Who Listens When Congress Holds a Hearing on a Proposed Merger?
Last week, a Rhode Island Congressman published a letter he sent to the Chairman of the House Judiciary Committee requesting that the committee hold a hearing on the recently-announced Amazon-Whole Foods merger. This post explores when and why Congress holds hearings on particular mergers and what power Congress has to stop a merger.
Congress is not the natural body to enforce the antitrust laws. Congress’s main role in this arena is to enact antitrust legislation. The executive branch’s Department of Justice and Federal Trade Commission enforce that legislation and the federal judiciary adjudicates challenges to mergers brought under the antitrust laws.
Notwithstanding these conventional roles, Congress has carved out a space for itself in merger review. Unlike the DOJ and FTC, which under the Hart-Scott-Rodino Act are required to review mergers larger than a particular size before they close, Congress is not required to review mergers at all, nor is it, in theory, constrained by the HSR threshold. Congress tends to hold hearings for mergers that are particularly large and that involve industries likely to be of interest to constituents and consumers. For example, Senate or House judiciary committees held hearings on proposed tie-ups between AOL & Time Warner; US Airways & American Airlines; AT&T & Time Warner; AT&T & T-Mobile; Comcast & Time Warner; Comcast & NBC Universal; Universal & EMI; and Dow Chemical & DuPont.
Congressional hearings carry additional risks for companies beyond those faced at the DOJ and FTC. While the agencies focus their merger review on the likely effect on competition in the relevant market, and are steered by published horizontal or non-horizontal Guidelines as well as case law, Congress is free to explore any topic even if not directly related to competition. For example, Congressman Cicilline’s letter acknowledges that leading antitrust scholars believe that the proposed vertical Amazon-Whole Foods merger will not injure competition or consumers, but raises concerns about the merger’s effect on employment and inequality. Companies and executives that are called to testify before Congress should therefore be prepared to defend a proposed merger on grounds more broadly than its effect on competition.
Of some comfort to companies may be that while Congress can ask whatever it wants, it does not have direct power to stop a merger. To the authors’ knowledge, Congress has never passed a resolution or special bill disapproving of a particular merger, and any attempt to do so would raise novel separation of powers issues. Still, Congress has virtually unfettered power to engage in fact-finding that it considers relevant to possible future legislation, and under that rubric Congress can use hearings to publicly voice concerns of their constituents and to extract concessions from companies. As one example, after tough questions and criticisms from senators at a hearing, Comcast and NBC Universal agreed to conditions, lasting seven years, on content distribution and pricing. While it is not possible to know whether these conditions would have been imposed absent the Congressional hearing, they demonstrate the “soft” power of Congress in challenging mergers.