It is too early to predict with confidence the direction that antitrust policy will take in the Trump Administration, because the President-elect has not yet announced who will lead the Antitrust Division of the Department of Justice (“DOJ”) or the Federal Trade Commission (“FTC”). But President-elect Trump’s selection of Senator Jeff Sessions for Attorney General and an antitrust transition team consisting of former Antitrust Division Deputy Assistant Attorney General David Higbee, former FTC Commissioner Joshua Wright, and Alex Pollock of the R Street Institute suggest that some changes to the level and types of federal antitrust enforcement are likely to occur.
We think antitrust enforcement and policy in the Trump Administration may roughly track the approaches of recent Republican administrations. While the Trump Administration is the product of a different political environment, it appears that Mr. Trump, like recent past Republican presidents, will focus on reducing economic regulation while at the same time maintaining competitive markets. Combined, these objectives will likely produce the same or higher level of criminal cartel enforcement and potentially a modest reduction in the number of enforcement challenges to mergers, although whether the number of merger investigations declines will likely depend heavily on the level of M&A activity. The Trump Administration may also devote fewer resources to civil, non-merger matters and move those resources to cartel investigations.
The Trump Administration could affect FTC merger enforcement in particular by securing passage of the Standard Merger and Acquisition Reviews Through Equal Rules (SMARTER) Act of 2015, commonly referred to as the “Smarter Act.” The bill, which former Commissioner Wright and sitting Republican FTC Commissioner Maureen Ohlhausen have generally supported, would align the FTC’s and DOJ’s preliminary injunction standards by applying the common law standard–long-since used by the DOJ–to FTC merger challenges as well. It would also substantially limit the FTC’s ability to challenge mergers by using its administrative adjudicative authority (often referred to as “Part III” proceedings). The Democratic FTC Commissioners and the Obama Administration strongly oppose the bill.
In addition, the Trump antitrust team may reduce the number of investigations of non-merger conduct. However, Mr. Trump’s comments expressing antitrust concerns with respect to some companies suggest the possibility of conduct investigations in particular industries.
Finally, the Trump Administration may support amendments to the Hart-Scott-Rodino (“HSR”) statute to reduce filing requirements for private equity companies and other entities that acquire minority shares in companies. Commissioner Wright has supported reducing HSR filing requirements for minority stock acquisitions that are unlikely to result in a reduction in competition.
- Prospects for Current DOJ and FTC Cases
It is important to note at the outset that there is no indication that the Obama Administration will back off from ongoing antitrust investigations or prosecutions in its last two months. Current Antitrust Division Acting Assistant Attorney General Renata Hesse recently said that the “transition isn’t likely to affect the timeline of any pending matters . . . nor does the election of [President-elect] Trump change anything about how current officials view those cases.”
The DOJ is currently in trial for its challenges to Anthem’s attempt to purchase Cigna and Aetna’s attempt to purchase Humana. Additionally, on November 16, the week after the election, the DOJ sued to block EnergySolutions’ acquisition of Waste Control Specialists. Also ongoing are the DOJ’s litigation challenge to Deere & Company’s attempted acquisition of Precision Planting and its lawsuit against DirecTV and parent AT&T, which alleges that DirecTV unlawfully exchanged competitively sensitive information with Cox, Charter, and AT&T during the companies’ negotiations for the right to telecast the Dodgers Channel.
The FTC similarly has significant ongoing litigation matters, including its challenge to Advocate Health Care Network’s attempt to merge with NorthShore University HealthSystem. The Court of Appeals for the Seventh Circuit recently reversed a ruling for the merging parties by the district court and remanded the case for further proceedings. The Commission is also still reviewing several large mergers, including the Walgreens-Rite Aid transaction.
It is conceptually possible that the Trump Administration could materially alter the course of these cases. For example, the Administration could decide to settle some of the matters prior to trial or the issuance of a court decision. However, with the exception of the Bush Administration’s rapid settlement of the Microsoft case in 2001, new Administrations tend not to change course on pending enforcement actions even when there is a change of party.
- Process of Appointing and Selecting a New Leadership Team
All signs point to the Trump Administration moving rapidly to fill out its leadership team, including at the antitrust agencies. But putting in place the new leadership at the DOJ and the FTC will likely occur in stages and take at least several months. At the DOJ, the new Assistant Attorney General (“AAG”) for the Antitrust Division requires confirmation by the Senate. Even though the Republicans control the Senate, confirmation will likely take until at least early spring because cabinet-level positions and other more senior positions are typically taken up first by the Senate. In the meantime, it is probable that Deputy AAG for Criminal Enforcement Brent Snyder would serve as Acting AAG starting on January 20. (The Deputy AAG for Criminal Enforcement is the highest career official at the Antitrust Division.) When the Obama Administration took office, Gibson Dunn Partner Scott Hammond, who at the time was the Criminal Enforcement Deputy AAG, served as the Acting AAG.
Alternatively, immediately upon taking office, the Trump Administration could appoint someone as the Principal Deputy Assistant Attorney General for the Antitrust Division (“Principal Deputy”) who could serve as Acting AAG. The Principal Deputy position does not require Senate confirmation.
At the FTC, the transition process could move faster than at the DOJ. Immediately upon taking office, President Trump could appoint the sole Republican currently serving on the Commission, Maureen Ohlhausen, as the FTC’s Chairwoman. (The President has the authority to appoint the FTC’s Chair from among the sitting Commissioners.) If the President intends for Commissioner Ohlhausen to serve as the FTC’s Chair at least through the end of her term, which expires in September 2018, she then would likely move quickly to fill the key leadership positions at the FTC: the Directors of the Bureaus of Competition, Consumer Protection, and Economics; and the position of General Counsel. None of these positions require Senate Confirmation.
In addition, there currently are two vacant Commissioner slots at the FTC, and the term of the current Chairwoman, Edith Ramirez, has already expired. Accordingly, President Trump will have at least three Commissioner slots to fill, all of which require Senate confirmation. The President will fill two of these seats with Republicans and Chairwoman Ramirez’s seat with a Democrat. Not more than three of the five Commissioners may be members of the same political party. It is possible that the President will decide to select one of the new Republican Commissioners as Chairman or Chairwoman once confirmed, in which case Commissioner Ohlhausen is unlikely to select new Bureau Directors or the General Counsel.
The DOJ has exclusive jurisdiction to bring criminal actions against cartel conduct such as price fixing and bid rigging. For the past two decades, there has been strong bipartisan support for aggressive prosecutions of cartels, with substantial prison sentences for individuals and large fines for corporations convicted of cartel conduct. We do not expect this policy to change. Both Republican and Democratic antitrust enforcers agree that such conduct is particularly harmful to competition and consumers. When Mr. Higbee served at the DOJ during the Bush Administration, both he and then-AAG R. Hewitt Pate placed significant emphasis on cartel enforcement. Moreover, while serving on the Judiciary Committee, Senator Sessions supported legislation to strengthen the Antitrust Division’s “leniency program,” which is designed to incentivize companies to report cartels to the Division. The Trump Administration may even allocate more resources to cartel enforcement, particularly if it decides to reduce civil enforcement actions against mergers and other types of non-cartel conduct. In addition, if the Administration is successful in increasing infrastructure spending, there may be an upswing in bid-rigging cases.
Both the DOJ and the FTC investigate mergers. We expect that the leaders of the agencies in the Trump Administration will generally continue to challenge transactions in highly concentrated markets, meaning transactions that combine the only two, or two of only three, strong competitors in a market. Challenges to such transactions are more likely to occur if there are substantial barriers to entry in the market.
In the healthcare sector, we expect the FTC to continue to aggressively investigate hospital mergers. The FTC’s current hospital merger enforcement strategy was developed and put in place by former FTC Chairman Tim Muris in the first term of the last Bush Administration. Commissioner Wright is a strong supporter of using the antitrust laws to protect competition in the healthcare sector. He wrote approvingly in the November 14, 2016 New York Times that “the Federal Trade Commission has successfully challenged proposed mergers with convincing economic evidence that greater concentration would lead to increases in price and reduced quality of service.”
However, there could be a modest reduction in the number of overall transactions that the agencies challenge, because the Trump Administration could use a somewhat higher evidentiary “bar” for deciding whether to try to block a merger in court or require divestitures. While he was at the FTC, Commissioner Wright dissented from the Commission’s decision to challenge or require remedies in a number of mergers, such as the FTC’s divestiture orders in the Reynolds American/Lorillard and Nielsen/Arbitron transactions, because he thought there was insufficient evidence that the transactions would reduce competition.
For the same reason, there may be fewer challenges to transactions about which the primary concern is a decrease in innovation or “potential” competition. The Obama Administration challenged several mergers in the technology and pharmaceutical sectors on these grounds. However, the evidence that such transactions will produce anticompetitive effects is generally more speculative than it is for deals where the parties are engaging in substantial head-to-head price competition at the time of the merger.
The antitrust agencies in the Trump Administration may also rely less on market shares and more on economic analysis when deciding whether to challenge a transaction. Commissioner Wright has frequently written that the antitrust agencies should base enforcement decisions on economic theories that are subject to market testing and analyses of empirical data. He has critiqued reliance on market shares as an indication of pricing power. In his November 14 Times article, Commissioner Wright wrote that “a high level of concentration in an industry simply does not mean the industry lacks competition. Concentration and competition are distinct concepts. . . . The new anti-merger fervor is based upon the presumption that they are never a good deal for consumers because more consolidation always leads to higher prices, and never leads to cost savings or product improvements that benefit consumers. Both are demonstrably false.”
If the Trump Administration does in fact give market shares less weight, it will likely provide opportunities for merging parties to obtain merger clearances for strategic transactions by using economic analyses and direct evidence of how a market actually performs during investigations.
The most uncertain question is how the Administration will treat large “vertical” and “complementary” mergers, where the parties do not engage in material direct competition but some companies or individuals are nonetheless concerned that the transaction will in some sense give the combined companies too much power or reduce the level of innovation. The Obama Administration Antitrust Division blocked several such transactions, such as the Comcast/Time Warner Cable and Applied Materials/Tokyo Electron deals. During the campaign, Donald Trump vowed to block the AT&T/Time Warner transaction on the ground that it would create an excessive concentration of power, but we expect that the Antitrust Division will make decisions on this and other vertical deals based on a factual analysis applying traditional antitrust principles.
The Republican-controlled Congress may also reintroduce and pass the Smarter Act. The U.S. House of Representatives passed the legislation on March 23, 2016, but the Senate never acted on it due to opposition by Democratic Senators and the White House. The purpose of the bill is to standardize the procedures used by the DOJ and the FTC when challenging transactions and the requirements that both agencies must satisfy to obtain a preliminary injunction.
Currently, when the DOJ challenges a transaction, it must litigate in federal district court and satisfy the common law standard, which includes demonstrating that it is likely to succeed at a trial on the merits, in order to obtain a preliminary injunction. In contrast, the FTC may choose to use its administrative adjudicative process (rather than litigating in federal court) to block a transaction. In addition, the FTC’s authority to seek a preliminary injunction of a transaction comes from Section 13(b) of the FTC Act, whereas the DOJ’s authority derives from the Clayton Act. Several courts have recently held that Section 13(b) permits a preliminary injunction if the FTC shows that it would serve the “public interest,” which is arguably a lower standard than the DOJ faces.
Thus, the FTC has two advantages vis-à-vis the parties involved in a transaction that the DOJ does not have: the ability to continue to challenge a transaction in its own administrative court even after a federal court denies an injunction and a lower preliminary injunction standard. The Smarter Act would neutralize these advantages by prohibiting the FTC from using its administrative proceedings to challenge unconsummated transactions and standardize the preliminary injunction standards for the agencies.
- Non-Merger Civil Investigations
Both the DOJ and the FTC have jurisdiction to investigate non-merger conduct that they believe reduces competition. In the Obama Administration, the two agencies brought several cases challenging such conduct, two of which were in the healthcare sector.
Because such cases are very fact-specific, it is difficult to predict whether and how the Trump Administration will decide any particular matter. Generally, Republican administrations have devoted fewer resources at the DOJ to these matters, particularly to cases involving unilateral conduct, preferring to devote more bandwidth to challenging cartel behavior and mergers for which there is powerful evidence that the transaction will reduce competition.
That said, there has been strong bipartisan support at the FTC for the Commission’s challenges to agreements between brand and generic pharmaceutical companies that the FTC believes have delayed entry of generic drugs. The strategy for challenging these cases was also put in place by former Chairman Muris. And in 2002, Senator Sessions commented in favor of legislation that was designed to close loopholes in the Hatch-Waxman Act that let brand drug manufacturers keep generic rivals off the market. Accordingly, we expect the FTC to continue to aggressively investigate what the Commission terms “pay-for-delay” agreements between brand and generic pharmaceutical companies and the DOJ to support such cases if they reach the Supreme Court.
The leadership team at the FTC during the last Bush Administration also brought a number of civil conduct cases designed to attack the use of state regulatory systems to reduce competition, as well as the activities concerning standard-setting organizations that allowed IP holders to create “lock-in” effects with respect to particular patents.
We suspect that the Antitrust Division in the Trump Administration is not likely to bring an enforcement action when there is not clear evidence of a reduction in competition. Moreover, the ability of the Trump Administration (or any administration) to litigate antitrust cases that are not focused on traditional antitrust standards is limited given the likelihood of continuity of the current Supreme Court balance. In recent years, the Court has gradually incorporated key principles of the Chicago School antitrust jurisprudence, most notably that the conduct at issue must produce actual anticompetitive effects to violate the antitrust laws. Gibson Dunn’s antitrust and appellate groups have played significant roles in these cases, including Leegin.
- Changes to the HSR Statute
The Trump Administration may formally or informally expand the scope of the investment-only exemption from the HSR Act reporting requirement. The exemption excludes from the Act’s notice and waiting requirements “acquisitions, solely for the purpose of investment, of voting securities, if, as a result of such acquisition, the securities acquired or held do not exceed 10 per centum of the outstanding voting securities of the issuer.”
The Obama Administration’s appointees at the FTC worked to narrow the scope of the exemption. For example, in August 2015 the Commission charged Third Point with violating the HSR statute for failing to observe the filing and waiting requirements of the HSR Act before purchasing shares in Yahoo. The FTC alleged that the investment-only exemption did not apply because Third Point communicated with third parties to determine their interest in becoming the CEO or a board candidate of Yahoo. (Third Point acquired less than six percent of Yahoo’s stock.) Notably, Commissioner Ohlhausen and then-Commissioner Wright dissented from the Commission’s decision. They wrote that the majority’s interpretation of the investment-only exemption was “likely to chill valuable shareholder advocacy while subjecting transactions that are highly unlikely to raise substantive antitrust concerns to the notice and waiting requirements of the HSR Act.”
HSR practitioners and the financial services sector have long argued, unsuccessfully, for expanding the scope of the investment-only exemption to, at a minimum, apply to acquisitions by officers and directors of voting securities of the companies for which they serve. We think there is a strong possibility that the Trump antitrust team at the DOJ and FTC will agree to some expansion of the exemption.
- U.S. Relationships with Foreign Antitrust Enforcement Officials
The Trump Administration could both privately and publicly advocate against the European Commission (“EC”) and other foreign competition agencies taking enforcement actions against U.S. companies when the Administration disagrees with the analysis underlying the enforcement. In the 1990s, Senator Sessions wrote a letter to then-Attorney General Janet Reno expressing concern that the Antitrust Division was assisting the EC’s investigation of Microsoft. And in the second Bush Administration, U.S. antitrust officials were critical of several enforcement actions taken by the EC against U.S. firms, which they believed were not targeted at reductions in competition but instead designed to protect European competitors.
However, we do expect the Trump Administration to continue the Obama Administration’s efforts to use bilateral meetings and international fora (such as the Organization for Economic Cooperation and Development and the International Competition Network) to try to persuade other competition agencies to increase the procedural fairness and transparency of their processes. We also expect the administration to encourage cooperation that reduces the costs on parties in responding to multi-jurisdiction merger investigations.
 Standard Merger and Acquisition Reviews Through Equal Rules (SMARTER) Act of 2015, H.R. 2745 (June 12, 2015).
 In 1988, the DOJ and FTC charged Mr. Trump with failing to report under the HSR Act the acquisition of stock in two gaming companies. Mr. Trump is not alone in being fined for violating the HSR Act reporting requirements. Other prominent individuals and companies that have been fined for HSR Act violations include Barry Diller, John C. Malone, and William H. Gates (https://www.ftc.gov/system/files/attachments/hsr-resources/enforcement_actions_final_updated_aug_2016.pdf). Many violations of the HSR Act, generally first offenses, do not result in fines; in fiscal year 2015 alone, 39 post-consummation “corrective” HSR filings were made (https://www.ftc.gov/system/files/documents/reports/federal-trade-commission-bureau-competition-department-justice-antitrust-division-hart-scott-rodino/160801hsrreport.pdf).
 President-elect Trump has personally been involved in two other antitrust lawsuits. In the early 1980s, Mr. Trump was a successful plaintiff in the USFL’s antitrust suit against the NFL, although the USFL dissolved shortly thereafter. And in the late 1980s and early 1990s, Mr. Trump successfully defended charges that he attempted to monopolize casino gambling in sections of Atlantic City. It is difficult to gauge whether these cases will affect the Trump Administration’s antitrust policies.
 Leah Nylen, Pending matters won’t be affected by Trump transition, DOJ’s Hesse says, mLex (Nov. 17, 2016).
 See R. Hewitt Pate, International Anti-Cartel Enforcement, Before the 2004 ICN Cartels Workshop, Sydney, Australia (Nov. 21, 2004) (“[W]e at the U.S. Justice Department see antitrust enforcement as a three-part hierarchy. At the top of this hierarchy is enforcement against cartels, conduct that is devoid of any efficiency justification and inflicts tremendous harm on our economy.”), available at https://www.justice.gov/atr/speech/international-anti-cartel-enforcement.
 Joshua Wright, Concentration in an Industry Does Not Mean It Lacks Competition, New York Times (Nov. 14, 2016), available at http://www.nytimes.com/roomfordebate/2016/11/14/should-the-government-bring-back-trust-busting.
 See, e.g., FTC v. Whole Foods, 548 F.3d 1028, 347-48 (D.C. Cir. 2008).
 See United States v. United Regional Health Care System of Wichita Falls, Texas, No. 7:11-cv-0030 (N.D. Tex. 2011); United States v. Blue Cross Blue Shield of Michigan, No. 2:10-cv-15155 (D. Mich 2010).
 See, e.g., In re Ky. Household Goods Carriers Ass’n Inc., 139 F.T.C. 404 (2005) (finding Kentucky’s high-level review of the reasons for movers’ rate increases did not constitute sufficient supervision to immunize the Association from the antitrust laws).
 See, e.g., In re Rambus Inc., 2007 WL 431522 (FTC 2007) (finding that Rambus engaged in anticompetitive acts to deceive a standard-setting organization); In re Union Oil Co. of Calif., 140 F.T.C. 123 (2005) (ordering that Unocal not enforce certain patent rights).
 15 U.S.C. § 18a(c)(9); Section 801.1(i)(1) of the HSR Rules, 16 C.F.R. § 801.1(i)(1).
 Dissenting Statement of Commissioners Maureen K. Ohlhausen and Joshua D. Wright, In the Matter of Third Point, FTC No. 121-0019 (Aug. 24, 2015).
This post comes to us from Gibson, Dunn & Crutcher LLP. It is based on the firm’s client alert, “Antitrust in the Trump Administration,” dated December 6, 2016, and available here.