On August 26, 2022, the Federal Trade Commission (FTC) voted 3-2 to authorize two new omnibus resolutions permitting compulsory process and to revise a third, which was approved last year. These resolutions allow FTC staff to conduct investigations into key enforcement areas without first obtaining approval of the full Commission. The three compulsory process resolutions concern: (1) collusive practices; (2) the car rental industry, and (3) mergers, acquisitions, and transactions. The last category was approved by an omnibus resolution last year and was updated by this recent vote.
The FTC uses the compulsory process in its investigations through the issuance of demands for documents and testimony via civil investigative demands (CIDs) or subpoenas. The FTC Act authorizes the Commission to use compulsory process, which requires the recipient to produce information, and these orders are enforceable by courts.
According to the FTC’s press release, “[n]ot individually authorizing compulsory process in each matter removes an unnecessary and time-consuming barrier to staff’s pursuit of an investigation.” Now, only a single Commissioner needs to approve compulsory process requests in any investigation within the scope of the resolutions for the next ten years.
Below is additional discussion of the areas impacted by these resolutions that are relevant to antitrust policy.
- Collusive practices: According to the press release, “[t]he omnibus resolution governing potentially unlawful collusive and coordinated conduct will allow FTC staff to more quickly and efficiently obtain evidence in connection with investigations involving competitors working together in an anticompetitive fashion.” The FTC specifically noted that the Commission is concerned that the recent inflationary increase in prices may be giving companies cover to price collude.
- Mergers, Acquisitions, and Transactions: This resolution will allow for quick investigations of mergers, including those that fall below the value thresholds that require reporting under the Hart-Scott-Rodino Act (HSR). The previous resolution only concerned mergers and acquisitions that were subject to notification under HSR. The press release noted that “[t]he Commission’s 6(b) study on non-HSR reported acquisitions by technology companies highlighted how some of the largest firms in our economy have made hundreds of acquisitions that are not being reported to the FTC or DOJ.”
In 2021, soon after Chair Lina Khan’s appointment, the Commission adopted compulsory process resolutions on a wide range of topics. Specifically, the FTC authorized compulsory process for fifteen new topics, including, for example, repair restrictions, abuse of intellectual property, monopolistic practices, and interlocking directors and officers and common ownership.
Commissioners Noah Phillips and Christine Wilson voted against all three resolutions and issued a separate dissenting statement for the omnibus resolutions governing potentially unlawful collusive and coordinated conduct and proposed mergers, acquisitions, and transactions. In their dissent, Commissioners Phillips and Wilson first highlighted the fact that the resolutions take away “the only layer of Commission oversight concerning the use of compulsory process in the vast majority of the agency’s competition related-investigations.” They also assert that the core justification for the resolutions—expeditious investigations—is unsubstantiated, noting that the majority “fails to produce a shred of evidence that the Commission’s longstanding process causes material delays.”
Finally, Commissioners Phillips and Wilson noted that the specific explanation for revising the omnibus resolution for merger investigations—that certain deals that do not trigger HSR fly under the Commission’s radar—is also unfounded and point out that the Commission routinely has authorized investigations of non-reportable deals.
While the practical impact of these resolutions remains to be seen, businesses and individuals engaged in conduct related to these areas should be on notice that the FTC staff is able to expedite compulsory process requests, allowing for an increase in the number and scope of FTC investigations. The FTC Staff has been given a broad “hunting license”. Conduct investigations can be triggered by a complaint by a customer, supplier or competitor. Similarly, non-reportable merger investigations can be more easily initiated in response to a market participant contacting the FTC—or even a press report.
Should you have any questions about this, or any other antitrust or competition law question, please feel free to contact the attorneys listed above or your Mintz attorney.