Ohlhausen says study shows FTC’s in-house court isn’t pre-ordained to find liability

29 March 2017 12:22pm

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29 September 2016. By Curtis Eichelberger.

The US Federal Trade Commission's in-house court may not be as biased as some in the antitrust bar believe it is, the agency's Republican commissioner said Thursday.

Commissioner Maureen Ohlhausen took a close look at 145 cases from January 1977 to July 2016 that the FTC voted to send to its own administrative court. These so-called 'Part 3' proceedings are heard by the agency's administrative law judge, who issues a decision that can be appealed by either side to the agency's commissioners and, if necessary, on to a US appeals court.

Some have criticized the FTC's use of the internal proceeding because of the frequency with which the process results in a ratification of the agency staff's decisions — even when the ALJ rules against the staff. Such rulings can be overturned on appeal to the agency's commissioners.

Ohlhausen's study excluded cases resolved by consent before the full commission issued a liability decision on appeal, and those that challenged mergers if the commission dismissed the case after a federal court denied the agency a preliminary injunction.

"The popular narrative is that the Commission always finds liability," Ohlhausen said a conference* Thursday in Williamsburg, Virginia. "What the study showed, however, was that this only holds true for a very limited time period and group of cases."

If you look at the past four decades, the commissioners ruled in favor of the company or individual in nearly one-third of Part 3 complaints, Ohlhausen said. For just antitrust cases, the Commission ruled for the company or individual in 40 percent of the cases — but did so in only nine percent of consumer protection matters.

If one considered just decisions on the merits — not for changes of facts or law, or other reasons such as the public interest — the commission has favored the company or individual in 16 percent of all cases, and 24 percent of antitrust cases, she said.

"What this tells us is that the Commission does not always impose liability and that high-level statistics, particularly if limited in time or scope, can obscure the underlying reality. We should be cautious in extrapolating grand principles from aggregate data," she said.

Ohlhausen acknowledged that in the past decade, the FTC has found liability in 11 of 12 Part 3 cases it considered on the merits. She said the high win-rate wasn't the result of a stacked deck, but instead an indication of the FTC's care in selecting cases.

In the late 1980s to mid-1990s, the FTC won at the appeals courts only about 50 percent of the time. In the past decade, that has increased to 100 percent.

"This suggests that the Commission's recent record of bringing fewer cases but finding liability more often is not a failure in due process or pre-ordained decisions, but rather improved case selection on issues of import to antitrust law development," she said in her prepared remarks, citing the FTC's recent cases against ProMedica, McWane, and the North Carolina Board of Dental Examiners.

In ProMedica, the US Court of Appeals for the Sixth Circuit affirmed the Commission's decision to unwind a consummated merger of two hospitals in northwestern Ohio. In doing so, it confirmed the commission's approach regarding cluster markets and how it defined the geographic market.

In McWane, a monopolization action over ductile iron pipe fittings, the Eleventh Circuit affirmed the Commission's liability finding. And in NC Dental, where the FTC won both its appeal before the Fourth Circuit and the Supreme Court, the case narrowed the state action doctrine that shields potentially anticompetitive actions from antitrust review, she said.

Fewer but faster

When Congress established the FTC in 1914, it wanted the agency to serve as an expert antitrust body, so it empowered the commission to try cases and render decisions. In this way, the FTC would help to develop antitrust laws, and as an independent agency be less subject to politics, Ohlhausen said.

In reviewing cases over the past four decades, Ohlhausen saw a drop in Part 3 cases in recent years, and said cases tend to be resolved much more quickly through Part 3 now than in the past.

From 1997 to 2006, Part 3 cases played an important role in the evolution of the law, Ohlhausen said.

Although the FTC lost its case against Schering-Plough before the Eleventh Circuit, "that case helped establish the circuit split that the Supreme Court ultimately resolved in the Commission's favor with Actavis,'' she said.

Polygram — where the FTC challenged a joint distribution agreement between Polygram and Warner and was affirmed by the D.C. Circuit — "serves as a key decision for joint venture law, and the evolution of the analytical continuum between per se and rule of reason analysis."

The FTC has argued seven cases before the Supreme Court in the past 30 years, according to Ohlhausen's research. The court upheld the FTC in six of them. Of the seven, five were brought by the Commission through Part 3.

"Based on this record and a review of the individual cases, Part 3 has clearly helped the Commission fulfill its mission as Congress intended — to enforce, adjudicate, and develop the antitrust laws," she said.


Ohlhausen has said in the past that the FTC should use Part 3 when seeking to develop more novel questions of antitrust law, rather than going to the federal courts. To that end, she recently voted against the FTC's case over alleged pay-for-delay agreements related to the pain drugs Opana ER and Lidoderm, because she thought it would be more appropriate to bring those cases via Part 3. The FTC's other commissioners, though, preferred federal court, where the agency can seek disgorgement.

Ohlhausen expressed concern that since 2012, when the Commission withdrew its policy statement on disgorgement, the agency has neglected to fully use Part 3.

"I believe we missed important opportunities to use the Commission's expertise in adjudicating the cases in Part 3, with review by the appellate courts," she said.

The commissioner said she hopes her study will eliminate misperceptions.

"My in-depth study of Part 3 should help allay concerns that the Commission's decisions are pre-ordained to find liability," Ohlhausen said. "I hope that with increased knowledge of the Commission's record of administrative adjudication, we will bring cases on the cutting edge of antitrust law more frequently in Part 3."

*ABA Antitrust Masters Course VII, Williamsburg, Va., Sept. 29-Oct. 1, 2016.

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