FTC and DOJ Hear from Public on Effects of Mergers in Agriculture, Health Care, Media and Technology Sectors

FTC and DOJ Hear from Public on Effects of Mergers in Agriculture, Health Care, Media and Technology Sectors


The Federal Trade Commission (FTC) and the Department of Justice (DOJ) recently concluded a series of public virtual listening forums to hear the testimony of individuals who “have experienced first-hand the effects of mergers and acquisitions.” . . . “1 in the food and agriculture, healthcare, media, and entertainment and technology industries. Led by Deputy Attorney General Jonathan Kanter and FTC President Lina Khan, the forums to assist agencies as they continue their ongoing efforts to revise federal merger guidelines to “better fit the modern economy” 2 and clarify what the FTC and DOJ are prioritizing as areas of focus as they move forward The selected speakers, who were almost uniformly opposed to M&A activity, and the range of new antitrust theories raised in the listening forums, reflect the willingness of the agency’s leaders to promote antitrust limits and are indicative of the current enforcement environment of the current antitrust law.

Agencies solicit input on “off-ring” stakeholder merger effects

Kanter said the listening forums were intended to help agencies broaden their understanding of how mergers affect the economy at large by listening to stakeholders who “are true experts in terms of field experience. with the impact of mergers. ” “3 Coinciding with the official public comment period launched by the agencies as part of the process of reviewing the federal merger guidelines,4 The FTC and the DOJ said the four industries that were the focus of the listening forums were selected by the agencies because “they are usually affected by mergers that can reduce competition.”5 The industries chosen are also priorities in the broader objectives of implementing the antitrust law of the Biden Administration, as stated in its “Executive Order on the Promotion of Competition in the US Economy” of July 9, 2021.6

Listening forums included opening and closing comments by Kanter and Khan. Members of the audience made comments as “invited guests” or during the “public comment” part of the session; Public comments were limited to two minutes, while guest speakers made longer statements. The process by which guest speakers and public commentators were selected by agencies is unclear. In recent public statements, FTC Republican Commissioner Noah Phillips hinted that other FTC Commissioners were not asked to contribute to the selection of speakers. Commissioner Phillips said “there is no transparency for me or the public about how the presenters [in the listening forums] – who have uniformly negative things to say – are being selected. This is in stark contrast to previous public hearings, where commissioners, in addition to the presidency, obtained information about who to speak to. “7

The conclusions of each of the four sessions are set out below, focusing on the comments and reactions of the DOJ and FTC leadership in response to the testimonies of the participants in the listening forum.8

Agriculture

During his opening remarks during the agriculture session, Khan highlighted the “key aspects of the FTC’s work” focused on promoting competition in the agricultural sector. This work includes looking at whether repair restrictions by equipment manufacturers limit options and increase costs, and enforcing antitrust laws in retail markets. Khan also praised the FTC’s efforts to partner with the Department of Agriculture and the DOJ to help “establish strong USDA rules that can strongly protect farmers’ rights under the Packers Act.” and Stockyards “.9

During the session, the FTC and the DOJ listened to ranchers, grocery stores, farmers, and other stakeholders and participants in the livestock, dairy, seed, retail, poultry, and pork markets, who witnessed how the increase in the consolidation of their industries has affected their business. . Khan expressed concern that consolidation in the industry could lead to higher costs, lower quality and poor choice, and could “allow companies to engage in business practices, such as dictating terms or engaging in discriminatory conduct.” harm competition. Kanter also highlighted exclusionary practices as an area of ​​focus for agencies as they work to revise the merger guidelines, saying he believes these practices are a “very real consequence of consolidation” that “could be used.” to exercise market power as a result “. of consolidation ”.10

Health care

Deputy Chief Prosecutor Doha Mekki opened the health care session by noting that in the healthcare industry, “concentrated market structures can harm patients downstream while harming upstream healthcare workers.”11 After witnessing nurses, doctors, pharmacists and other stakeholders, Khan said the FTC should be “adequately skeptical” of claims of efficiency regarding hospital mergers, arguing that “sometimes … “. . . Reducing costs can be at the expense of quality of care. “12 President Khan also said the agencies have been analyzing the effects of health mergers on workers and labor markets, expressing concern that the mergers are “reducing the employment opportunities of health workers, allowing employers to dictate wages. and degrade working conditions, whether in the context of pharmacy or medical context, or in the context of nurses or health workers. ” It should be noted that many of the comments refer to the corporate ownership of healthcare providers, rather than to more traditional antitrust theories.Khan also expressed interest in the effect that the vertical integration of pharmaceutical benefit managers (“PBMs”) ) has had on drug prices.

Media and entertainment

Khan opened the media and entertainment session by noting that the entertainment industry has undergone a “major transformation” in recent years, specifically in terms of distribution options and the structure of entertainment ticket markets. live, streaming content and news media. Khan talked about how the vertical integration of media companies makes large companies “control the supply chain” from content creation to distribution and allows companies to exercise market power over creators. and other market participants. Khan also described the consolidation of the news industry as a “worrying trend” that has an effect on the quality of local coverage in smaller communities. According to the testimony of musicians and writers, Khan warned that the increase in consolidation has made it easier for a small number of companies “to occupy[ing] disproportionate power in terms of how power is distributed in that country, “he said. to consumers.Kanter reiterated his belief that behavioral remedies cannot resolve anti-competitive mergers.13 noting that the terms of a merger designed to preserve competition may be difficult to administer.

Technology

Kanter opened the discussion on the effects of mergers on the technology sector by noting that “perhaps there is no more consistent issue in the application of antitrust law today than digital markets.”14 Kanter expressed concern that if diversity in digital markets is not protected, consumers will “lose their ability to exercise significant decision-making power over where they get their information” and which companies control the use of digital information. your personal data. Kanter argued that allowing “dominant” technology companies to buy nascent competitors has the effect of reducing competition and limiting innovation. This argument was questioned by the testimony of technology investors and venture capitalists, who countered that the exclusion of the opportunity for startups to be acquired by large digital companies would lead to a decrease in innovation by limiting investments in the initial phase. enabling emerging companies to develop technologies.

The testimony of small business owners addressed the difficulty (and lack of alternatives) in doing business with large technology companies that demand high rates in exchange for using their platforms, making it difficult for independent companies to make a profit. . Khan stressed that the lack of viable alternatives to these dominant platforms means that a small number of digital guardians control how consumers find restaurants, home services, healthcare and “a host of other services.”15 Finally, the discussion also addressed the difficulty parents and students have in maintaining control over student data that is routinely collected through the use of educational technology platforms.

Conclusion

The listening sessions highlighted some common areas of focus on industries that agencies are likely to prioritize in their reviews of federal merger guidelines. These include the effects of consolidation on wages and working conditions, the potential harms of vertical integration, the impact of nascent competitor acquisitions on innovation, and how mergers affect ownership of user data and free information flow. Whether the revised merger guidelines will explicitly address these issues is an open question. However, it is clear that the agencies are considering substantial changes to their merger guidelines.



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