DOJ moving at ‘full speed’ while FTC stays in holding pattern

14 November 2017 9:34am

By Kirk Victor Originally published on FTC:Watch on November 13, 2017

It didn’t take long for Makan Delrahim to make a first impression.

Less than two months into his new gig as head of the Justice Department’s antitrust division, Delrahim is off to a fast start, backed by a full slate of seasoned deputies, making waves and even ruffling feathers.

In recent days the Delrahim-led division has been all over the news, stunning veteran practitioners by reportedly demanding that AT&T divest Turner Broadcasting System or its DirecTV division before it will approve the company’s proposed $85.4 billion merger with Time Warner.

The overwhelming consensus among antitrust lawyers has been that this tie-up would easily be greenlighted, like a hot knife through butter. After all, it’s a vertical merger and, as AT&T is quick to point out, not one such deal has been blocked in more than 40 years.

While this move, by itself, has rocked the usually staid antitrust world, Delrahim also made news by stressing his commitment to international engagement to the point of promising to boost resources in that area even in a time of budget austerity.

Delrahim, in remarks at New York University School of Law last month, also noted that one of his first decisions after being nominated in March — and well before his confirmation in September — was to reach out to law professor Roger Alford of Notre Dame University to become the international deputy assistant attorney general.

Other deputies also were installed before his confirmation — principal deputy Andrew Finch started in April and was acting assistant attorney general until Delrahims’s confirmation in September; Donald G. Kempf in June; Luke Froeb in July; Alford and Barry Nigro in August.

Delrahim also has aired his skepticism of behavioral consent decrees and pledged to review the roughly 1,400 consent decrees on the books for their continuing relevance because his role is a “law enforcer, not a regulator through consents.”

What made this flurry of activity even more noticeable was its contrast to the Federal Trade Commission, the other agency with antitrust jurisdiction. Only two of the commission’s five seats are filled, and their occupants are short-timers: acting Chairman Maureen Ohlhausen and Democratic Commissioner Terrell McSweeny.

President Donald Trump had ignored the agency until last month when he stated his intention to nominate Joseph Simons for the permanent chairmanship and Rohit Chopra, a Democrat, to another vacant seat. Inexplicably, as of Nov. 13, the White House still had not formally nominated them — meaning that it may not be until next year that the Senate votes on their confirmations.

Meanwhile, McSweeny, whose term ended last September, continues to serve until Simons (who is nominated for her seat) is confirmed. Similarly, Ohlhausen, whose term ends next September, also stays on as acting chairman until Simons comes on and then she returns to being a commissioner unless she decides to leave the agency.

Also, unlike Delrahim’s deputies at the DOJ, Bruce Hoffman, the acting director of the FTC’s Bureau of Competition, and Thomas Pahl, the acting director of its Bureau of Consumer Protection, may or may not be retained once the new chairman takes office.

Some longtime followers of the FTC worry that it’s at a disadvantage during this interregnum period as the Justice Department, with its full complement of leaders, can move more boldly.

“The antitrust division is going full speed ahead,” Stephen Calkins, a law professor at Wayne State University and former FTC general counsel said in an interview. “They have their team and their leader. He is setting his priorities.”

Meanwhile, Calkins noted that Ohlhausen “is at best somebody who is in the long run just one commissioner, and she may be stepping down altogether. So she doesn’t have the same clout.”

“So, sure, people who care about the relative pecking order of the FTC versus the Justice Department — people who care about the FTC — have to be sad that the FTC is going to be spending more time playing second fiddle than would have been the case if it had been treated more sensibly by the Trump administration,” he said.

Even so, Calkins said in a follow-up e-mail that “Joe Simons is bright, energetic and experienced. He’ll have to play some catching up on the FTC’s relative profile, but I’m confident that he will make that a priority. There’s no reason to think he can’t generally succeed, although much will depend on the cases the two agencies bring.”

Former FTC Chairman William Kovacic disagreed that Delrahim’s push on the international front will give the antitrust division an advantage, though he acknowledged the slowness of filling the FTC seats can take a toll.

“Among the world’s antitrust agencies, the FTC’s Office of International Affairs, headed by Randy Tritell, is preeminent,” he wrote in an e-mailed response. “Acting Chairman Ohlhausen also is well-known and highly respected in these groups. For these reasons, the FTC’s program abroad carries on without a loss of effectiveness.”

“That said, the process of waiting for Joe Simons to complete the confirmation formalities creates some uncertainty overseas as the counterparts of the United States speculate about what he will do as the FTC’s chairman,” Kovacic added. “The sooner you have the permanent leadership team in place, the better, because it eliminates any questions about whether current policies are likely to endure.”

Steven Cernak, of counsel at Schiff Hardin, agrees that uncertainties in leadership at the FTC create some short-term problems.

“Prior to the announcement on Joe Simons, Maureen was acting, but she was still the acting chairman. She was in charge. Now you know she is a short-timer,” he said in an interview.

“To the extent the audiences, especially outside the United States, are listening to the [antitrust] agencies, I think they are listening to Makan as the new permanent. He’s been confirmed. He’s going to be the guy around as compared to Maureen, whom everybody likes and respects, but she is going to be gone soon,” Cernak added.

Former FTC Chairman Timothy Muris dismisses the notion that the FTC is at a disadvantage. “Maureen has done a great job and if Joe is confirmed by early next year, I just don’t see why there is any disadvantage,” he said in an interview.

But another longtime antitrust practitioner pointed out that “you can see the new head of the antitrust division flexing his muscles, with a very skilled group of people who have been on the other side of deals who are now his politicals. He can flex his muscles in a way that is hard to do if you are not presidentially nominated and Senate-confirmed.”

That strength has played out in the reports about the demands that Delrahim is making on AT&T as a prerequisite to approve its Time Warner deal. It’s difficult to imagine an acting division leader would proceed with quite this aggressiveness in a high-stakes negotiation.

His stance has surprised veteran antitrust practitioners, who simply didn’t see this proposed tie-up exploding into a contentious battle that could even wind up in court.

The acrimony and reported demands by the government for divestitures also have led to speculation that politics may be a factor in the government’s tough stance, given President Trump’s biting critiques of CNN, which is a part of Turner Broadcasting, and his vow to kill the proposed deal during last year’s presidential campaign.

That speculation prompted Delrahim to put out a statement that he “has never been instructed by the White House” on the deal.

Still, antitrust lawyers are airing plenty of skepticism.

“It’s too bad,” one wrote in an e-mail. “I can see real antitrust issues that a behavioral remedy might be needed to fix. I don’t get what antitrust issues would be fixed by a structural remedy. Maybe I’m missing something so I’m anxious to see an antitrust explanation. Because if we don’t get one, this looks like a political move, not a legal one. And certainly it’s being reported that way and, right now, I don’t have a better explanation. And that would be too bad for antitrust law.”

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