Lina Khan, chair of the Federal Trade Commission (FTC), responded to a letter by Sen. Elizabeth Warren, D-Mass., with regard to the lawmaker’s questions over FTC’s analysis of vertical mergers in the defense industry. Khan shared her views on the use of behavioral and structural remedies in vertical deals to protect competition in the industry.
“While structural remedies generally have a stronger track record than behavioral remedies, studies show that divestitures, too, may prove inadequate in the face of an unlawful merger,” Khan wrote in the Aug. 6th letter to the senator. “In light of this, I believe the antitrust agencies should more frequently consider opposing problematic deals outright.”
Khan answered several questions, including the consultative role the Department of Defense (DOD) plays in the commission’s review of proposed defense deals under the Hart-Scott-Rodino Act, transactions that have been subjected to behavioral remedies since 2000 and mechanisms FTC uses to select monitors to ensure that parties meet the requirements of a behavioral remedy.
The FTC chair also noted that she is skeptical that behavioral remedies are enough to keep a vertical merger from harming competition.
“This is especially true for vertical mergers involving large firms with substantial market power at one or more levels of the supply chain. The larger the market share, the higher the risk that a vertical merger will result in a reduction of competition post-merger,” Khan said.
“For that reason, I prefer structural remedies that prevent the harmful integration of assets, or would support the Commission moving to block the merger altogether,” she added.
Warren said she believes Congress and FTC should launch major antitrust reforms to safeguard national security and reduce costs for U.S. taxpayers.