Federal Trade Commission Chair Lina Khan defended her forward-thinking approach to antitrust enforcement at an event Monday, as the agency has drawn a barrage of criticism from the business community.
“The role of the FTC is not to have our own personal philosophical beliefs about the virtues of big versus small. It’s really about the statutes,” Khan said during a question-and-answer session at the Economic Club of New York.
investment related news
“Congress, by passing antitrust statutes, was establishing a political preference, in many cases, for competition over monopoly,” Khan said. “That being said, the statutes do not prohibit being a monopoly. They only prohibit becoming a monopoly through illegal tactics. And that’s the kind of thing we look at.”
Khan later added that the FTC views mergers through the competition paradigm, “but there are certainly cases where you need to have large companies to be able to provide the types of services and the scale that we need.”
The comments come less than a week after the FTC and the Justice Department’s Antitrust Division unveiled their new merger guidelines, signaling a broader application of antitrust laws than the government has taken in the recent past. For example, the new guidelines, which are still in draft form, include acknowledgments that law enforcement may consider the impact of competition for labor in certain cases and may also weigh how a series of mergers may negatively affect competition, rather than thinking about individual mergers on their own.
While not yet finalized as the agencies take public comment, the new guidelines have already sparked backlash from the business community.
Neil Bradley, executive vice president and director of business group policy for the US Chamber of Commerce, said in a statement that the guidelines were “designed to chill merger activity, denying smaller companies access to the capital and experience they need to grow and putting US companies at a disadvantage compared to their global competitors.”
Khan noted that despite increased attention on enforcement agencies’ moves to block mergers, they still refuse to take action on the vast majority of deals.
“Any year, antitrust agencies get between 1,500 and 3,000 merger filings. Of that number, 98% go through without the agencies asking a second question,” Khan said. “So about 2% of all deals even get what’s known as a second request, which is a set of questions for us to do a deeper investigation. And an even smaller fraction ultimately results in a legal challenge.”
Khan said problems arise when there are deals “on the margins” that, in hindsight, the agencies realized led to reduced competition, prompting a “course correction.”
Khan also defended the agency’s record in court when it comes to merger cases. He said that of the 13 to 20 cases the agency has filed, based on the criteria used for counting, the FTC has lost two in federal court.
“In the scheme of our merger compliance program, losing two is fine,” Khan said, adding that the agency only brings cases that its executors believe they can win, and when that doesn’t happen, they look at how they can improve going forward.
However, even in those losses, Khan said there have been some positives in gaining more clarity on the case law. He pointed to the agency’s attempt to block Goalthe acquisition of virtual reality fitness developer Within Unlimited as an example. Although the FTC lost its bid to block the deal, Khan said the judge rejected some of Meta’s arguments about how the law should or should not be applied.
Khan also responded to a criticism of the new merger guidelines, which is that the cases the agency cites to support its draft policies are old and outdated. She said that even the cases from the 1960s and 1970s “are the ones that are still routinely cited in modern merger decisions.” That’s partly because the Supreme Court hasn’t heard merger cases nearly as often in recent decades, meaning “older law is still good law.”
He added that the updates to the merger filing form are not intended to create additional burdens for companies, but rather to speed up the FTC’s review process, rather than having to go back to the parties for more information.
Khan acknowledged that initial public offerings might be a less viable path for many companies these days, and said the agency listens and considers arguments about the business necessity of acquisitions. However, much depends on the circumstances of each case. As an example, he said, “an instance where you have a pharmaceutical deal that’s a very, very early stage acquisition of a drug is going to land differently than the acquisition of a very popular fully-fledged drug.”
Finally, Khan also addressed low morale at the agency under his leadership.
“There’s no question that when I walked in, I think a lot of people said, ‘What is she doing here?’ you know, a fraction of my age,” said Khan, the youngest president to be sworn in at the agency, at 32. “I think it’s also true that my career previously had focused on criticizing the approaches of previous administrations and the decisions that previous FTCs had made, and I can definitely see how that critic who put himself in this position could create some friction.”
“I think he could have done a much better job, and our team should have, making it very clear that such criticism was not intended to impugn the integrity or question the talent and ability of our racing staff,” he said.
SEE: How US antitrust law works and what it means for Big Tech