FTC Renews Prior Approval Policy for Consent Orders with Firms Accused of Antitrust Violations

As part of the Biden Administration’s push to strengthen antitrust enforcement, the Federal Trade Commission has announced that it is restoring its prior approval policy, increasing the agency’s authority to block transactions proposed by firms it had previously accused of attempting anticompetitive mergers or acquisitions. The announcement signifies a reversal of a 1995 Policy Statement which ended the FTC’s “longstanding” practice of including prior approval requirements in its merger enforcement orders, which had typically required the FTC’s approval for any future acquisitions within certain markets for a ten-year period. The 1995 Statement reasoned that, although the prior approval requirements “may save the Commission the costs of re-litigating issues that already have been resolved,” the Hart-Scott-Rodino Act’s premerger and notification requirements were sufficient and an “effective means of investigating and challenging most anticompetitive transactions before they occur.” 

The FTC, however, has recently decided that the Hart-Scottt-Rodino Act leaves it with too large a blind spot. The agency issued a report, for instance, showing that from 2010 to 2020, Google, Amazon, Apple, Facebook, and Microsoft engaged in hundreds of acquisitions that went unreported because they fell below the Hart-Scott-Rodino transaction value threshold for FTC review. FTC Chair Lina Khan commented that the report demonstrated “the extent to which these firms have devoted tremendous resources to acquiring start-ups, patent portfolios, and entire teams of technologists—and how they were able to do so largely outside of our purview.” This view aligns with the House of Representatives’ report from last year, which found that dominant tech firms had been acquiring “nascent or potential competitors to neutralize a competitive threat” or to shut them down entirely in so-called “killer acquisitions.”   

In its statement on the renewed prior approval policy, the FTC anticipates that its about-face will prevent merging parties that are “too willing to roll the dice” from engaging in facially anticompetitive deals “that should have died in the boardroom.” It will protect the FTC from having to devote resources to reviewing—and suing on—the same or similar proposed mergers multiple times. And it will allow the FTC to monitor harmful mergers that fall below the Hart-Scott-Rodino Act’s reporting threshold, which is especially important “for merging parties with a history of attempting anticompetitive transactions,” like those who have previously entered consent orders with the FTC. 

The prior approval requirement will be included in FTC consent orders going forward as a matter of course. Indeed, the FTC has already included the language in a proposed consent order with Davita, Inc.—a dialysis service provider—following the FTC’s allegations that DaVita’s proposed acquisition of the University of Utah Health’s dialysis clinics would reduce competition in the outpatient dialysis services market.  

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About Raymond N. Barto

Raymond N. Barto is a senior associate in Faruqi & Faruqi’s New York office. He focuses his practice on antitrust litigation.

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