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FTC Moves Aggressively on Rulemaking and Mergers

Medmarc Insurance Group

July 16, 2021

The U.S. Federal Trade Commission has undertaken several decisive moves since the beginning of the year, including the formation in March of a multi-lateral work group for mergers in the pharmaceutical industry. More recently, the agency reiterated its intent to more closely examine merger and acquisition (M&A) activity in the pharmaceutical industry, and to streamline rulemaking procedures that would give the FTC much wider leeway in enforcement.

 

The March 16 FTC announcement said the agency will form a working group with authorities in Canada, the European Union and the U.K. to update their approaches to analyzing the impact of M&A activity in the pharmaceutical industry. Among the key considerations is how these activities affect innovation, and how current theories of harm to consumers can be expanded and refreshed. The European Commission lauded the news in a statement that indicated that enhanced scrutiny and more detailed analyses of M&A activity might soon be put into use as a result.

 

The FTC said in a July 1 statement that it has approved a series of changes to the agency’s rulemaking practices under Section 18 of the Federal Trade Commission Act, a change intended to assist the agency’s efforts to deter corporate misconduct. The changes, which were approved in a 3-2 vote, include that an administrative law judge is no longer needed to serve as a presiding officer in rulemaking procedures at the FTC.

 

The agency said these changes will eliminate “self-imposed red tape” that has created uncertainty and hampered the agency’s enforcement responsibilities. In addition to providing consumers and businesses clear guidance regarding their rights and responsibilities, these changes will allow the FTC to “exercise its prosecutorial discretion to seek a wide variety of relief” against first-time violators. This includes civil monetary penalties and reformation of contracts.

 

Resolution Highlights Key Enforcement Priorities

 

In a separate July 1 statement, the FTC said it had voted to approve a series of resolutions that authorize the agency to conduct investigations into key law enforcement priorities. These seven specific priority areas include health care businesses such as pharmaceutical companies, as well as technology companies and digital platforms. The resolutions call upon FTC staff to make use of a variety of compulsory processes such as subpoenas, and the statement indicates that these priorities will be in place for the next decade unless the agency rescinds the resolution sooner.

 

In addition to subpoenas, the compulsory processes to be used by FTC staff include civil investigative demands, both of which are enforceable by the courts. FTC Commissioner Lina Khan said in remarks delivered during the meeting that some of the targeted industries are conspicuously concentrated, adding that there is “widespread concern” about unfair methods of competition and unfair or deceptive practices.

 

Khan said the resolutions are intended to provide the agency with a more expeditious investigatory process, a change she said was necessary due to a “massive merger boom.” These compulsory processes would be available to FTC staff when investigating a proposed merger, but also when examining the activities of repeat offenders. These tools would also give FTC investigators the ability to investigate adjacent violations of the law as well, Khan said.

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