The FTC and DOJ Are Violating an Executive Order

In late September, the Federal Trade Commission announced its lawsuit against the popular online retailer Amazon. In discussing the suit with several news channels, Federal Trade Commission (FTC) Chair Lina Khan was asked numerous times what remedies the agency would pursue to address its concerns. Without answering specifically, she suggested the agency is too focused on establishing liability to consider any potential remedies.

The fact that the FTC is unwilling to identify potential remedies in the Amazon case – or any case for that matter – is deeply concerning. But more importantly it violates a Presidential Executive Order that’s been on the books for over a quarter century.

The Executive Order

Issued in 1996, Executive Order 12988 — Civil Justice Reform, directs the government to attempt to settle lawsuits against private parties as a means of avoiding costly litigation. Specifically, it states an agency, “shall evaluate settlement possibilities and make reasonable efforts to settle the litigation.”

According to public reports, the FTC had no interest in offering Amazon a settlement despite the company’s history of settling complaints raised in foreign jurisdictions. Unfortunately, the Amazon case isn’t an anomaly in current U.S. antitrust enforcement, it’s the norm. At the Department of Justice (DOJ) Assistant Attorney General Jonathan Kanter has also expressed his opposition to settlements. And, in case after case, the FTC and DOJ are filing suits without presenting settlements offers and rejecting overtures from numerous companies.

Many cases, no settlement offers

• Google — Prior to DOJ filing its ad tech case, Google offered to split the part of its business that auctions and places ads on websites and apps into a separate company, yet DOJ preferred to go to court to force “deep structural changes”.
• Microsoft — Although Microsoft signaled a strong willingness to address the FTC’s concerns about its Activision acquisition without litigation, the FTC declined even to discuss remedies, which have satisfied regulators in Europe and the United Kingdom.
• Meta — The FTC never offered settlement terms in the Meta-Within matter; instead, according to public reports, Chair Lina Khan overruled the staff’s recommendation and ordered them to file a lawsuit.
• llumina — Illumina actively sought to resolve the FTC’s concerns regarding its proposed acquisition of Grail, and the FTC’s own Administrative Law Judge later found that a standardized, long-term supply agreement offered by Illumina to its U.S. oncology customers would resolve any competitive concern, but remarkably, the FTC filed an opposition to the scheduling of a settlement conference, which never happened. 
• Amgen —The FTC moved to block Amgen’s acquisition of Horizon based on complete speculation about potential future competition, even though Amgen and Horizon did not compete in the same markets. As numerous amici pointed out Amgen had offered reasonable, manageable settlement terms. After filing its lawsuit and facing withering criticism, the FTC quickly agreed to seek a settlement on terms Amgen had offered all along.

Putting the U.S. behind

The EO clearly directs agencies to engage in good-faith settlement talks, yet the agencies are routinely refusing to do so, even as foreign competition agencies and the FTC’s own internal adjudicator have supported reasonable remedies to resolve both genuine and hypothetical competitive concerns. Companies may not agree with the government’s analysis and have no interest in settling, but the government should offer its proposed remedy as a settlement before litigating.  

Refusal to identify potential remedies and seek settlements imposes real costs on the parties, the government, and U.S. economy. Antitrust cases can take years to resolve. Direct legal and expert fees can easily run into the tens of millions of dollars, and the indirect costs probably far exceed those in terms of lost employee productivity and distraction. The agencies are bogged down by pursuing litigation and resources are consumed that may be better deployed examining other anticompetitive concerns that arise in the economy.   

Beyond settlement offers

EO 12988 serves a broader purpose than just to encourage the government to pursue settlements in civil litigation. It is also designed to improve the public’s confidence in the justice system by resolving concerns about bias. The EO directs all federal agencies to safeguard against bias, including a call to action to “regularly train all factfinders, administrative law judges, and other decision-makers to eliminate such bias.” Although largely directed at administrative adjudication, rather than civil litigation, this portion of the EO reinforces the importance of impartiality, and the appearance of impartiality, throughout the justice system.

Multiple cases brought by the DOJ and the FTC raise concerns about the impartiality of DOJ and FTC leadership. In Meta-Within, Chair Khan refused to recuse herself despite critical past statements about Meta, disregarding the views of the FTC’s own ethics official and later dissembling before Congress. In Illumina-Grail, the FTC colluded with foreign regulators to scuttle the deal.  In FTC v. Amazon, the company had asked Chair Khan to recuse herself from the antitrust probes given her past, sharp criticisms of the company, which included saying that Amazon “should be broken up.”

In its case against Google, the DOJ faced scrutiny by the judge who expressed concerns about the participation of Assistant Attorney General Kanter. Google requested that Mr. Kanter recuse himself based on his past work for Google’s competitors. Although the court declined to order his recusal, the Judge clearly saw the argument for bias stating:

Given these objectively legitimate concerns, neither Chair Khan nor Mr. Kanter as decision makers appear to have been well-trained on how to eliminate bias as the EO directs. Their ongoing participation raises questions about the validity of the lawsuits, the refusals to engage in settlement talks, and the use of taxpayer dollars. 

To begin to address these concerns, the U.S. Chamber has filed a petition for rulemaking that would seek to bring transparency to the recusal process at the FTC.

More oversight is needed

The contradictions between the antitrust agencies’ actions and EO 12988 raises serious questions about the agencies’ conduct. For its part, Congress should demand the agencies take bias concerns more seriously when recusal questions arise. Confidence in the justice system, tens of millions of taxpayer dollars, and ultimately competitiveness of our economy depends on it.

About the authors

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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