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Federal Trade Commission Chair Lena Khan defended her progressive approach to antitrust enforcement at an event Monday, as the agency drew a barrage of criticism from the business community.
“The FTC’s role is not to own our personal philosophical beliefs about the virtues of the big versus the small,” Khan said during a question-and-answer session at the Economic Club of New York. “It’s really about the laws.”
“Congress, in passing antitrust laws, has been establishing a policy that is preferential, in many cases, to competition over monopoly,” Khan said. “However, the laws don’t prohibit being a monopoly. They prohibit becoming a monopoly solely through illegal tactics. And that’s the thing we’re looking at.”
Khan later added that the FTC views mergers through a competition model, “but there are certainly cases where you need to have large companies to be able to offer the kinds of services and scale that we need.”
The comments come less than a week after the Federal Trade Commission and the Justice Department’s antitrust division unveiled their new guidelines for mergers, indicating broader enforcement of antitrust laws than the government has taken in the recent past. For example, the new guidelines — which are still in draft form — include acknowledgments that enforcement agencies can consider the impact of competition on employment in certain cases and can also weigh how a series of mergers could negatively affect competition, rather than considering individual mergers on their own.
While it’s not yet finalized as the agencies receive public comment, the new guidelines have already sparked a backlash from the business community.
Neil Bradley, executive vice president and chief policy officer of the US Chamber of Commerce business group, said in a statement that the guidelines are “designed to dampen merger activity, which will deny small businesses access to the capital and expertise they need to grow and put US companies at a disadvantage with their global competitors.”
Khan noted that despite the growing interest in the enforcement agencies’ moves to block mergers, they still refuse to take action on the vast majority of deals.
“In any given year, 1,500 to 3,000 merger filings are obtained by antitrust agencies. Of that number, 98% go through with no second questions asked by the agencies,” Khan said. “So about 2% of all deals get what’s known as a second request, which is a set of questions so we can do a deeper investigation. A smaller portion eventually results in a legal challenge.”
Khan said issues arise when there are deals “on the margins” which in the past agencies have realized have reduced competition, resulting in a “course correction”.
Khan has also defended the agency’s record in court when it comes to merger cases. Of the 13 to 20 cases the agency has brought — depending on the criteria used in the count — the FTC has lost two in federal court, she said.
“In our merger enforcement program scheme, losing two is OK,” Khan said, adding that the agency only brings cases that enforcers think they can win, and when that doesn’t happen, they look at how they can improve in the future.
Still, Khan said that even in those losses, there were some upsides to having more clarity on case law. She referred to the agency’s attempt to refuse metaIts acquisition of VR fitness developer Unlimited is an example. Although the FTC lost its bid to block the deal, Khan said the judge rejected some of Meta’s arguments about how the law should or should not be applied.
Khan also responded to a criticism of the new merger guidelines, which is that the cases the agency cites in support of its draft policies are outdated and outdated. Even cases from the 1960s and 1970s “are still routinely cited in modern merger decisions,” she said. In part, this is because the Supreme Court has not heard merger cases frequently in recent decades, which means that “the old law is still good law.”
She added that the merger filing form updates are not intended to create additional burdens on the companies, but rather to speed up the FTC review process, rather than having to go back to the parties for more information.
Khan acknowledged that IPOs may be a less viable path for many companies these days, saying the agency hears and weighs arguments about the commercial necessity of acquisitions. However, a lot depends on the circumstances of each case. For example, she said, “A case where you have a pharma deal that is an acquisition of a property at a very early stage will land differently than the acquisition of a well-formed and very popular property.”
Finally, Khan also addressed low morale at the agency under her leadership.
“There’s no doubt that when I came in, I think a lot of people were like, ‘Huh, what are you doing here?'” And I think it’s also true that my career has previously been focused on criticizing the approach of previous administrations and decisions made by previous FTC, and I can certainly see how putting that critic in that position could lead to some friction.”
“I think I could, and should have, done a much better job of making it clear that those kinds of criticisms were in no way intended to impinge integrity or question the talent and professional skill of our staff,” she said.
WATCH: How US antitrust law works, and what it means for big tech companies
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