In most areas of federal law enforcement, a single agency has jurisdiction. For antitrust, however, there are two: the Federal Trade Commission and the Antitrust Division of the Department of Justice. Both agencies have similar mandates to protect consumers by ensuring competitive markets, but there are important differences, especially in health care enforcement.
Federal antitrust enforcement has resided in the DOJ since the enactment of the Sherman Act in 1890. The DOJ is part of the executive branch, and the assistant attorney general for antitrust is a political appointee who must be confirmed by the Senate. With rare exceptions, AAGs are experienced antitrust practitioners. Enforcement actions are brought in federal court.
The FTC in many respects is a different entity. In 1915, after a lengthy political debate about the inadequacy of antitrust enforcement under the Sherman Act, Congress formed the FTC to establish a single agency with broad powers dedicated to competition and consumer protection enforcement. Because Congress was unhappy with the inability of courts to interpret the antitrust laws, it gave the FTC the power to litigate its cases through an "administrative process."
The FTC is comprised of five commissioners appointed by the president and confirmed by the Senate; they serve staggered seven-year terms. The FTC is bipartisan; no more than three commissioners can be of the same political party. Like any other administrative agency, the chairman is designated by the president.
AAGs invariably are seasoned antitrust practitioners, and two have become Supreme Court justices. The FTC has more modest requirements for leadership positions: a commissioner need not be a lawyer or an economist. Often, commissioner positions are used as political rewards. In the early 1960s, when Attorney General Robert Kennedy accused the FTC of hiring cronies, the FTC chairman noted, "They may have been cronies, but they are your brother's cronies." Neither the AAG nor any commissioner has had any significant experience in health care.
Both agencies dedicate considerable resources to health care enforcement. The FTC has a health care division in its Bureau of Competition that has 32 attorneys, and health care enforcement accounts for more than 25 percent of its resources. The DOJ has a smaller number of attorneys in its Litigation 1 Section. These individuals also typically lack health care experience; the agencies proclaim that antitrust is the same across all industries, but this one-size-fits-all approach often does not work for health care.
The division of responsibilities between the agencies is not wholly transparent. The FTC typically focuses on health care providers, primarily doctors and hospitals, and rarely has ventured into issues involving health insurers. The DOJ typically focuses on health insurers and occasionally on hospitals and providers. Both agencies challenged hospital mergers in the 1990s but, after a series of painful defeats, the DOJ seems to have ceded hospital merger review to the FTC.
Why do we need two federal antitrust cops, and what are the central differences between the two agencies?
Jurisdiction. Only the DOJ has the authority to bring criminal actions. The FTC's authority is limited to bringing enforcement actions to civil actions against commercial sector entities, although it can oversee nonprofit entities in certain limited circumstances (for example, when a nonprofit association adopts a rule with a clear commercial impact). Consequently, the FTC has been reluctant to investigate or bring enforcement actions against insurance companies (some of which are still nonprofit) or nonprofit hospitals.
The DOJ rarely has pursued criminal charges against health care providers for alleged collusion. Those endeavors generally have been perceived as fools' errands because of the significant public outcry behind the idea of putting doctors in jail.
Litigation. The DOJ litigates all its cases in federal court before a generalist independent judge. The FTC can choose between a federal court injunction or an administrative proceeding before an FTC administrative law judge. This is no minor home-court advantage. Ultimately, the same commissioners who decided to issue the complaint are the final judges, and they haven't ruled against themselves since 1990. A company can appeal the commission's decision to a court of appeals, but that is minor solace to someone who might have to survive several years of litigation to reach a more impartial judge. Recently, the commission took almost two years to issue an opinion.
There have been occasions in which the FTC appears to use administrative litigation to relitigate a merger case already lost in federal court, and many have criticized this effort to take a second bite of the apple. Moreover, this policy seems inconsistent with the Clinton administration policy that the FTC would not litigate an administrative case after it had lost in federal court.
Politics. As with everything else, politics matter. The DOJ is an arm of the administration and its actions reflect the administration's economic policies. During his candidacy, President Obama criticized the DOJ's lack of health insurance enforcement. Not surprisingly, once in office, the administration began to challenge health insurance mergers and other anticompetitive conduct.
Because it is bipartisan, the FTC is somewhat less political and less susceptible to pressure from a change in administration. On the other hand, as an independent agency, it is more sensitive to concerns raised in Congress.
Studies and Reports. The FTC also has broader powers to study competitive problems, hold hearings and prepare reports to better educate businessmen, Congress and other decision-makers about competition issues. One example is its 2002 retrospective review of mergers, which imposed significant costs on many hospitals as they responded to the FTC's extensive requests for information. Although the study created the expectation of numerous enforcement actions to unwind troublesome mergers, the FTC brought only a single case against the merger of Evanston (Ill.) Northwestern Healthcare and Highland Park (Ill.) Hospital. The FTC ultimately approved the merger with a modest remedy. Over the objections of the staff, it chose not to break up the merger because of the quality achievement of the merged hospital; instead, it required separate insurance negotiating teams for the two former hospitals.
Another example is the FTC's 2004 report on health care competition, "A Dose of Competition." The report was based on 27 days of hearings and addressed a broad range of topics including hospital and provider competition, hospital-merger analysis, and transparency in health care markets. Unfortunately, the report echoed Snow White's stepmother's mirror by telling the agencies that their enforcement standards were "the fairest of them all."
Shared antitrust jurisdiction is at best a mixed bag for consumers and competition. Because of it, enforcement is somewhat less susceptible to political forces. On the other hand, because health insurance and provider enforcement are separate, the FTC too often fails to see how health insurance concentration is the critical problem in the market. Competition problems need a coordinated approach, and we can ill afford the luxury of competing antitrust enforcers. In his State of the Union address, Obama called for rationalization of government agencies. Perhaps having a single health care antitrust cop is a great place to start.
David Balto (firstname.lastname@example.org) is an antitrust lawyer and a senior fellow at the Center for American Progress. He is the former policy director of the Federal Trade Commission.