A Report on Section 5

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Joe Sims, Nov 12, 2008

As this is published, the United States has just elected a new President. No matter who won, it is likely that the federal antitrust enforcement agencies—the Department of Justice’s Antitrust Division (DOJ) and the Federal Trade Commission (“FTC”) will become more aggressive in their enforcement agendas. With the DOJ, that is most likely to manifest itself in somewhat more aggressive merger enforcement. Absent something crazy, that is a path we have been down before without systemic damage to the economy. Of course, those parties whose mergers are attacked are not happy, but it seems pretty unlikely that the change here will be more than marginal from a broad economic perspective. On the FTC front, however, there is the risk of something more dangerous. Even today, the FTC is noticeably more aggressive than the DOJ, and in fact recently went so far as to publicly criticize the DOJ for releasing a report on Section 2 enforcement that the Commission did not agree with an odd step but one that reflects the pretty wide gulf between the two agencies at the moment. But tomorrow, probably regardless of who becomes President but certainly if the Democratic candidate has been victorious, the FTC could become a much more serious risk to the U.S. economy, which already has all the problems it needs. There is currently a majority of the four sitting FTC Commissioners (there is one vacancy) that actively supports the reinvigoration of Section 5 of the FTC Act the part of the Act that prohibits “unfair methods of competition.” This language, which has been part of the Act since it was enacted nearly a century ago, is the nuclear bomb of U.S. antitrust enforcement or perhaps the neutron bomb is a more accurate analogy, since structures would be left standing even while businesses were seriously injured.

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