Federal Trade Commission Chairwoman Lina Khan defended her progressive approach to antitrust enforcement at an event Monday as the agency drew a barrage of criticism from the business community.
“The FTC’s job is not to have its own personal philosophical beliefs about the merits of big versus small. It’s really about the statute,” Khan said during a Q&A session at The Economic Club of New York.
“Congress, when it passed antitrust laws, in many cases established a policy preference for competition over monopoly,” Khan said. “That said, the statute doesn’t prohibit being a monopoly. It only prohibits becoming a monopoly through illegal tactics. And that’s how we look at it.”
Khan later added that the FTC views mergers through a competition paradigm, “but there are certainly cases where you need large firms to be able to provide the types of services and the scale that we need.”
The remarks come less than a week after the FTC and the Justice Department’s antitrust division revealed theirs new guidelines for mergers, which signaled a broader application of antitrust laws than the government had enacted in the recent past. For example, the new guidance – which is still in draft form – includes an acknowledgment that enforcement agencies may consider the impact of competition on the workforce in certain cases and may also consider how a series of mergers may adversely affect competition, rather than considering individual mergers in isolation.
Although not yet finalized as the agencies receive public comments, the new guidelines have already drawn opposition from the business community.
Neil Bradley, executive vice president and director of policy for the U.S. Chamber of Commerce trade group, said in a statement that the guidelines were “designed to moderate merger activity that will deny smaller companies access to the capital and expertise they need to grow and put American businesses at a disadvantage against their global competitors.”
Khan noted that despite increased attention to enforcement moves to block mergers, they still refuse to take action on the vast majority of deals.
“Each year, antitrust agencies receive between 1,500 and 3,000 merger applications. Of that number, 98% pass without further questions being asked,” Khan said. “So about 2% of all deals will even get what’s known as a second demand, which is a set of questions so we can do a deeper investigation. And an even smaller fraction will eventually result in a legal challenge.”
Khan said problems arise when there are deals “on the fringes” that, in the agency’s hindsight, have led to reduced competition, necessitating a “course correction.”
Khan also defended the agency’s record in court when it comes to merger cases. She said that of the 13 to 20 cases the agency has filed — depending on the criteria used to count — the FTC has lost two in federal court.
“Within our merger enforcement program, losing two is OK,” Khan said, adding that the agency only brings cases where its enforcers think they can win, and when they don’t, they look at how they can improve in the future.
Even in those losses, however, Khan said there were some upsides in getting more clarification from the case law. She pointed to the agency’s attempt to block it Target‘with acquisition of virtual reality fitness developer Within Unlimited as an example. Although the FTC lost its attempt to block the deal, Khan said the judge rejected some of Meta’s arguments about how the law should or shouldn’t be applied.
Khan also responded to criticism of the new merger guidelines that the cases the agency cites to underpin its policy proposals are old and outdated. She said even cases from the 1960s and 1970s “are cases that are still commonly cited in modern merger decisions.” That’s partly because the Supreme Court hasn’t heard merger cases as often in recent decades, meaning “old law is still good law.”
She added that the updates to the merger filing form are not intended to create additional burdens for the companies, but rather to speed up the FTC’s review process rather than having to go back to the parties for more information.
Admitting that IPOs may be a less viable path for many businesses these days, Khan said the agency hears and considers arguments about the commercial necessity of acquisitions. However, much depends on the circumstances of each case. As an example, she said, “the case where you have a pharmaceutical business that is an acquisition of a very, very early drug is going to turn out differently than an acquisition of a fully established, very popular drug.”
Finally, Khan also addressed low morale in the agency under her leadership.
“There’s no doubt that when I walked in, I think a lot of people were like, ‘Huh, what’s he doing here?’ you know, a fraction of my age,” Khan said the youngest chairwoman to be sworn into the agency, at age 32. “I think it’s also true that my career has previously been focused on criticizing the approaches of previous administrations and the decisions that have been made by previous FTCs, and I can certainly see how this critic being put in this position could cause some friction.”
“I think I could have done, and our team should have done, a much better job of making it clear that these types of criticisms were in no way intended to impugn the integrity or challenge the talents and skills of our career employees,” she said.
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