FTC's new stance: Litigate, don't negotiate
FTC Chair Lina Khan has a warning for Big Tech companies and other would-be dealmakers: she'll sue to stop anticompetitive mergers rather than negotiate settlements with companies.
Why it matters: This approach will likely change the strategy for companies pursuing mergers and acquisitions. They'll have to work out for themselves in advance whether they need to sell or spin off parts of their business to win regulators' approval.
Driving the news: In an interview with Axios Tuesday, Khan said the pattern of companies coming to the FTC with illegal deals and expecting agency staff to spend months working to "fix" them through divestiture or other means is not happening under her watch.
- "That is not work that the agency should have to do," Khan said. "That's something that really should be fixed on the front end by parties being on clear notice about what are lawful and unlawful deals."
- Khan said the agency hasn't banned the current approach, in which companies try to meet FTC requirements under the terms of a consent decree. But, she added, "We're going to be focusing our resources on litigating, rather than on settling."
Context: Khan joins Justice Department antitrust chief Jonathan Kanter in her skepticism of government-led merger settlements, signaling a greater willingness from both of the administrations' antitrust enforcers to sue to stop acquisitions.
- In a speech early in his tenure as head of the antitrust division, Kanter warned he prefers lawsuits to stop problematic deals rather than government-led fixes.
Between the lines: Critics of the new approach say the current model — an agency-supervised process with an ongoing consent decree — gives the government more power to preserve competition than an off-the-books process done by the companies themselves.
- In a speech criticizing the Biden administration's broader approach to merger enforcement, Republican FTC Commissioner Noah Phillips said the new strategy provides cover for agency heads who do not want to be associated with "clearing" deals.
- "As a result, the public loses out on the protections that a consent agreement provides," Phillips said. "Only agency heads, who get to avoid the appearance of blessing mergers, gain."
The big picture: Nearly one year into her tenure as chair, Khan has overseen 20 merger enforcement actions, including nine consent decrees and five complaints.
- Chip supplier Nvidia abandoned its $40 billion acquisition of U.K. chip designer Arm after the FTC sued to block the deal.
- Amazon closed its acquisition of Hollywood studio MGM after the time period for the FTC's review of the deal expired without the agency taking action.
What's next: Khan declined comment on the Amazon-MGM deal, but noted the agency said at the time it could "challenge a deal at any time if it determines that it violates the law."
- With Alvaro Bedoya confirmed to the FTC, Khan has the Democratic majority she may need to push through new guidelines for mergers with the DOJ and rules on privacy and unfair methods of competition.
What to watch: Khan told Axios the FTC will be extra wary when it comes to transactions involving areas where there is growing adoption of emerging technologies, such as smart home technologies and virtual reality.
- Those represent opportunities for new competitors to emerge, but that competitive threat also means the major players will try to extend their power into new platforms, she said.
- "In as much as we are seeing some of the existing incumbents gain positions in some of these next-generation technologies, including through acquisitions, that's something that we have to be extremely vigilant about," Khan said.