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Potential budget cuts of government antitrust agencies threaten the efficiency and efficacy of enforcement and could undermine transparency, according to practitioners and former government officials.
The agencies face additional uncertainty as overall government funding questions loom. Congress is slated to leave town for two-and-a-half weeks starting April 7. Lawmakers will return to Washington the week of April 24 with just five legislative days before confronting an April 28 deadline when government funding for the current fiscal year will expire without further action. The fiscal year ends in September, but the two stopgap funding measures since then have only extended the availability of funds through April 28.
Lawmakers have the option to extend the funding past April, but the legislation would need approval of both chambers, which would require negotiating several procedural hurdles. Then President Donald Trump would have to sign it.
The funding questions and the talk of cutbacks in the Trump administration could hurt the smaller agencies like the Federal Trade Commission as well as the corporate governance divisions of the Justice Department that are typically shorthanded.
Antitrust agencies that review mergers and crack down on price fixing and cartels “are already lean,” said former Federal Trade Commission Chairman William Kovacic at the American Bar Association’s antitrust meeting March 28-31 in Washington.
Even a 15 percent cut for the FTC and DOJ budgets would result in staff cuts and hurt recruitment efforts, said Kovacic, who was a Republican commissioner on the FTC from 2006 to 2011 and chaired it in 2008. He is now the director of the competition law center at George Washington University Law School.
The White House has provided few guidelines for how it wants to see the government funded, but Trump’s proposed fiscal 2018 “skinny budget” called for a 3.8 percent cut to the Justice Department as a whole. It didn’t address the Federal Trade Commission.
The Justice Department’s antitrust division is operating under its fiscal 2016 allotment of $165 million, which includes 830 full-time-equivalent employees, including 380 attorneys. Those staffing levels have stayed consistent since fiscal 2014, and the division has only had slight bumps in its funding levels.
The Federal Trade Commission’s competition bureau, with allotments for 554 full-time-equivalent employees, is operating under a fiscal 2016 $135.7 million annual budget. It got a slight bump from $127.1 million in fiscal 2015, which allowed for 16 more full-time employees.
Last year, both antitrust agencies requested increases over the previous year’s allotment but have been operating under stopgap funding since October. The DOJ’s antitrust division wanted 98 more attorneys, while the FTC asked for 19 additional full-time-equivalent employees.
For staffers at the agencies and the attorneys who regularly deal with them, cuts would be problematic. Even the threat of cuts “is poison,” said Kovacic.
In 2016, the DOJ’s antitrust agency faced “huge logistical challenges” in simultaneously prosecuting two major trials to block the proposed mergers of Aetna Inc. with Humana Inc. and Anthem Inc. with Cigna Corp., said Patricia Brink, the director of civil enforcement in the division.
“We ended up getting lawyers from virtually every section of the division,” she said, adding that the “back office” support staff processed 15 million documents.
Marvin Price, director of criminal enforcement, said the career staff at the agency is ready to work with the new administration, but he acknowledged the challenges that could arise with multiple litigations. “I’m confident we’ll be able to handle anything that comes up,” he said.
Price, Brink and Kovacic spoke on various panels at the ABA meeting, which is one of the U.S.'s biggest gatherings of antitrust professionals and government officials.
Kovacic was on a panel of lawyers from the ABA section’s transition task force, which released a report in January recommending antitrust priorities for the new administration. Current antitrust practitioners and Kovacic said talk from the White House of severe budget cuts across the government could blunt the ABA’s suggestions. If such cuts occur, the enforcement agencies will struggle to fulfill their mandate with fewer resources.
There are “soft” areas of investment -- the ones most likely to be cut if the budget shrinks -- that could pay off in more coherent enforcement and better transparency, some antitrust practitioners said. Leah Brannon, a partner at Cleary Gottlieb and co-chair of the ABA report task force, said mergers “should remain a major focus for the agencies” and more transparency would improve the process.
More transparency also means more work. The ABA antitrust section recommended that the FTC and the DOJ issue closing statements in all investigated merger cases that don’t lead to a formal challenge. Closing statements would tell merging parties why some deals cleared after receiving a second request for information, she said. Without them, attorneys only understand the agency’s reasoning when a merger doesn’t clear.
For the DOJ, this would mean about 25 closing statements a year. Brannon said the parties would learn from them, which would help them streamline future submissions.
Activities like this -- designed to create a coherent domestic enforcement framework or improve cooperation internationally -- would be some of the first areas hurt if there is a budget cut, said Theodore Voorhees Jr. of Covington & Burling, the task force’s other co-chair. Those may seem like a “soft” activities, but they’re “incredibly important,” he said.
One area where enforcement is expected to stay keen? There is “no chance” that the new administration won’t continue to vigorously enforce against cartels, Voorhees said.
Uncertainty about budgets has already impacted the agencies, Kovacic said.
“There is not a lot of spare capacity there,” he said, adding that hiring decisions at the FTC and the DOJ are on hold. New hires, many recent college or law-school graduates, are still waiting to see if there is funding for the positions they are supposed to fill, he said.
“Key to the capabilities of the agencies is their people,” Kovacic said. Hampering recruitment of new talent, whether through budget cuts or hiring freezes, hamstrings agencies reliant on top quality staff, he said.
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