Featured Expert Contributor, Antitrust & Competition Policy—U.S. Department of Justice

Anthony Swisher

Anthony W. Swisher is a Partner in the Washington, DC office of Baker Botts L.L.P. Mr. Swisher serves as the WLF Legal Pulse blog’s Featured Expert Contributor on Antitrust & Competition Policy—U.S. Department of Justice.


A recent Ninth Circuit decision shines a light on an unusual characteristic of the U.S. antitrust enforcement system. The question addressed by the court in FTC v. Axon is whether Axon can challenge as violative of constitutional due process the United States’ antitrust dual-enforcement system in which some mergers are reviewed by the Department of Justice (DOJ) and some are reviewed by the Federal Trade Commission (FTC).

One of the peculiarities of the U.S. antitrust enforcement scheme is the division of enforcement responsibility between the Antitrust Division of DOJ and the FTC. This division was something of an historical accident stemming from the creation of the FTC in 1914, some 24 years following passage of the Sherman Act in 1890. DOJ had a 24-year head start on the FTC in antitrust enforcement, but since passage of the FTC Act, with some limitations, the two agencies largely split antitrust enforcement duties. In particular, both agencies enforce Section 7 of the Clayton Act, the country’s principal antitrust merger statute.

Beyond the initial merger screening exercise under the Hart-Scott-Rodino (HSR) Act, only one agency can investigate any given merger. Which agency reviews which deal is not always obvious, however. To take healthcare as an example, not all healthcare-related deals are reviewed by one agency. Recently, hospital mergers have tended to go to the FTC, including such recent examples as Jefferson/Einstein, Advocate/North Shore, and Penn State Hershey/Pinnacle. This is not a hard-and-fast rule, however. DOJ just recently concluded its own challenge to a hospital transaction, settling a case that challenged the partial acquisition by Geisinger of Evangelical Community Hospital in central Pennsylvania. Stretching back further in time, DOJ also has a long history of investigating and challenging hospital mergers. Health plan matters typically go to DOJ, such as recent challenges to Anthem/Cigna and Aetna/Humana. Pharmacy benefit managers historically were the province of the FTC, but two recent deals that involved a combination of a PBM and a health plan both went to DOJ, which took the lead on CVS/Aetna and Cigna/Express Scripts.

Which agency gets which deal may not even be clear to the agencies themselves. It is not unusual for multiple days of the HSR Act-mandated 30-day waiting period to slip away while the agencies debate among themselves which one will get to review a particular deal. The results of that internal bureaucratic struggle can have significant consequences.

The split in antitrust enforcement has both substantive and procedural implications for merging parties. Antitrust enforcement, like all law enforcement, necessarily involves judgments by enforcers about where to direct scarce enforcement resources, what theories to apply, and which matters warrant investigation or challenge. Different agencies may reach different decisions on these questions as a natural result of the fact that reasonable minds can differ, and people of goodwill sometimes reach different conclusions on the same facts. As we have written about previously, even within the same administration, officials at one agency or the other may take sharply different approaches to antitrust enforcement, which has the potential to affect the outcome of a merger’s review. Just recently, for example, although not a merger matter, DOJ weighed in on the FTC’s case against Qualcomm, urging the district judge, should she find in the FTC’s favor, to carefully consider the remedies to be imposed.

Procedurally there are differences as well. The standards for obtaining a preliminary injunction differ between the two agencies. To obtain a preliminary injunction the DOJ must show that a merger is likely to harm competition. The FTC, by contrast, must only show that “the merger raise[s] questions going to the merits so serious, substantial, difficult and doubtful as to make them fair ground for thorough investigation, study, deliberation and determination by the FTC in the first instance . . . .” In essence, after a substantial investigation (pre-challenge merger investigations often last a year or more), the FTC must only show that it needs even more time to investigate. The FTC also has available to it an administrative process that, in the rare instances in which it is employed, can expose merging parties to lengthy litigation in front of an administrative law judge and the FTC itself before getting the opportunity to appeal to an Article III court.

Which set of rules the parties to a merger are subject depends not upon an objective, identifiable set of guidelines, but upon which agency is able to wrest the investigation away from the other. The Ninth Circuit’s Axon decision addresses interesting constitutional questions about this split in the U.S. antitrust enforcement system. Facing an FTC challenge to a completed merger, Axon sued the FTC alleging that the clearance process used to decide which mergers get reviewed by the FTC and which get reviewed by DOJ is an unconstitutional due process violation. Axon similarly raised a due process objection to the FTC’s administrative process, “which combines investigatory, prosecutorial, adjudicative, and appellate functions within a single agency.” (Slip op. 12-13.)

Axon’s merger clearance due-process claim, which the Ninth Circuit called “superficially appealing,” argued that the split in antitrust enforcement between the FTC and DOJ leads to arbitrary distinctions between which firms find themselves in front of which agency. The Ninth Circuit ultimately upheld the district court decision dismissing Axon’s complaint for lack of subject matter jurisdiction. Essentially, the court held that Axon would have sufficient judicial review in due time. “Axon can present its constitutional claims to this court after the conclusion of the FTC enforcement proceedings. That is enough under Supreme Court precedent.” (Slip op. at 18.) Axon has petitioned the Ninth Circuit for en banc review of the panel’s decision.

But regardless of whether Axon’s claim rises to the level of presenting a valid constitutional claim, it raises again important questions about the wisdom of a dual-approach antitrust enforcement system. Under the current system, whether a company ends up at DOJ or the FTC depends, substantially, on the whim of the agencies and which decides to review a particular deal. Whether or not this is a constitutional question, it is not good governance.

Fundamentally, there is no reason to have the two-agency antitrust enforcement system that we have today. If one were creating an antitrust enforcement system from scratch, the current two-agency system would unlikely be one’s first choice. Whatever political factors led to splitting enforcement between the FTC and DOJ in the first instance have long since passed. Procedurally, the FTC downplays the differences in injunction standards between itself and DOJ and does not seem to rely on its administrative litigation process as a key component of its merger enforcement (the vast majority of FTC cases are decided at the preliminary injunction stage without resort to follow-on administrative litigation). As we have previously discussed, it seems unlikely that the FTC needs a lower preliminary injunction standard than DOJ to prevail in its merger challenges. Substantively, it does not serve good antitrust enforcement to have dueling agencies taking different positions on significant matters of antitrust policy. Public disputes among enforcement officials over antitrust remedies, or the efficacy of the consumer welfare standard, do not serve the public interest in clear, consistent antitrust enforcement.

None of these policy questions were in front of the Ninth Circuit in Axon. They, like Axon’s constitutional claims, will have to wait for another day. As we wait, it is interesting to note that the Ninth Circuit made one particularly fascinating comment that will bear future attention. In a footnote, the court left open the possibility that a future constitutional challenge based on the FTC/DOJ clearance process could possibly proceed. The court noted that, “[h]ad Axon brought its clearance process claim early in the investigation, before the enforcement proceeding began . . ., Axon might have had a stronger case for district court jurisdiction.” (Slip op. at 29, n. 11.) The court left the door open for a potential future constitutional challenge to the historical anomaly that is the U.S. antitrust enforcement system. Whether a merging party seizes upon this opportunity remains to be seen.