Perhaps in no area is antitrust enforcement as important as mergers. Anticompetitive consolidation leads to higher prices, less choice for consumers and less innovation. Both the DOJ Antitrust Division and the FTC have made great strides in merger enforcement in the past few years. The DOJ in particular has shown a renewed willingness to go to court to block anticompetitive mergers, bringing marquee cases like its successful challenge to the merger of H&R Block and TaxAct, which would’ve produced a virtual duopoly in the tax preparation industry. As we’re working hard to prepare our taxes, we applaud the DOJ’s action to preserve consumer choice in a critical market.
Since the majority of merger cases end in a negotiated settlement, it’s crucial for consumers that the enforcement agencies get the remedy right and make sure it works. If the ultimate decision doesn’t produce a market that works, consumers and competitors alike will be harmed, and the enforcement agency hasn’t fully done its job.
An example where this could become an issue is the recent merger of rental car firms Hertz and DollarThrifty. After an exhaustive 2.5 year investigation of the proposed merger, the FTC in November entered into a complex settlement requiring Hertz to divest assets, including the Advantage brand, that will be used to create a new company to compete with the three remaining firms. The parties chose as the acquirer of the divestiture package Macquarie Group, an Australian private equity firm.
Generally the antitrust agencies are skeptical about private equity buyers, who usually only hold assets for a short time before reselling them to another party. There may have been just cause for concern in this case. Five months after the consent decree with Macquarie was proposed, the matter is still pending, a troubling sign considering most consent decrees get final approval within 30 days. Perhaps more disconcerting, the press is reporting that the FTC is now investigating whether Macquarie violated the terms of the proposed decree by terminating Sanford Miller, the executive named in the decree to be the head of the new firm.
With the troubling trajectory the deal has recently taken, the FTC needs to make clear that it will take all necessary steps to ensure that the consent decree works and is enforced as originally envisioned. It’s critical for the millions of consumers that use rental cars every year that there be a strong new competitor in this highly consolidated market. As then-FTC Chairman Job Leibowitz said when he announced the consent decree, “[t]his is a real pocketbook issue for everyday people.”
It’s also critical that the FTC get this remedy right for its own reputation and stature as an antitrust enforcer. Firms need to know that FTC consent orders will be fully enforceable, or the consequences could be considerable. The nation’s consumers need both the DOJ Antitrust Division and the FTC to be powerful, proactive enforcers willing not only to take legal action against problematic mergers, but to go to whatever length is necessary to ensure that their ultimate outcomes are pro-consumer and pro-competitive. A less-than-ideal resolution in Hertz-DollarThrifty won’t send that message. The FTC can’t afford to stop short on the rental car merger, and consumers can’t afford to let it.
Balto is an antitrust attorney, consumer advocate, and former Federal Trade Commission policy director.