Divided FTC Greenlights Wide-Ranging Investigations into Anticompetitive Conduct
On August, 26, 2022, the Federal Trade Commission announced it had approved a series of “omnibus” resolutions permitting FTC staff to more freely use compulsory process (civil investigative demands or subpoenas) in investigations of alleged violations of the federal antitrust laws.1 It is no secret that the Federal Trade Commission under Chair Lina Khan has placed a heightened emphasis on enforcement of alleged anticompetitive mergers and unfair methods of competition.2 The Commissioners in favor cited flexibility and speed in investigations at time of quickly-rising consumer prices as justification for the resolutions.3 However, the omnibus resolutions drew sharp criticism from Commissioners Phillips and Wilson, who argued that the resolutions’ scope threatened the Commission’s oversight and cost-control over internal investigations. Regardless, the FTC’s policy for the next decade will be to allow expansive investigations into anticompetitive conduct.
The FTC’s Use of Compulsory Process
Under the Federal Trade Commission Act, the Federal Trade Commission (FTC) is authorized to use compulsory process – namely subpoenas and civil investigative demands (CIDs) – to obtain documents or testimony from witnesses or subjects of an investigation. To issue a CID or subpoena, FTC staff typically have to (i) obtain authorization to investigate a particular company or companies from a majority of the FTC’s Commissioners in the form of a resolution, and then (ii) receive sign-off approval for specific subpoenas or CIDs from one FTC Commissioner.4 In certain instances, the FTC will issue “omnibus” or blanket resolutions to authorize compulsory process for investigations into certain types of practices or industries. But historically, such omnibus resolutions were not used in antitrust matters, with the FTC instead relying on “case specific resolutions.”5
New Omnibus Resolutions Bless Liberal Use of Compulsory Process in Antitrust Investigations
By a vote of 3-2, the FTC voted in August 2022 to approve two omnibus resolutions (“the August 2022 Resolutions”) to allow compulsory process in investigations regarding mergers and collusive practices for the next ten years.6
Compulsory Process for Merger Investigations.
The Commission authorized compulsory process for investigations “[t]o determine whether any proposed merger, acquisition, or transaction” violates Section 7 of the Clayton Act or Section 5 of the FTC Act.7 This resolution serves to amend a near-identical resolution passed in July 2021 for transactions subject to premerger notification requirements under the Hart-Scott-Rodino Act (HSR).8 However, there is no such restriction in the amended resolution. In a statement in support of the resolutions, Commissioner Bedoya maintained that “[b]roadening the merger omnibus equips the FTC to expeditiously investigate even those deals [not subject to HSR reporting requirements] that would otherwise fly under our radar.”9 In particular, Bedoya expressed concern over deals structured “to sidestep the HSR reporting thresholds” and thus “actively subvert[s] the agencies’ work.”10
Compulsory Process for Investigations into Collusive Acts
A majority of the Commissioners likewise approved an omnibus resolution directing the use of compulsory process in investigations into collusive acts and practices, defined in the resolution as conduct “inviting, initiating, participating in, or facilitating collusion or coordination in any way with any other market participant . . . in violation of Section 5 of the Federal Trade Act.”11 According to the FTC, this resolution is necessary, in part, to address a “rising concern that the recent inflationary increases in prices may be giving companies cover to collude against the public interest.”12 On a more general level, Commissioner Bedoya’s supporting statement emphasized the effects collusive conduct might have on average consumers, arguing that such “competition harm” “warrants fast and thorough investigation by Bureau of Competition staff and strong enforcement by the commission.”13 In a statement regarding the initial merger resolution in July 2021, Chair Khan stated that streamlining investigations into mergers was necessary because “extra bureaucratic hurdles” were slowing down and hobbling investigations during a “merger boom.”
Resolutions Draw Sharp Dissent from Republican Commissioners
The vote to approve the August 2022 Resolutions was split along partisan lines with the Democrat-appointed Commissioners (Chair Khan, Commissioners Bedoya and Slaughter) voting to approve and the Republican-appointed Commissioners (Commissioners Phillips and Wilson) opposing. Commissioners Phillips and Wilson issued a scathing dissent,14 asserting that “these broad resolutions eliminate the only layer of Commission oversight concerning the use of compulsory process in the vast majority of the agency’s competition-related investigations.”15 With respect to the merger resolution, the dissenting Commissioners argued that allowing a blanket authorization for compulsory process in all merger investigations, not just those subject to HSR notification rules, would allow staff to initiate long and expensive investigations into any transaction without any sort of Commission vote.16 The dissenting Commissioners likewise viewed the collusive acts resolution as over-expansive. In particular, the Commissioners argued that – to the extent the resolution authorized investigations into a party’s “coordination in any way with any other market participant[,]” – the resolution would sanction investigations into conduct that does not violate antitrust laws (i.e., parallel conduct).17 All in all, the dissenters called the resolutions a continuation of “an ill-advised overhaul of longstanding and well-functioning (and perfectly expeditious) Commission procedures[.]”18
The August 2022 resolutions will grant FTC staff license to advance antitrust investigations through compulsory process without approval from the Commission. This is by design to allow the Bureau of Competition “to enhance the Commission’s ability to quickly investigate emerging threats of anticompetitive conduct in the economy.”19 Time will tell whether these new processes will enhance antitrust enforcement or lead to greater waste or abuse in agency investigations.
1Press Release, Federal Trade Comm’n, Federal Trade Commission Authorizes Three New Compulsory Process Resolutions for Investigations (Aug. 26, 2022).
2F.T.C., Strategic Plan for Fiscal Years 2022-2026 13-14 (2022)
3F.T.C., Statement of Commissioner Alvaro M. Bedoya, Joined by Chair Lina M. Khan and Commissioner Rebecca Kelly Slaughter (Aug. 17, 2022).
415 U.S.C. § 57b-1; 16 C.F.R. § 2.71(a)
5Howard Morse & Sarah Swain, Defending the Federal Trade Commission Consumer Protection Investigations: A How-to-Guide, 31 Antitrust 26 (2017).
6Press Release, Federal Trade Comm’n, Federal Trade Commission Authorizes Three New Compulsory Process Resolutions for Investigations (Aug. 26, 2022). The FTC also approved a resolution authorizing compulsory process for investigations relating to unfair and deceptive acts and practices in the car rental industry.
7F.T.C., Resolution Directing Use of Compulsory Process in Nonpublic Investigations of Proposed Mergers, Acquisitions, and Transactions (Aug. 26, 2022).
8Press Release, Fed. Trade Comm’n, FTC Authorizes Investigations into Key Enforcement Priorities (July 1, 2021).
9F.T.C., Statement of Commissioner Alvaro M. Bedoya, Joined by Chair Lina M. Khan and Commissioner Rebecca Kelly Slaughter (Aug. 17, 2022).
11F.T.C., Resolution Directing Use of Compulsory Process in Nonpublic Investigations of Collusive Practices (Aug. 26, 2022). Section 5 of the FTC Act prohibits “unfair methods of competition.” 15 U.S.C. § 45(a)(1).
12See supra note 1.
13See supra note 9.
14F.T.C., Dissenting Statement of Commissioners Noah Joshua Phillips and Christine S. Wilson Regarding the Issuance of Two Omnibus Compulsory Process Resolutions (July 1, 2021)
15Id. at 2.
16Id. at 3.
17Id. at 4.
19See Note 9, supra.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.