June 19, 2020
At the beginning of the coronavirus outbreak, Americans quickly learned just how unprepared the country was for a pandemic. One of the most alarming revelations was that the U.S. had nowhere near the number of ventilators and other life-saving medical equipment it needed to fight the virus. That’s largely because of a surprising culprit: the Federal Trade Commission (FTC).
In April 2020, the New York Times reported on medtech giant Covidien’s 2012 acquisition of Newport Medical Instruments, a small company tasked by public health officials to produce portable ventilators to replenish the Strategic National Stockpile, an integrated collection of secret, federally-controlled warehouses stocked with critical supplies in case of an emergency, such as a terrorist attack or pandemic. Since the two companies have consolidated, however, some problems have arisen. Most notably: Covidien canceled Newport’s government contract in 2014, meaning that almost eight years after the initial push, the federal government has yet to receive any ventilators.
My colleagues and I at the Revolving Door Project recently investigated the merger and found that all of the FTC officials known to be involved in the case have since moved on to private law firm positions; many of these law firms, such as Ropes & Gray, pushed hard for the acquisition’s approval at the time. This calls into question their interests back when they oversaw the FTC and allowed a deal that would unquestionably crush competition in the ventilator manufacturing sector, leading to the problems we’re now facing.
We have identified at least one of the lawyers who worked behind the scenes of the merger: Ropes & Gray’s Michael McFalls, who boasts in his professional biography of advising Covidien in this deal. McFalls’ professional history, starting with a role at the FTC after years at private law firms, exemplifies the revolving door trajectory of successful antitrust lawyers and their role in economic consolidation.
And yet, despite his role in this debacle, one could easily imagine McFalls as a prospective appointee in Biden’s FTC or Justice Department. Historically, presidential appointees to the antitrust enforcement agencies have been attorneys with private sector experience. Career civil servants, meanwhile, rarely ascend to top posts. Former Obama administration Bureau of Competition Director Debbie Feinstein came to the FTC from a long career at Arnold & Porter, one of the largest law firms in the country, and returned to the same firm when her stint ended. Ian R. Conner, the current Bureau of Competition head, started his career at the DOJ’s Antitrust Division as a trial attorney, but climbed in rank after years at two private law firms, Hunton & Williams and Kirkland & Ellis.
As a private sector antitrust lawyer with FTC experience, McFalls has used his history of working in government to push his pharmaceutical and med tech clients’ merger deals through antitrust enforcement agencies. At least one of the cases—the Covidien-Newport merger—had serious, indeed fatal, consequences for American consumers.
The world of antitrust law, both in private practice and government, habitually relies on such lawyers. If Joe Biden really hopes to address increasing concentration in the U.S. economy, he must first address the revolving door between government, private law firms, and their corporate clients that consolidate their power through anti-competitive mergers and acquisitions.
That means people like McFalls shouldn’t have a seat at the new administration’s antitrust table.
McFalls launched his career as an attorney advising the late Democratic FTC commissioner Robert Pitofsky, the “apolitical” mentor to many of today’s influential antitrust actors across party lines, including current FTC chair Joseph Simons and the former top DOJ Antitrust enforcer Christine Varney. After “accomplishing pretty much all he set out to do” at the FTC, McFalls leveraged his experience into a position at Jones Day. There, he was promoted to a partner in the firm’s antitrust practice and worked on merger deals, including Google’s acquisition of DoubleClick, a merger whose knock-on effects cemented Google’s place as the king of search. Allowing Google to acquire DoubleClick—and its early tech which would lead to today’s targeted advertising—has grossly hurt consumer privacy and accelerated the struggles of independent journalism to this day.
McFalls’ strategies for securing merger approvals draw on his insider experience; in an interview on a 2004 tobacco industry merger, he described his predilection to encourage his client to pose a “credible threat” of litigation, an exploit aimed at the FTC’s general reluctance to go to court.
At Ropes & Gray, McFalls helped bring about the 2010’s spike in medtech mergers: Currently, McFalls lists more than 18 mergers he advised on, almost all of which fall into the medtech or pharmaceutical industries. McFalls never fails to note when a case proceeds “without Second Request,” including the Covidien-Newport merger. This means the FTC or DOJ Antitrust Division sought no additional information on how the transaction might be anti-competitive. In other words, he’s taking credit for the FTC’s failure to meaningfully investigate the competition-harming merger.
McFalls also touts his co-chairmanship of the Intellectual Property Committee of the American Bar Association’s Antitrust Section. While he ran one of the most influential publications in his legal specialty, McFalls’ work mostly fell in line with his clients’ interests. For instance, while he was still at Jones Day, he helped write an article on the “tragedy” of the FTC allowing for increased competition to incumbent pharmaceutical monopolists, i.e. his main clients. Ironically, promoting competition is ostensibly the whole point of antitrust law.
McFalls did not respond to multiple requests for comment.
If you are a prospective employer—whether public or private—who values antitrust insiders, McFalls’ resume is phenomenal. His experience at the FTC, his role in influential mergers, his connections to other antitrust lawyers, and his ABA committee chairmanship all indicate his deep knowledge of antitrust law and precedent.
What’s more, his many successes and Democratic alignment (McFalls maxed out donations to the 2012 Obama and 2016 Clinton campaigns) mean that Biden would seem lucky to have him as an antitrust employee. But this view reflects a misguided outlook that Democrats are finally starting to recognize as deeply flawed. In fact, it has led to the high rates of economic concentration that have battered the U.S. economy.
If progressives really want more antitrust enforcement from Washington, they will need to pressure a future Biden administration to exclude figures with such experience. That may be an even easier argument to make now—since a lax approach to competition policy has made it all the more difficult to fight the COVID-19 pandemic, which has already taken more than 110,000 American lives.
The same people who defend corporate clients are often entrusted with enforcing the very laws they’ve spent their careers trying to neuter from the other side of the bench. These laws are supposed to safeguard the economy and the rights of workers and consumers. But to actors like McFalls, the goals of antitrust law become secondary to how they can use their experience at enforcement agencies to more successfully advocate on behalf of harmful consolidation when they go back into higher-paying private firms.
As the Covidien-Newport merger highlighted—and plentiful statistical data proves—the revolving door at the FTC thrives because of an institutional culture. Future revolvers are influenced by like-minded private sector attorneys like McFalls. As a result, an agency designed to protect the nation from monopolistic practices instead fails miserably at defending the public interest.
Biden says he wants to reverse the inequities that stem from a highly concentrated economy, like the decline of small businesses and rising drug prices. If he wins, he will have to prove it. He will need to recognize that “personnel is policy.” As such, his team must reorganize the antitrust enforcement agencies around experienced, public-interest-focused regulators rather than smart lawyers biding their time until they can make a lucrative rotation through the revolving door.