The Effect of the Merger Filing Fee Modernization Act on Antitrust Litigation and Multidistrict Litigation Venue Considerations

MFFMA’s Multidistrict Litigation Venue Change

The MFFMA’s venue rule changes may affect many MDL cases in which state attorneys general have filed parallel suits. After the new statute’s amendments, the Judicial Panel on Multidistrict Litigation may not transfer parens patriae suits brought by state attorneys general under Clayton Act section 4A to a general private civil MDL. Like federal government enforcers, state attorneys general may now file their enforcement actions in their choice of an appropriate venue and keep their cases there, without the cases being moved into MDL proceedings.

The statute governing MDLs provides that the federal courts may transfer cases to a particular district “for coordinated or consolidated proceedings” if civil actions with common questions of fact are pending in different districts. 28 U.S.C. § 1407. After such a transfer, the “coordinated” cases proceed through pretrial proceedings together under the control of a single judge. “Coordination” by itself stops short of consolidation, which combines formerly separate cases into a single legal action. The JPML may form an MDL for cases involving common questions and for the convenience and justice of the parties and witnesses. Once the relevant cases are transferred, the transferee court sets a schedule for the litigation and may appoint lead and local plaintiffs’ counsel and a plaintiffs’ steering committee to manage the MDL litigation administratively for the collective plaintiffs. As to the end of MDL proceedings, Section 1407(a) states that the JPML shall remand the cases to the district from which they were transferred unless the cases have been previously terminated.

Section 1407(g) provides that the MDL statute does not apply to actions in which the United States “is a complainant arising under the antitrust laws,” defined as certain federal antitrust statutes. Accordingly, the Department of Justice may retain its chosen venue for antitrust actions despite any MDL proceedings. Conversely, prior to the enactment of the MFFMA, antitrust actions commenced by individual states were subject to being swept into MDL proceedings. But the MFFMA changes that provision, excluding from MDLs actions asserted by state antitrust authorities based on federal antitrust statutes.

For example, In re Digital Advertising Antitrust Litigation, MDL No. 3010 (J.P.M.L. Aug. 10, 2021), involved Google’s motion to centralize various antitrust litigations in the Northern District of California, where its headquarters are located. The actions concerned alleged monopolization and suppression of competition in online display advertising, which the JPML decision described as “the marketplace for the placement of digital display ads on websites and mobile apps.” The cases at issue included claims asserted by advertisers and publishers, as well as one filed by the attorneys general of 15 states in the Eastern District of Texas. The JPML found the cases involved common issues of fact, and it combined them in the Southern District of New York, despite the objections of the state attorneys general. The JPML was unpersuaded by the states’ argument that their action was more advanced because their 18-month pre-suit investigation had already compiled voluminous discovery.

The Digital Advertising panel also denied Google’s request to transfer the action for trial pursuant to 28 U.S.C. § 1407(h). At the time of that order, section 1407(h) authorized the JPML to transfer actions brought under section 4C of the Clayton Antitrust Act, 15 U.S.C. § 15c, for trial. The MFFMA, however, deletes that provision, removing JPML authority to make such transfers for trial.

Merger Fees and Public and Private Challenges to Anticompetitive Mergers

As noted above, the MFFMA restructures fees for merger filings as part of a broader effort to increase funding for the federal agencies to challenge anticompetitive mergers. The fees that private parties pay to file Hart-Scott-Rodino notices of mergers that meet certain size thresholds offset federal agency enforcement budgets because, pursuant to Hart-Scott-Rodino, the FTC and the Department of Justice’s Antitrust Division split the filing fees. For example, the FTC’s 2020 budget justification to Congress assumed that filing fees of $136 million, together with fees for the FTC’s Do Not Call registry, would provide $151 million in fiscal year 2020. The FTC’s budget assumed the $161.3 million difference between the offsetting collections and its $312.3 million funding request would be funded through a direct appropriation. Fed. Trade Comm’n, Fiscal Year 2020 Congressional Budget Justification 5 (Mar. 11, 2019) [hereinafter Budget Justification 2020]. Discussing 2023, the FTC noted it budgeted for $274.5 million in such filing fees for 2023, along with Do Not Call registry fees, and requested a direct appropriation for the rest of its $490 million budget request. Fed. Trade Comm’n, Fiscal Year 2023 Congressional Budget Justification 15 & 71 (Mar. 28, 2022) [hereinafter Budget Justification 2023].

Merger Review Process

Hart-Scott-Rodino set up the Premerger Notification Program, requiring entities meeting certain size thresholds to file notifications with the FTC and the Department of Justice’s Antitrust Division and wait a prescribed time period before completing their transactions. The FTC also reviews news publications, industry research, and customer complaints to identify potentially anticompetitive mergers that the parties do not report.

The FTC’s Premerger Notification Office reviews reported transactions and prepares a summary description and a preliminary antitrust analysis of the reported transactions. The FTC’s Bureau of Competition’s litigation division, its Bureau of Economics, and its Merger Screening Committee then review those summaries. The FTC also shares the summaries and preliminary analyses with the Department of Justice’s Antitrust Division. The FTC and the Antitrust Division use a “clearance” process to coordinate challenges to any particular transaction so that only one agency brings any needed challenge.

The FTC reports that, to identify an anticompetitive merger, it evaluates whether the merger may enhance the surviving firms’ ability to raise prices or enable them to raise prices, reduce output, diminish innovation, or otherwise harm consumers, and whether the merger may raise barriers to entry or expansion in the industry. Budget Justification 2023, at 52. The FTC particularly notes mergers that are likely to lessen competition substantially in the economy’s sectors affecting consumers, such as healthcare, technology, energy, and retail goods and services.

The Need for Increased Enforcement to Keep Up with Increased Merger Activity

The MFFMA’s proponents, and the agencies, have noted a need for increased merger enforcement just to keep up with the number of mergers. Assistant Attorney General Jonathan Kanter, head of the Antitrust Division, expressed interest in increasing the division’s merger cases if the MFFMA passed. Testifying at a Senate hearing in September 2022, he stated that the MFFMA, if passed, would better facilitate “funding for the Division’s merger enforcement program and enabling other funds to be expended elsewhere.” He noted a record number of merger filings in 2021 and stated that increasing the division’s “capacity to block more illegal mergers” is a high priority for the division. U.S. Dep’t of Justice, Assistant Attorney General Jonathan Kanter of the Antitrust Division Testifies Before the Senate Judiciary Committee Hearing on Competition Policy, Antitrust, and Consumer Rights (Sept. 20, 2022). He noted the nearly 3,000 transactions of which the agencies were notified in fiscal year 2022, which followed fiscal year 2021 “as the largest number of filings any year since the reporting thresholds were adjusted in 2000.” He also stated the division “will litigate more merger trials this year [2022] than in any fiscal year on record.”

As shown in the graph below from the FTC, neither FTC funding nor FTC staffing has kept up with the increased number of mergers during the last 12 years:

The MFFMA should help to support additional merger enforcement. Mr. Kanter stated that enhancing the Antitrust Division’s merger enforcement capacity was a high priority. The FTC budgeted an increase of 61 additional full-time-equivalent employees for merger and joint venture enforcement between 2022 and 2023, from 202 to 263 employees, and requested more funding than in 2020. Congress reportedly approved $430 million in FTC funding for 2023, an increase from previous years. Accordingly, the MFFMA and that funding may support more litigation challenging potentially anticompetitive mergers.

Potential for Increased Private Enforcement

A second way that the MFFMA could increase litigation concerning potentially anticompetitive mergers is through increased identification of anticompetitive mergers that may be subject to private challenges. Anticompetitive mergers can harm consumers and other market participants. For example, the FTC estimated that it saved consumers over $2 billion in each year of fiscal 2015, 2016, 2017, and 2018 through litigated enforcement actions, consent orders, and abandoned or restructured transactions. It further estimated that it saved between $25.10 and $55.60 in consumer savings per dollar spent on merger enforcement allocation. Budget Justification 2020, at 83 & 84. At least some merger policy studies suggest “that a significant share of mergers have resulted in price increases[.]” Lina M. Kahn, “The End of Antitrust History Revisited,” 133 Harv. L. Rev. 1655, 1672 (2020).

Fortunately, private parties harmed by anticompetitive mergers may also bring private civil actions for damages caused by the mergers. For example, in Optronic Technologies, Inc. v. Ningbo Sunny Electronic Co., Ltd., 20 F.4th 466, 475 (9th Cir. 2021), the Ninth Circuit upheld a $ 16.8 million jury verdict for Optronic Technologies (aka Orion), a telescope distributor, on several antitrust claims, which the district court trebled. Among other claims, Optronic challenged the defendants Sunny’s and Synta’s acquisition of Meade, a telescope manufacturer. Optronic’s theory under section 7 of the Clayton Act, 15 U.S.C. § 18, was that the acquisition of Meade reduced the number of major telescope manufacturers from three to two, increasing already substantial market concentration, lessening competition, and enabling the defendants to charge supra-competitive prices. The Ninth Circuit upheld the jury’s liability finding. The Ninth Circuit also held that a proven antitrust violation that changes market structure may be a material cause of continuing damages, so recovery of such damages may continue “even after the last proven date of the violative conduct.” Commentators in 2021 noted 35 private merger challenge cases filed from 2015 to 2021, and 10 of them have been filed since 2020, suggesting private merger challenges may be increasing. Kevin Hahm et al., “Recent Private Merger Challenges: Anomaly or Harbinger?,” Antitrust 90, 92 (Summer 2021). More government challenges can point out to affected parties more mergers that are anticompetitive—for example, within the meaning of section 7—a potential secondary reason for increased litigation over mergers.

Conclusion

The MFFMA and Congress’s funding bill should increase funding for federal agency challenges to mergers that the agencies conclude are anticompetitive. The FTC’s increased funding requests and comments by the head of the Department of Justice’s Antitrust Division suggest agency interest in increased capacity and effort to challenge such arrangements, all of which suggest an increase in the amount of litigation over mergers in 2023 and following years. The number of reported mergers has increased in the last several years, and commentators suggest both that more private challenges are being filed and that a significant share of mergers increase prices for other market participants, all of which suggest a potential for increased private merger litigation based on deals that are identified as anticompetitive. The MFFMA also provides that actions by state attorneys general may now proceed in separate venues from MDL cases of private litigants, as has been the case for federal enforcement actions.

Craig S. Davis is an associate at Lockridge Grindal Nauen P.L.L.P. in its Minneapolis, Minnesota, office.

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