November 2, 2015 - The full text of this article is below, or click here to access our library. 

Commission Meeting Set for Today at 3pm

Today at 3pm, the Federal Trade Commission is set to meet for consideration of an enforcement action in a nonpublic Part II matter. The timing, and the lack of other high-profile merger reviews nearing HSR deadlines, indicates that the meeting may be to consider a recommendation to challenge Staples/Office Depot.

That said, there are reasons to believe the Commission meeting may be unrelated to the controversial office supply merger. Per the parties’ current timing agreement with the FTC, the Commission has agreed to issue a decision on the deal by December 8, 2015, just over 5 weeks from today. Additional time would serve to further strengthen the FTC’s eventual litigation position, and, it is not clear that the FTC has an incentive to vote out a complaint well in advance of December 8.

In addition, given reports that Staples has offered a fix, BC Director Debbie Feinstein in particular, would likely push to use additional time to vet offered remedies, rather than rush forcefully into litigation. And finally, other items on the FTC's enforcement agenda, which could require a Commission meeting, include various pay-for-delay matters, or non-reportable transactions.

Antitrust and the 2016 Elections

With the 2016 presidential election in full swing, below we offer stakeholders an opportunity to explore how politics are affecting merger enforcement in the U.S.

A quick look at the politics of Pfizer/Allergan.  In our previous articles on the politics of inversions, we noted that it would take a big household name to pursue an inversion through merger for the politics to ratchet up to the point that Congress and/or the White House would intervene to rewrite the tax code to address the issue.  Pfizer, currently based in New York, is a big enough name to create a political backlash.  We would expect negative headlines and policy developments from the following key players:

1. Presidential Candidate Hillary Clinton: We expect Senator Clinton to come out forcefully against the Pfizer/Allergan combination.

2. President Obama, U.S. Treasury, and the IRS: Stakeholders should expect a statement and IRS regulations targeting earnings stripping.

3. New York Governor Andrew Cuomo and Attorney General Eric Schneiderman: We expect Governor Cuomo and AG Schneiderman to come out against the merger, or to at least demand substantial commitments from the company regarding jobs and spending in New York.

4. Senator Chuck Schumer: Senator Schumer’s statement regarding the Pfizer/Allergan merger was less negative than expected.   At once, he denounced inversions broadly, but he also pointed out that only legislation could fully stop them, which may be accurate, but is not the most effective way to threaten this particular deal.  If Senator Schumer turns his focus to scuttling the Pfizer/Allergan merger, it would be a major development, but his spokesperson has signaled a more neutral posture than expected.

Further, the intense political scrutiny of the ongoing drug pricing saga only exacerbates the political risk to Pfizer in the Allergan merger.

Current Ideological Spectrum of U.S. Antitrust Enforcement

Presidential politics more likely to impact pending mergers at the FTC. The major near-term takeaway for stakeholders is that political influence is more likely to affect mergers at the FTC because FTC Chairwoman Edith Ramirez’ current position is more politically sensitive than that of decision-makers at the DOJ.  Further, the DOJ’s approach is already more in line with the aggressive and thorough approach that the Democratic presidential candidates and outside influencers are demanding.

Where decision-makers fall on the ideological spectrum. Perhaps the best way to lay out the current tensions among antitrust enforcers is to show why it makes sense to group some of the key players together on an ideological spectrum, with Secretary Clinton and Senator Sanders pushing Obama-appointed Democratic enforcers—AAG Bill Baer and Commissioners Brill, McSweeney, and Ramirez—to the left.  None of the Republican front-runners have yet weighed in with clear statements on an antitrust platform.  Should Senator Rubio or Senator Cruz win the presidency, either candidate would be expected to appoint enforcers at the DOJ and FTC that would be very conservative and non-interventionist on antitrust issues.

McSweeney’s drift left isolates Ramirez. Looking at the spectrum, FTC Chairwoman Ramirez finds herself somewhat isolated and forced to choose between a voting bloc to her left—Brill and McSweeney—and Commissioner Ohlhausen on her right.   Sources also indicate that Chairwoman Ramirez is interested in a federal judgeship after her time at the FTC, but it is increasingly likely that time may run out before Ramirez could be nominated by her former Harvard Law School classmate President Obama, and confirmed by the Senate.  To the extent that Chairwoman Ramirez hopes to curry favor with the likely Democratic presidential nominee, it would appear that the Chairwoman would have political incentive to embrace a more pro-enforcement approach through the rest of her tenure.

Feinstein’s approach to enforcement contrasts with DOJ leadership’s approach. Stakeholders should also continue to view FTC Bureau of Competition Director Debbie Feinstein as a key player in antitrust enforcement.  Feinstein will become even more influential with the expected departure of BC Deputy Director Stephen Weissman, who is widely viewed as a pro-enforcement voice.  Importantly, sources suggest that Feinstein’s views on enforcement are increasingly at odds with the direction of the DOJ’s enforcement and the clearly stated positions of the Democratic presidential candidates. 

Unlike McSweeney, Brill, and Baer, according to a source, Feinstein is unmoved by a recent study by Northeastern University economics professor John Kwoka that calls into question antitrust agencies’ reliance on remedies.  Further, Feinstein also vigorously defends even the most questionable remedies—including Hertz/Dollar Thrifty and Albertson/Safeway —as smart enforcement decisions.  According to multiple sources, Feinstein has also shown far less interest than DOJ in exploring issues involving vertical market power.  Stakeholders should view Feinstein’s ultimate departure back to private practice as a significant moment for the ideological direction of the FTC and of antitrust enforcement more broadly.

The Democratic presidential candidates. Senator Sanders and Secretary Clinton are pushing Democratic policymakers and enforcers to the left by calling for a broader lens through which to view the harm of concentrated economic power, and for more action from antitrust enforcers.  Stakeholders should look to Senator Sanders’ positions on issues involving concentrated industries and should expect him to position himself to the left of Secretary Clinton at some point on antitrust enforcement specifically.

Clinton embraces antitrust, pushed by research studies, articles, and op-eds. Secretary Clinton’s campaign has issued two statements, and a number of studies and newspaper items are gaining traction with Clinton’s economic team.  To get a feel for team Clinton’s newfound interest, we suggest reading these recent op-eds, statements, and articles: Clinton op-ed in Quartz; Clinton’s statement on Aetna/Humana and Anthem/Cigna mergers; Washington Post Opinion by Lina Khan calling for a bolder antitrust agenda; Wall Street Journal article highlighting USC study and data on concentration; and a weekend editorial in the New York Times piggybacking on Khan’s opinion piece and the USC study.

Sanders’ record on monopoly issues. Examples of Senator Sanders’ recent positions on concentrated industries include: he wants to break up the banks and re-impose Glass-Steagall; he advocated for breaking patents on pharma using executive authority; he advocated blocking Comcast-TWC; he asked the FCC for data on broadband because cable rates are way too high (and he may support rate regulation); he called for regulating Uber; and he pushed for a price cap on monopolistic FCC prison telecom providers.

Walgreens Rite Aid Conference Call Transcript

On October 30, The Capitol Forum hosted a call on the Walgreens/Rite Aid merger. The full transcript, which has been edited slightly for clarity, can be accessed by clicking here.

Editor’s note: Data as of 12:30pm ET on November 2nd.