The FTC is Guilty of Violating the Laws that Authorized Its Creation
“The FTC’s Antitrust Collusion” (Wall Street Journal editorial page, February 24) pieces together 628 pages of redacted emails revealing that the Federal Trade Commission coordinates with foreign antitrust officials to block mergers involving U.S. companies. (The emails were obtained by the U.S. Chamber of Commerce in a lawsuit forcing the Commission to comply with the Chamber’s Freedom of Information Act request.)
Enlisting foreign governments in its law-enforcement activities both betrays the Commission’s mandate to identify and prohibit “unfair methods of competition in or affecting commerce”—to be read as interstate commerce—and sacrifices U.S. sovereignty on the altar of ersatz globalization. If two private business entities coordinated their commercial decisions in ways revealed by email exchanges between the FTC and the European Commission on the policy front, they almost surely would be charged and convicted of criminal conspiracy.
It also turns out that “coordination” in the matter at hand—the merger of Illumina and Grail (see below)—supplies evidence of the politicization of antitrust processes whereby special interests can gain at least temporary advantages over their rivals at consumers’ expense.
Illumina, the market leader in DNA-sequencing technologies, created Grail in 2015 to develop technologies for detecting certain cancers in human blood but later spun the company off as an independent business entity. Grail’s subsequent successful devising of blood-testing methods for uncovering “big C” with 76 percent accuracy—even in asymptomatic patients—prompted Illumina to reacquire Grail for $8 billion in September 2020.
The merger’s announcement, which simply would have restored the status quo ante, triggered an FTC investigation into possible anticompetitive effects. Finding not necessarily sound reasons for worrying about potential damage to competitive market conditions, the Commission’s antitrust law-enforcement procedures required a hearing before one of its own administrative law judges (ALJ). The ALJ rejected the staff’s complaint and ruled in Illumina’s favor, thus allowing the merger to be consummated in August 2021.
While the administrative trial was still underway, perhaps anticipating (from the Commission’s viewpoint) an adverse outcome, email exchanges between FTC staffers and their European counterparts suggest that FTC staffers sought help from “across the pond” to stop the merger. Shortly after the ALJ’s decision was announced, the European Union’s competition authorities began taking steps to “unscramble the eggs,” that is, force Illumina to divest Grail’s assets and DNA-testing know-how.
The EU’s agreement to assist the FTC is exceptional because, according to the Journal, Grail neither owns assets nor conducts operations in Europe, thus raising important jurisdictional questions about the European Commission’s authority to challenge the Illumina-Grail merger after the fact. On the other hand, business consolidations that do not offend the consumer-welfare standard that held sway in U.S antitrust law jurisprudence until very recently are more likely to be found anticompetitive under European competition law, which worries more about post-merger “market dominance” (a company’s sheer size relative to its rivals) rather than a merger’s effects on prices and profits. The EU announced last September that it would oppose the merger, a decision Illumina said it would appeal.
The United States is unique in having a dual system of antitrust law enforcement (see Richard S. Higgins, William F. Shughart II & Robert D. Tollison, “Dual Enforcement of the Antitrust Laws,” in Robert J. Mackay, James C. Miller III and Bruce Yandle (eds.), Public Choice and Regulation: A View from Inside the Federal Trade Commission, pp. 154–180. Stanford, CA: Hoover Institution Press, 1987). The Antitrust Division of the Department of Justice and the Federal Trade Commission share responsibility for maintaining competitive conditions in domestic markets. Both agencies explicitly are empowered to enforce the Clayton Act of 1914, section 7 of which prohibits mergers and acquisitions where the effect “may be substantially to lessen competition or to tend to create a monopoly.”
To avoid the embarrassment of attacking combinations of the same formerly independent companies at the same time, the Justice Department and the FTC negotiated a “liaison agreement” in 1948, assigning themselves separate responsibilities for investigating and challenging mergers in specific industries. Collusion between U.S. antitrust law enforcement agencies is not so unusual after all.
What is unusual in the matter of Illumina and Grail is an apparent conspiracy between American and European authorities to scuttle a merger that one of them (the FTC) could not stop on its own account, perhaps because the combination would strengthen already vibrant competition rather than undermine it. Innovation often finds more fertile ground at a small scale in companies like Grail, but developing novel cancer-detection methods or any other innovative idea into commercially successful products requires the marketing and distribution resources of larger enterprises like Illumina.
Antitrust (competition) laws routinely are weaponized by business entities seeking to win advantages in the courtroom that they cannot win in the marketplace. Concerns about the consequences of the Illumina-Grail merger were not voiced by consumers. As the Journal suspects, it is plausible to conclude that the FTC’s opposition to the Illumina-Grail combination was instigated by “other companies working on early cancer detection [that] were years behind. They [the rivals] worried that Illumina’s head start and deep pockets could make it harder to compete.”
FTC Chair Lina Kahn has been a lightning rod for criticism ever since her appointment by President Biden, so much so that Christine Wilson, the one Republican appointee to the Commission’s five seats (two of which now are vacant), felt duty-bound to resign recently. Conscripting the European Commission in an end-run around U.S. antitrust laws is an outrage. Illumina-Grail can be added to the list of complaints against Ms. Kahn’s (mis-)management of her policymaking position.