Saturday, 1 October 2011

FTC vs. Justice Department

"This Takeover Battle Pits Bureaucrat vs. Bureaucrat," in the WSJ says

Many antitrust lawyers believe that several deals that were approved by the Justice Department during the Bush administration—including Whirlpool Corp.'s purchase of Maytag Corp. and the merger of Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc.—would have been challenged by the FTC. Whirlpool and SiriusXM declined to comment, as did the two agencies....

Some methods used to resolve agency disputes belie the stakes involved. In addition to the most recent coin toss—which several people familiar with the matter said the Justice Department won—the agencies have employed the "possession arrow" system borrowed from college basketball, in which they take turns.

How else might the agencies decide who should analyze a given merger proposal?


  1. It is clear that both agencies continue to fight over who gets to take whcih case.
    One key difference is that Department of Justice can bring cases only to federal court, whereas FTC cases can go through an internal administrative law procedure, which can sometimes yield a quicker resolution. One factor to decide who gets to analyze a given proposal merger is to see how fast you need the case resolved.

  2. It seems to me that in terms of timing it is too late to effectively do anything about this situation. Even if challenged, the mergers have already occurred and we are talking about two large operational companies, so the punishment would most likely have to be in the form of fines. I think as with all 'regime' changes priorities are different, and the republicans have always preferred less government interference and regulation.

  3. I think that for any given merger proposal the consumers should have the largest say in whether or not it should be allowed to go through. Stakeholder referendums should be considered. In this way, the potentially merging firms will have a strong incentive to educate the public on why it would be good for them to merge. Ultimately the total number of mergers would fall drastically most likely which would help promote more competition and less merger and acquisition strategies.

  4. The taking turns mechanism is ridiculous. If that is the case, why do we need two agencies? And if the FTC is independent, why would it have too make concession to the Justice Department? It would possibly be better to set up a arbitrator higher up in the bureaucratic hierarchy to resolve the dispute, something like the judicial system.

  5. It seems that part of the problem is that the agencies can't seem to agree because they don't report to the same entity -- one of them is independent, the other a part of the administration. Maybe if there was a committee independent of the FTC and the DoJ to which each agency could present their case as to why they would be best suited to pursue a specific case.
    Some problems with this idea, however, are that neither agency might like it, it could delay the antitrust investigations and proceedings, and there might not be a group of people that the agencies might consider neutral enough to act as this delegating committee.

  6. In much of the same way Supreme Court justices are said to be 'politicized,' the DoJ and its antitrust matters certainly incorporate a degree of political leanings or preferences. It is frustrating, however, that a regulatory environment is so heavily influenced by the executive branch that a company might intentionally put off or rush to merge with another company before the next politician takes office. The FTC does not share this same shortcoming, but also does not necessarily always win the bureaucratic tug-of-war, as this article highlights.

    I believe there should be a small (in terms of office staff numbers) federal arbitrator that deals exclusively with antitrust/M&A matters. This would reduce the cost of maintaining an agency as large as the FTC that is sometimes completely ineffective and allow the voters to decide (through executive appointment) who will serve in this role.

    I also feel the role of this individual and his office should be to assess the potential market impact of a merger and, more importantly, how many new competitors could realistically enter a particular market when economic profits exist. If a merger will give a company 75% market share, it is not necessarily a bad thing that the two companies merge. If new competitors are blocked from entry by significant fixed costs, economies of scale, or regulations - then more care should be taken in deciding what mergers to allow and which to disallow.

  7. I would recommend having the companies arm wrestle the agencies to see who wins. However, another way you could go about it would be to value how much the companies financials have changed since the deal went through. You could look at each firm as an individual entity to examine the before and after successes of the firms. Also, look at how easy the market is to enter from a before and after viewpoint.

  8. It is clear that there is a bias in decision making based on which political party is in power. There is a need of a more unbiased approach and checks and balances in these organizations to ensure that consumers are being protected, and not the agendas of different ideologies.
    It would be beneficial to put more weight on objective mathematical valuations such as the HHI along with considering the state of the industry. This would lead to a more efficient process when making these decisions