Dionne Lomax and Joe Miller Take a Deep Dive Into Consent Decree Enforcement at FTC and DOJ

Dionne Lomax Welcome everyone, to the AMI podcast. I am Dionne Lomax, and I am the Managing Director of Antitrust and Trade Regulation for Affiliated Monitors, Inc. Today, I would like to introduce our guest speaker, Joe Miller. Joe is the co-chair of Mintz Levin's antitrust practice, and is also a partner in the firm's healthcare practice group. At Mintz, Joe advises health systems, physician groups, health plans, trade associations, and other healthcare related businesses on assessing and mitigating antitrust risk, as well as representation before antitrust enforcers. Joe began his career in 1991 at the Federal Trade Commission, starting in the compliance division, where he focused on enforcing SEC final orders and investigating potential violations of the Hart-Scott-Rodino Act. After a four-year stint in private practice, Joe spent 12 years at the Antitrust Division where he tried merger cases, and later served as Assistant Chief of the Antitrust Division, Healthcare section. Joe has also served as General Counsel of AHIP, America's Health Insurance Plans, the national trade association for the health plan industry. Joel returned to private practice in 2015, where he continues to work at the intersection of healthcare law and competition policy. So, Joe, thank you for joining us today. Joe Miller Thanks Dionne. Pleased to be here, and thanks for the introduction. Dionne Lomax So today I really want to talk about some recent developments, and I really want to focus on the compliance aspect. when we discuss antitrust and antitrust compliance at conferences and webinars — you and I have been co-hosts of webinars together and whatnot — we often focus on those hot button or red-flag issues; those areas that are high risk, that companies basically should steer clear of to avoid criminal fines and monetary penalties. And we discuss compliance, but we do that from the vantage point of how the company and business executives can comply with government scrutiny and private lawsuits. What I realized recently was there's not as much focus on compliance with government consent decrees, and what might be occurring behind the scenes at the federal enforcement agencies once the company has settled antitrust charges. So I — again, thank you for joining us today to specifically help us shed some light on that aspect of antitrust compliance. And so I think I would just like to kick it off with — thinking back to your bio that I just read, I understand that your first job out of law school was in the compliance division at the FTC. So can you tell us a bit about how things were structured while you were there and perhaps how they've changed since your time at the FTC? Joe Miller Sure. So I started — the compliance division was my first job out of law school, which is really an interesting place to start a legal career, because the compliance division,although it had a relatively narrow set of responsibilities, saw everything that was coming through at least the competition side of the agency. So you really got a really nice broad overview of what was happening. Your actual responsibilities in the compliance division (especially as a junior staffer) was to get put on a matter after it had been settled. So typically a merger case doesn't get tried. Typically they get either let go — this is, the government, in most cases doesn't enforce against the merger — but when they do decide to enforce, typically it's resolved with a consent decree of some sort after the deal was finalized. That is, after the staff had negotiated whatever it was they were going to negotiate for a remedy (typically a divestiture), and it was finalized by the commission, they voted on it and it became final. After the process set up by statute, a compliance staffer would get the assignment. And so then you'd have a final decree — good, bad, or indifferent there it was — and it was your job to enforce it. So you would send a letter to the respondent just outlining their obligations and timelines. You'd follow up with polite reminders if they missed a deadline or two. If it warranted, you open an enforcement action for a decree of violation, which could be remedied with a civil violation and injunctive relief — and again, those were mostly settled, but could go to court if necessary. That's kind of how it went. It was more . . . after the fact, it was your responsibility to enforce the decree however it came to you. Now the compliance division is more actively involved upfront with the settlement. As the case is headed toward a settlement, the compliance staff will be an integral part of what's going on. If it's going on a litigation track, or if it's going on a settlement track, they want to be prepared to settle. And so the compliance division staffer will, at this point, be involved in leading or at least heavily involved with the decree negotiation. This came about, I think, because the commission — to its credit — does periodic lookback studies to see how well their decrees are meeting their stated objectives, and then implements changes as warranted. Some changes over time — so this is not necessarily a wholesale change — but some differences that are now emphasized as a result of some of this self-reflection includes upfront approval for buyers of the vested assets, the use of outside monitors, if there's a hold separate (that is of the merging parties have to hold part of their businesses separate during the pendency of the divestiture), they can close the deal but then they have to run a separate business under one roof, but continue to compete and keep those assets prepared to be divested and make sure they don't waste in any way. And so there's a use of frequent outside monitors to make sure that those decree provisions are being lived up to, if there's not a simultaneous divestiture to the closing. And then there's the continuing emphasis — as there always has been — on structural remedies instead of behavioral remedies. What we mean by that is — a structural remedy is there's going to be some set of assets that are divested, and then the antitrust enforcement agencies move on. They're not continually regulating something because they've got a decree. They don't want that. They're not in a position to do that, and it really sort of upholds the institutional integrity of both the DOJ antitrust division as well as the FTC, to be law enforcers. They don't want to become price regulators or industry regulators. It's not their job. And so they would want decrees that just have a lot of finality to them. And relatively soon — however, sometimes you do need a behavioral remedy where they know agencies require a behavioral remedy, meaning there's some sort of ongoing monitoring of the behavior. And in that case, you would also see a use of a monitor. Those are some of the changes and some of the consistencies over time. Dionne Lomax So based on what you just described (and thank you for giving us that little bit of inside baseball in terms of how things are working behind the scenes), from your perspective, does any of that change how a company should approach how you negotiate consent decree — particularly as it relates to whether or not you're dealing with structural versus behavioral remedies? Joe Mille Well, I think over time, because of these policy changes, the commission has put into place — the expectations are clear. That is, they wrote all this down and they sort of — even if you're sort of not clever enough to go look for their policies, you can study their decrees and see a lot of consistency. So the expectations are clearer and enforced more consistently, which I think makes the negotiation at least shorter, if not easier. So if you know, going in, what's going to be required. there's less to talk about. I think companies need to understand that this negotiation is unlike a typical commercial negotiation where each side probably comes in with some room to give. In this circumstance, at least in theory, the government's alternative is to go to court to get full relief in the form of an injunction. And so if they're talking to you, it means — you know, not always, but it should mean — that they are prepared to go litigate the case and get an injunction, which means your deal was actually dead. And so, it's really different from a commercial negotiation, and the metric for success for the government is preserving the competitive status quo ante, without really much look to profitability. But is — if you're negotiating this decree, and you can sort of retain the assets that will make the deal profitable for you, the government doesn't object to it on that basis, right? They object to it on the basis of market power. And if they can ameliorate the delta — that is, the change in the market power — they should be completely satisfied. So understanding the decree negotiation from their perspective — I don't know if that's a change, but that's the way that that's expressed. And the way that the government looks for relief has changed a bit over time, and so that's important to understand. Dionne Lomax Yeah, no, thanks for that. And you mentioned earlier about upfront buyers, with respect to the FTC. And so there appears to be somewhat of a difference between the approach that the FTC takes regarding consent decree compliance and enforcement versus the DOJ. And you've been at both places, so I feel even more delighted that we have you as our guest today. Can you speak to some of those historical differences between the agencies? Joe Miller Sure. So, they are separate agencies. The DOJ is an executive branch agency, and the FTC is independent, which means that it doesn't answer to the Attorney General or directly to the President. There's been a couple of Supreme Court cases about whether that's permitted; it turns out it is, um, who knew (laughter). In any event, they can have different approaches. I mean, historically they've been aligned at a high level. The DOJ has had policies and principles for consent decrees and they've been more or less aligned (although, less, maybe in practice than you would read in a speech). So the preference for structural remedies instead of behavioral remedies has been pretty consistent. Some Assistant Attorney Generals, AG’s have been more able to stay flexible in their approach, depending on what they're trying to do. If you're looking at a vertical case — that is, there's no current competition but it's companies are different parts of a supply chain, so there's no direct competition, and direct divestiture of assets won't cure the competitive problem, that might require a behavioral remedy. And so the ability to, or the willingness to take a behavioral remedy has, sort of ebbed and flowed over time, depending on the circumstance. So DOJ, I would say, has policies and principles, and they give speeches, and they sort of change over time. There's been a bit of a difference — and there's been less until recently — institutional focus on decrees and their enforcement (so, maybe talk about it in a little bit), but that's changed over time. Historically at DOJ, if the lead attorney who was preparing the case for litigation, who settled the case — it would be that person's responsibility to then also enforce the decree. However, lead attorneys who are talented are in short supply, and often they're off doing the next thing, right? So it's not their highest and best use to continue to work on this matter that's been settled. The division might want them off working on the next big case, or something along those lines. And so, it would be a bit haphazard, and sometimes the responsibilities for enforcing the decree would fall to another attorney who was maybe not as familiar with the background or the negotiations, and would be less personally invested in seeing it through. Not that they wouldn't do a good job, but they simply just don't have all the facts and the background. And so I think, at least in my observation, the enforcement of existing decrees historically could be a bit uneven. I don't think they did a bad job, but I think there was less of a focus on it. Dionne Lomax Yeah. And look, speaking of structural changes, the DLJ actually made some structural changes of its own, and has recently centralized its activity in this area in what is now called the Office of Decree Enforcement. Just curious to know, what's your understanding of this new entity and what you think its implications are for business enterprises? Joe Miller Well, this happened last August, so it hasn't even been a year. And if you look on the DOJ website, there's no list of enforcement cases within that office. I think probably — just speaking as it's too new, when I saw this, it just really struck me as the DOJ was trying to mimic FTC best practices. So now they're making it more of an institutional commitment to enforcing decrees; that it won't be up to the lead attorney, if that person is still around and available to do this, that they'll have people in the division dedicated to doing just this. And so it just — it looks just like the FTC, right? So you've got the same thing, and I imagine (without knowing), but I think that they'll probably be involved in negotiating the decrees. Just because that person is there, they'll be demanding some consistent policy, right? So it sort of elevates the status of this thing, to sort of gain more attention on the front office. And if you've got an Office of Degree Enforcement, you'll need a consistent set of policies consistently enforced. And so I would expect, over time, that you'll get the AAG's attention, to try to articulate what it is that they're trying to do. And so you don't have a staffer making this policy, you'll have a politically accountable person appointed by the president, or one of that person's appointees, speaking to this with authority. Dionne Lomax Very interesting. Yes, we will most certainly keep our eyes on the activities of the Office of Decree Enforcement going forward. And so, there are some who might say that understanding the nuts and bolts of consent decree enforcement — Hey, you know what, that’s for the lawyers, we're going to let the lawyers take care of that. And then it may not really be necessary for business executives to understand much about that. What's your perspective on that? Do you agree? Do you disagree? And can knowing this information that we've just talked about today, help a company in it's antitrust compliance efforts? Joe Miller I think so. And I disagree with the idea that, leave it to the lawyers, everything's going to be fine. I think the lawyers — I don't want to lose my lawyer union card; lawyers can do a lot for you Dionne Lomax Laughter Joe Miller But, I think when a company signs a decree, they need to be prepared to live with it. And so it's not enough to say lawyers just negotiate this like it's a minor commercial contract and that'll be fine. Really need executive focus on what it is that you're signing up to do and being prepared to do it. Cause I think over time, you've seen more emphasis on decree enforcement. And I think the change at DOJ, the changes over time at the FTC, point to this. And if you're not prepared to live with it up front, and really think through what those obligations are gonna mean for your business, then think about whether you want to be signing that decree. As an example — this goes back a ways — but the famous Microsoft case, the monopolization case that went up through the DC Circuit — it’s kind of held up as now the example of how modern antitrust monopolization cases should be done. That is, it set out standards and it was a per curiam case. It was, I think, written by Judge Ginsburg, who's quite well known in the field of antitrust. It's really thought it was a very well done opinion, very well done case. That came out of some really hard-fought litigation at the Justice Department. The backstory to that is, it was actually the FTC that started investigating Microsoft in the — I kind forget it it was like ‘89 or early nineties — and the commission at the time split two-two, so they couldn't bring a case. And then they shifted over to the Justice Department which, as far as I can tell, hasn't happened since. It's quite unusual. They are usually pretty territorial about the commodities and the cases that they bring. And so, this went over to the Justice Department who did its own investigation. Wound up getting a consent decree with Microsoft with some, I think relatively — at least, relative to the decree they actually wound up with after the fully litigated case — but they entered a decree, they signed it. And then, as far as I can tell, they didn't take it all that seriously. I don't know all the details, but not long after that, there was a decree enforcement investigation when they weren't stopping what they said they would stop doing, which then mushroomed into the full-blown investigation. So it became a much broader scope of investigation, rather than just sort of the narrow practice that had been forbidden by the original decree. They started looking at that and they said, well, there's more here going on that we need to understand. And then that sort of led to the full-blown Superbowl of cases for — I think it was probably the biggest antitrust case to come along in a long time, and the biggest one after that for like ten years or something. So it was really the lack of focus. I mean, I — who knows whether Microsoft would've gotten sued or investigated anyway, but I think the mechanism for getting their government's attention was this. And so just a — I wouldn't call it an apocryphal tale, but just an interesting anecdote that if you aren't prepared to live up to the decree that you're signing, there could be consequences. Dionne Lomax Absolutely. Absolutely. Well, Joe, I really want to thank you for shedding some light on this inside baseball of consent decree enforcement at both FTC and DOJ. I look forward to working with you in a future podcast. Joe Miller Thanks. I look forward to that too. Appreciate the opportunity to speak with you, Dionne.