done expressly for the reason that the right of first refusal had the “…potential…to discourage investment by nonincumbent transmission developers…” The Commission emphasized that it was important to “…‘consider and evaluate, on a non-discriminatory basis, possible transmission alternatives and produce a transmission plan that can meet transmission needs more efficiently and cost-effectively.’”

If adopted, the effect of FERC’s new proposal on the federal right of first refusal will be to give large, incumbent, vertically integrated utilities first dibs on building new regional transmission facilities, without considering alternative, competitive proposals from entities such as independent transmission developers and others. Vertically integrated utilities often enjoy significant market power in wholesale markets, with strong incentives to operate their transmission systems in ways that foreclose competition and ultimately harm consumers. Indeed, regulatory initiatives launched by the Commission in the 1990s and 2000s were designed expressly to address this market power problem.

Even worse, FERC’s proposal would condition the federal right of first refusal on joint ownership of new transmission facilities, promoting collaboration between parties that could well be competitors. Such arrangements would facilitate collusive agreements, whereby the participants to a joint venture agree not to compete and divide up monopoly profits from new transmission projects. Reinstating the right of first refusal would therefore revert the industry to an era that prompted the Commission’s landmark competition initiatives.

IV.  FERC’s Abstinence on Updating Competition Policy on Affiliate Precedent Contracts as Evidence of Need for Natural Gas Pipeline Facilities

A second major initiative that raises concerns about the Commission’s commitment to promoting competition is the agency’s stalled effort to update its policies for certification of interstate natural gas pipeline facilities. Had the effort proceeded, updated policy would have addressed a major competition concern in the Commission’s 1999 policy statement.[6] That is, relying almost exclusively on agreements between the developer of a new pipeline project and shippers that have a corporate affiliation with that developer, as evidence of need for new facilities. Such “affiliate precedent” agreements have the potential to facilitate regulatory evasion or what is also known as self-dealing.

For example, an agreement between an affiliated natural gas pipeline developer and regulated distributor with a common profit interest can create the incentive to inflate input costs. Such inflated costs would likely go undetected by regulators and be passed on to ratepayers of the regulated entity in the form of higher prices.[7] Regulatory evasion of this kind can stifle competitive discipline and raise prices in consumer product markets. For that reason, it has been a longstanding concern of antitrust enforcement and regulation and has arisen in a variety of applications, including: Fresenius Medical Care AG & Co; Entergy-Koch Gulf South Pipeline Company LP; Okeechobee Lateral Pipeline Project; Florida Southeast Connection; and Constitution Pipeline.[8]

The D.C. Circuit also addressed regulatory evasion involving FERC’s pipeline certification policy in Environmental Defense Fund v. FERC.[9] There, the court found the Commission’s reliance on affiliate precedent agreements as evidence of need to be arbitrary and capricious, noting “…evidence of ‘market need’ is too easy to manipulate when there is a corporate affiliation between the proponent of a new pipeline and a single shipper who have entered into a precedent agreement.”[10]

FERC’s policy initiatives to address the adverse competitive implications of affiliate precedent agreements have stumbled. For example, in 2018 FERC issued a notice of inquiry, Updated Policy Certification of New Interstate Natural Gas Facilities (PL18-1-000),[11] to evaluate various public interest factors for determining whether a new interstate natural gas transportation project is required.[12] This notice of inquiry languished under the Trump administration[13] but in early 2021, FERC revived the inquiry under the Biden Administration,[14] took public comment, and issued an updated policy statement in early 2022.[15]

In the updated policy statement, the Commission explained that the 1999 policy statement “…‘noted concerns associated with relying “primar[ily]” or “almost exclusively” on contracts to establish need for a new project’….”[16] and, therefore, that the Commission would “…consider all relevant factors reflecting on the need for the project.”[17] However, the updated policy statement went on to state that since the 1999 policy statement was issued “…in practice, the Commission has relied almost exclusively on precedent agreements to establish project need [emphasis added].”[18] The 2022 updated policy statement would have provided needed clarification to ensure the Commission looks at evidence beyond affiliate precedent agreements to assess project need.[19] However, in an about-face only a month later, the Commission converted the policy statement to a “draft” policy statement.[20]

Notwithstanding that this decision put the updated policy statement in limbo, such that it can have no legally binding effect on either the Commission or the industry, the Commission has neither amended nor re-issued the draft statement since the public comment period on the draft policy statement closed months ago. As shown in the figure below, 23-years of inaction on updating pipeline certification policy thus appears to have come full circle, with the 1999 policy statement remaining in force despite significant changes in the industry and competition concerns around some public interest factors surrounding certification of new pipeline facilities.

V.  Conclusion

While other executive agencies under the Biden Administration have made visible progress toward promoting the goals of competition, FERC seems to be moving in the other direction. Proactive policies that are divorced from competition principles and a lack of action to codify policies to promote competition in energy markets work against the interest of consumers. Rather than sacrificing competition, the Commission should look to less harmful and more innovative policy approaches for promoting reliable, secure energy supply and infrastructure and the welfare of energy consumers. To the extent the Biden Administration is working closely with sector regulators to implement the EO, a conversation with FERC is overdue.

[1] Executive Order on Promoting Competition in the American Economy, The White House (Jul. 9, 2021), at § 1, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.

[2] Id. at § 2(g).

[3] Id. at § 2(d)(iii).

[4] Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888 (1996), 75 FERC 61,080; Regional Transmission Organizations (Order No. 2000), (2000), FERC ¶ 61,201; Transmission Planning & Cost Allocation by Transmission Owning & Operating Pub. Utils., Order No. 1000 (2011), 36 FERC ¶ 61,051; Pipeline Service Obligations, and Revisions to Regulations Governing Self-Implementing Transportation Under Part 284 of the Commission’s Regulations, Order No. 636 (1992), 59 FERC ¶ 61, 030; and Certification of New Interstate Natural Gas Pipeline Facilities, Statement of Policy, (1999), 88 FERC ¶ 61,227.

[5] Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generator Interconnection, Notice of Proposed Rulemaking (2022), 179 FERC ¶ 61,028.

[6] Supra note 4.

[7] See, e.g., Michael H. Riordan and Steven C. Salop, Evaluating Vertical Mergers: A Post-Chicago Approach, 63 Antitrust L.J. 513 (1995). See also, Richard P. O’Neill, Natural Gas Pipelines, in Network Access, Regulation and Antitrust (D. Moss ed., 2005).

[8] 552 F. Supp. 131, 226-34 (D.D.C. 1982); 109 F.T.C. 167 (1986); KGaA and Daiichi Sankyo Company, Ltd No. 081-0146 (F.T.C. Sept. 15, 2008); In re Entergy Corporation ad Entergy-Koch LP, Case No. C-3998 (Jan. 31, 2001); See, e.g., Gavin Bade, FERC splits again on affiliates, climate in Florida pipeline approval, utilitydive.com, Jun. 5, 2018; Florida Southeast Connection LLC, et al. (2016), 154 FERC ¶61,080; and Constitution Pipeline Company, LLC, and Iroquois Gas Transmission System, LP (2014), 149 FERC ¶ 61,199.

[9] Environmental Defense Fund v. FERC, 2 F.4th 953, 976 (2021). See Brief of the American Antitrust Institute, Environmental Defense Fund v. Fed. Energy Reg. Comm’n, Nos. 20-1016, 20-1017 (Consolidated) (9th Cir. filed July 3, 2020).

[10] Id. at 973.

[11] Certification of New Interstate Natural Gas Facilities, Notice of Inquiry (2018), 163 FERC ¶ 61,1042. See, Comments of the American Antitrust Institute, Certification of New Interstate Natural Gas Facilities, Notice of Inquiry (2018), 163 FERC ¶ 61,1042.

[12] 15 U.S.C. 717f.

[13] Executive Order 13771—Reducing Regulation and Controlling Regulatory Costs (Jan. 30, 2017), https://www.govinfo.gov/content/pkg/DCPD-201700084/pdf/DCPD-201700084.pdf.

[14] Certification of New Interstate Natural Gas Facilities, Notice of Inquiry (2021), 174 FERC ¶ 61,125.

[15] Certification of New Interstate Natural Gas Facilities, Updated Policy Statement on Certification of New Interstate Natural Gas Facilities (2022), 178 FERC ¶ 61,107.

[16] Id. at P. 53.

[17] Id.

[18] Id. at P. 54.

[19] Id.

[20] Certification of New Interstate Natural Gas Facilities (Docket Nos. PL18-1-001) and Consideration of Greenhouse Gas Emissions in Natural Gas Infrastructure Project Reviews (Docket No. PL21-3-001), Order on Draft Policy Statements (2022), 178 FERC ¶ 61,197.

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AAI Sets Record Straight on Unfounded Accusations of Biased Decision-Making in FTC Administrative Proceedings (Axon v. FTC)

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. 


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Toxic Cocktail or Essential Device for Protecting Competition: Recent Developments in the Empirical Study of Antitrust Class Actions

In this podcast episode, AAI Vice President of Legal Advocacy Randy Stutz talks with two experts who have led pioneering empirical research into antitrust class actions, Rose Kohles and Josh Davis. Stutz talks with Kohles and Davis about the Huntington Bank and UC Hastings “2021 Antitrust Annual Report: Class Action Filings in Federal Court,” and how empirical research into antitrust class actions might challenge the entrenched views of both tort-reform advocates and class-action proponents.  The three discuss previous efforts at empirical study of antitrust class actions prior to the Annual Report, which is now in its fourth edition (5:00), the type and nature of empirical data that is available and collected in the Annual Report and the role of class-action policy debate in shaping empirical study more generally (10:10), how empirical data may inform new arguments that support or refute various arguments on different sides of class-action debates (17:43), whether empirical data could inform legal arguments or judicial decision-making in court, including in the issuance of fee awards (25:37), whether empirical data might suggest legislative or other class-action reform proposals (32:32), and interesting developments reflected in the most recent edition of the Annual Report, covering data from 2009-2021 (36:54). 

The 2021 Antitrust Annual Report, published in May 2022, is available for download on SSRN. 

The AAI-UC Hastings Commentary on the Annual Report is available for download on the AAI website.

The latest edition of AAI’s biannual Class Action Issues Update, which reviews and discusses recent case-law and other important developments affecting antitrust class actions, is also available on the AAI website.

MODERATOR:

Randy Stutz, Vice President of Legal Advocacy, American Antitrust Institute

GUESTS:

Rose Kohles, Vice President, National Settlement Team, Huntington National Bank

Josh Davis, Research Professor in Residence, UC Hastings College of Law, and Shareholder, Berger Montague

 

 

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AAI Advisor Bill Comanor Joins Antitrust Bulletin Symposium Issue With Article on “The Antitrust Revolution”

AAI Advisor Bill Comanor contributed an article to the Antitrust Bulletin symposium issue (Antitrust Bull., 2020, Vol. 65(4)) in recognition of The Antitrust Revolution (John Kwoka and Lawrence White, eds.), in its seventh edition. Comanor’s article notes that the Antitrust Revolution of the early 1980s arose from various intellectual currents, including specifically the growing acceptance of modern game theory. Its greatest impact, however, lay in the development of revised standards for merger policy. From ones which employed largely a set of per se standards, they rapidly evolved into those more compatible with the Rule of Reason. Large horizontal mergers were routinely approved, and concentration levels in major industries soared. Although efficiency levels were sometimes enhanced, there is little evidence that consumers generally benefited in the form of lower prices. As a result, the new merger policy may have contributed to the observed growing inequality in U.S. distributions of income and wealth.