Under fire by members of Congress for holding in-house proceedings where the agency always wins, the Federal Trade Commission has delayed issuing a competition-related administrative decision.
The agency's four politically appointed commissioners last week were due to rule on a decision by Chief Administrative Law Judge Michael Chappell, who rejected a case by FTC prosecutors against McWane Inc. for colluding to fix prices in the water works fittings market in May. However, the judge did agree with the agency on other charges that McWane illegally excluded competitors.
The commissioners pushed the deadline for their review of the 464-page decision to late January.
Since 1995, the commission has always reversed its administrative law judges when they found for a defendant, according to David Balto, public interest antitrust lawyer and former FTC official, opening the agency to criticism that the process - where the commission acts as both judge and prosecutor - is unfair.
At a recent oversight hearing, Rep. Spencer Bachus (R-Ala.), who chairs the House Judiciary Committee's Subcommittee on Regulatory Reform, Commercial and Antitrust Law, flagged these concerns.
“With this kind of record and an unbeaten streak that Perry Mason would envy, a company might wonder whether it is worth putting up a defense at all in a system in which the FTC brings a complaint, the case is tried before an administrative law judge at the FTC, and the FTC holds the authority to overturn a decision adverse to the agency,” Bachus said on Nov. 15.
The agency may have taken the critique to heart. A week later, the FTC on Nov. 21 announced it would push back its decision in the McWane case “to ensure that it can give full consideration to the many issues presented.”
To Balto, the delay “likely shows the difficulty the commission faces in trying to find a violation where the [administrative law judge] found none,” he said. “In the past 20 years the commission has always reversed the [judge] when he dismissed a complaint; that will be a very tough job in this case.”
The case against McWane, represented by Baker Botts and Maynard Cooper and Gale, concerns the market for ductile iron pipe fittings used in municipal and regional water distribution systems. The FTC alleged seven counts of unfair competition in violation of Section 5 of the FTC Act, claiming that McWane and the other two leading companies in the market entered into an illegal agreement in 2008 to fix, raise and stabilize prices. (The other two companies, Sigma Corporation and Star Pipe Products Ltd., settled the charges.)
Chappell found that "Complaint Counsel's daisy chain of assumptions fails to support or justify an evidentiary inference of any unlawful agreement involving McWane.” However, he did find that the company “engaged in monopolistic practices, attempted to monopolize, engaged in a conspiracy to monopolize, and engaged in an unreasonable restraint of trade.”
Once the FTC issues its final determination, it can be appealed to the U.S. Court of Appeals for the D.C. Circuit. The appeals court has reversed the commission at a rate four times higher than the norm for a district court judge, according to Rep. Jason Smith (R-Mo.). “To me, that feels like an imbalance,” Smith said at the Nov. 15 hearing.
In July 2006, for example, the commissioners reversed administrative law judge Stephen McGuire after he dismissed a monopolization case against Rambus Inc. involving the market for dynamic random access memory. Two years later, the D.C. Circuit reversed the FTC and found for Rambus.
At the hearing, FTC Chairwoman Edith Ramirez defended the system. “I think when you examine the process as a whole, in my view it’s quite clear that the process is fair,” she said. “I recognize that we have been reversed on occasion, but I think that we look at these matters very closely and proceed only when we believe there is harm to competition.”
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