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New FTC Policies Restore Prior Approval Policy For Merger

 |  October 31, 2021

The Federal Trade Commission, led by new Democratic Chairwoman Lina Khan, has adopted a series of policy changes aimed at cracking down on corporate mergers, reported Wall Street Journal. 

The latest initiative came this week when Democrats who control the five-member FTC announced a policy that would give the commission veto power over a company’s future transactions once it attempts an allegedly anticompetitive merger or acquisition.

The new prior-approval policy will be incorporated into legal settlements in which merging companies make concessions to resolve FTC concerns that their tie-up would be anticompetitive. The commission in those agreements plans to prohibit companies from making future acquisitions in the same market—and possibly other markets—without its say-so. The FTC might also seek prior-approval rights when companies drop a proposed merger after an antitrust investigation, or if the FTC wins a merger challenge in court.

Holly Vedova, tapped by Ms. Khan to lead the FTC’s bureau of competition, said in a statement the new policy restores a practice the FTC followed until the mid-1990s and “forces acquisitive firms to think twice before going on a buying binge because the FTC can simply say no.”

The policy adds a layer of enforcement beyond standard US antitrust rules, which say companies doing sizable mergers must submit them for government review and can close their transaction after a waiting period, unless the FTC or Justice Department files a lawsuit and convinces a court to block the deal. The department hasn’t adopted a policy similar to the FTC’s new measure, raising questions about diverging approaches.

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