After a year with some notable defeats, an appeals court has given a big boost to Lina Khan’s aggressive enforcement strategy at the F.T.C.Credit…Haiyun Jiang for The New York Times
A vote of confidence
After a sometimes tough year for the F.T.C., the agency will end 2023 with a big win. The biotech company Illumina said on Sunday that it would divest Grail, the cancer test maker it acquired for $7.1 billion in 2021, after an appeals court sided with the F.T.C.’s argument that the deal could harm competition.
The news closes the book on an ill-fated acquisition that earned Illumina no end of trouble — and showed that the assertive enforcement strategy of regulators like Lina Khan, the F.T.C. chair, can produce results.
The Fifth Circuit Court of Appeals largely upheld the F.T.C.’s argument against the deal. The agency had said that putting Illumina and Grail together would hurt competition in the cancer diagnostics industry — even though the two companies aren’t direct competitors. Critics of the F.T.C.’s move said the so-called vertical merger was allowed under antitrust rules.
The appeals court found that the F.T.C. had misapplied antitrust standards and ordered it to conduct a new review of the deal, but it also said the transaction would “substantially lessen competition.” The decision “clearly recognizes how vertical mergers can threaten competition,” Doug Farrar, an agency spokesman, told DealBook.
It comes as agencies’ heightened enforcement reviews are being fought in court. Illumina had sued the F.T.C., arguing that efforts to halt the Grail deal were unconstitutional. That echoed complaints in other cases, including one from a former hedge fund manager against the S.E.C. that the Supreme Court is now considering. Some of these lawsuits are backed by conservative activists seeking to limit agencies’ powers.
Judges on the Fifth Circuit have previously ruled against regulators, raising questions about their use of in-house tribunals to prosecute their cases. But in the Illumina case, the appeals court dismissed the company’s claim that the F.T.C. was acting unconstitutionally. “They got totally dissed by this Fifth Circuit panel,” Jon Leibowitz, a former F.T.C. chair, told DealBook.
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