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.