Enter to open, tab to navigate, enter to select
FTC Chairwoman Ramirez Delivers Remarks on the Scope of FTC Antitrust Enforcement
Practical Law Legal Update w-003-7103 (Approx. 4 pages)
FTC Chairwoman Ramirez Delivers Remarks on the Scope of FTC Antitrust Enforcement
by Practical Law Antitrust
| Published on 04 Oct 2016 • USA (National/Federal) |
Federal Trade Commission (FTC) Chairwoman Edith Ramirez delivered remarks on the scope of FTC antitrust enforcement at the 10th Annual Global Antitrust Enforcement Symposium at Georgetown University Law School.
On September 20, 2016, FTC Chairwoman Ramirez made remarks at Georgetown Law School addressing the FTC's role in antitrust enforcement. She focused specifically on concerns about the FTC’s approach to industry concentration and emerging and dynamic markets.
Role of Antitrust Enforcement
Chairwoman Ramirez compared the FTC to a lifeguard: watching the markets to monitor anticompetitive activity but preferring to leave the markets alone. Chairwoman Ramirez noted that the FTC is ready to intervene, however, where the rules that safeguard competition are broken. Specifically, the FTC monitors the markets to identify where anticompetitive mergers or conduct may result in:
- Raising prices.
- Degrading quality.
- Lowering output.
- Stifling innovation.
Chairwoman Ramirez pointed out that the FTC has actively monitored competition across markets, challenging 44 mergers over the last two years in markets including:
- Healthcare.
- Pharmaceuticals.
- Retail.
- Energy.
However, Chairwoman Ramirez noted that the FTC's role in antitrust enforcement is limited because:
- The FTC is a law enforcer and not a sector regulator.
- The FTC only intervenes when qualitative and quantitative evidence supports a finding that there is actual or likely competitive impact of the merger or conduct.
- The FTC is not infallible because the nature of the work is to predict future outcomes and there is inherent uncertainty in that analysis.
Concerns About Industry Concentration
Chairwoman Ramirez noted that the FTC has fielded concerns that some US industries, including transportation and healthcare, are becoming too concentrated. Evidence cited by concerned parties to suggest that industry concentration is too high includes:
- Increases in the corporate profits and revenue share of market leaders.
- Negative trends in firm entry and exit rates.
- High profits.
- Lessened innovation.
- Weakened startup activity.
Chairwoman Ramirez stated that the FTC has concerns about the effect of proposed mergers on highly concentrated markets. She warned, however, that that broad industry measures may not take into account some possible benefits of large firms for consumers, for example:
- Big firms may be better than rivals at offering customers what they want.
- Large firms may have scale economies and efficiencies that are beneficial to customers.
As a result of these competing interests, the FTC carefully considers whether and how to intervene. The FTC’s approach may include one more of the following:
- Settlement, which offers an opportunity to address the potential competitive harm of a transaction while still allowing the merger to occur.
- Litigation, where remedies offered will not make up for the threat to competition that will arise from the proposed merger.
- Abandonment of the investigation, where there is no factual or legal basis to support taking action.
Chairwoman Ramirez noted that the FTC constantly seeks to assess the effectiveness of its remedies. For example, the FTC has recently commenced a study to review 89 FTC merger orders issued between 2006 and 2012, to determine which remedies have contributed to the success or failure of the remedial goals.
Emerging Competition and Dynamic Markets
Chairwoman Ramirez stated that the FTC also faces criticism of its approach to emerging competition and dynamic markets. Some critics believe there is an antitrust blind spot and that the FTC does not intervene enough where big companies try to purchase smaller ones to stifle future competition. Others argue that antitrust intervention is unwarranted in dynamic markets because it will impede innovation.
Chairwoman Ramirez stated that the special characteristics of dynamic markets do raise competition concerns. As a result, the FTC monitors these markets to determine whether competition is being harmed as the result of:
- First mover advantages, network effects, and intellectual property or regulatory barriers.
- Monopolists engaging in anticompetitive acquisition or exclusionary conduct.
The FTC has addressed competitive effects in dynamic markets where:
- The parties do not yet compete, but appear likely to in the future.
- The proposed merger was likely to harm competition in undeveloped markets.
- The proposed merger may have an impact on future innovation.
Chairwoman Ramirez said that the goal of the FTC is to ensure that businesses have the freedom to innovate and compete, while prohibiting conduct that harms competition or the competitive process. The FTC does not seek to restrict activity where there is competition on the merits, even if that means that a rival is harmed.
Commissioner Ramirez concluded by reiterating that the agency is determined to remain vigilant in monitoring the markets and determining where to intervene. The FTC's judgment will continue to be based on consideration of the facts, legal and economic analysis, and experience.