Overview of the Advisory Opinion Process at the Federal Trade Commission

The views presented are those of author and do not necessarily represent those of the Bureau of Competition, or any individual Commissioner.

1. The Commission's Rules are found at 16 C.F.R .§ 1.1
   1. Availability: "Any person, partnership, or corporation may request advice from the Commission with respect to a course of action which the requesting party proposes to pursue."
   2. Commission vs. staff opinions:
      1. "The Commission will consider such requests for advice and inform the requesting party of the Commission's views, where practicable, under the following circumstances: (1) The matter involves a substantial or novel question of fact or law and there is no clear Commission or court precedent; or (2) the subject matter of the request and consequent publication of Commission advice is of significant interest."
      2. "The Commission has authorized its staff to consider all requests for advice, where applicable, in those circumstances in which a Commission opinion would not be warranted."
      3. In practice, most advisory opinions are staff letters. The availability of Commission letters is limited by the rule and by practical considerations (such as the time limits).
   3. Limitations
      1. Hypothetical questions will not be answered.
      2. A request normally will be considered inappropriate where "(1) the same or substantially the same course of action is under investigation or is or has been the subject of a current proceeding involving the Commission or another governmental agency, or (2) an informed opinion cannot be made or could be made only after extensive investigation, clinical study, testing, or collateral inquiry."
      3. The identity of the companies or other persons involved should be disclosed.
      4. Opinions are available with respect to proposed conduct, not conduct that is ongoing; and it needs to be intended conduct, not merely possible conduct.
         1. The proposal needs to be fully enough developed so that we can evaluate it. Organizational efforts can go forward without jeopardizing the availability of an opinion, so long as the specific actions that give rise to the antitrust issues are not carried out.
         2. With respect to a network, for example, we expect to see at least drafts of the organizing documents, participation agreements, and marketing plans. We would consider the conduct ongoing if a network had negotiated or executed contracts with payers, whether or not performance had begun. In some cases, agreement among the providers as to prices would be considered ongoing conduct.
         3. If we see ongoing conduct, we may open an investigation.
   4. Nature of Advice: "On the basis of the materials submitted, as well as any other information available, and if practicable, the Commission or its staff will inform the requesting party of its views." The rules do not further describe the nature of the views to be provided. In the past, the advice generally has been in terms of legality. However, the Enforcement Policy Statements are phrased in terms of obtaining "the Agencies' enforcement intentions regarding specific conduct on an expedited basis." This is what DOJ and more recent FTC staff letters provide.
   5. Effect of Letter
      1. "Any advice given by the Commission is without prejudice to the right of the Commission to reconsider the questions involved and, where the public interest so requires, to rescind or revoke the action. Notice of such rescission or revocation will be given to the requesting party so that he may discontinue the course of action taken pursuant to the Commission's advice. The Commission will not proceed against the requesting party with respect to any action taken in good faith reliance upon the Commissions's advice under this section, where all relevant facts were fully, completely, and accurately presented to the Commission and where such action was promptly discontinued upon notification of rescission or revocation of the Commission's approval."
      2. "Advice rendered by the staff is without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding." To my knowledge, this has never been done; the letters have been a reliable indicator of the staff's intentions and views absent a significant change of fact.
   6. Application for an Opinion
      1. Under the rules, the request (even for a staff opinion) is to be filed with the Secretary (one original and two copies). At the same time, two copies should be sent directly to the Health Care office.
      2. The request "should (1) state clearly the question(s) that the applicant wishes resolved; (2) cite the provisions of law under which the question arises; and (3) state all facts which the applicant believes to be material. . . . Submittal of additional facts may be requested prior to the rendering of any advice."
      3. Thus, the rules suppose an opinion based on the factual submission of the parties, together with other available information.
   7. Public Disclosure
      1. Written advice and "requests therefor, including names and details, will be placed in the Commission's public record immediately after the requesting party has received the advice . . ." In practice, we place all information received from the requestor, including attachments and letters.
      2. Request for confidential treatment: "...subject to any limitations on public disclosure arising from statutory restrictions, the Commission's rules, and the public interest. A request for confidential treatment of information submitted in connection with the questions should be made separately." The staff withholds from the record all information for which confidentiality is asserted, and sends its recommendations to the Commission for action. The request should specifically describe why the information should not be disclosed, with reference to FOIA exemptions. Overbroad requests will not be granted.
2. The procedure for DOJ business review letters is outlined at 26 C.F.R. §  50.6.
   1. Availability: DOJ will review proposed business conduct and state its enforcement intentions.
   2. Limitations:
      1. Proposed business conduct only.
      2. The Department has discretion to refuse to consider a request.
   3. Effect of Letter
      1. "A business review letter states only the enforcement intentions of the Division as of the date of the letter, and the Division remains completely free to bring whatever action or proceeding it subsequently comes to believe is required by the public interest. As to a stated present intention not to bring an action, however, the Division has never exercised its right to bring a criminal action where there has been full and true disclosure at the time of presenting the request."
      2. The letter has no application to a party that does not join in the request.
   4. Application for a Business Review
      1. Requests must be submitted in writing to the Assistant Attorney General, Antitrust Division, Department of Justice, Washington, DC 20530.
      2. "The requesting parties are under an affirmative obligation to make full and true disclosure with respect to the business conduct . . . . Each request must be accompanied by all relevant data . . . . In connection with any request for review the Division will also conduct whatever independent investigation it believes is appropriate."
   5. Public Disclosure
      1. The Division's letter and the business review request are made public upon request.
      2. Supporting documents are made public within 30 days of release of the letter, for one year. Thereafter, the file is closed, and the documents are returned to the requesting party or disposed of.
      3. The requesting party may request delay in making some or all of the information public, for a specified minimum period of time, by showing good cause for nondisclosure: such as that disclosure would have a detrimental effect upon the requesting party's operations or business relationships. This is in addition to limitations on disclosure arising from statute, executive order, or the national interest.
3. Enforcement Policy Statements
   1. The health care community can obtain the Agencies' enforcement intentions regarding specific proposed conduct on an expedited basis.
   2. The Agencies will respond within certain time frames after "all necessary information is received": 90 days regarding any matter addressed in the statements, except hospital mergers outside the safety zone and multiprovider networks; 120 days regarding multiprovider networks and "other non-merger health care matters." "The Agencies intend to work closely with persons making requests to clarify what information is necessary . . . . "
   3. The Policy Statements do not otherwise vary the preexisting structure of the advisory opinion and business review programs.
4. Relationship Between the Agencies
   1. A clearance process is used to notify one Agency of requests received by the other.
      1. In general, requests are handled by the Agency receiving them.
      2. Requests can be transferred between Agencies due to factors such as prior experience, common issues or facts involved in different requests.
   2. While the opinion of one Agency is not binding on the other, the Agencies work closely together in issuing opinion letters.
      1. The Policy Statements are issued by the Agencies jointly.
      2. The Agencies engage in ongoing discussions of issues of mutual concern.
5. Information to Submit
   1. We need a clear description of the proposed conduct and the relationships among the participants, identification of the relevant markets, and a discussion of the likely competitive impact of the conduct.
   2. We need factual support for the assertions concerning issues such as market definition and market share. If the asserted markets do not appear plausible on their face, more information may be required.
   3. DOJ has published a summary of the information it needs for business reviews concerning proposed joint ventures or information exchanges. 58 Fed. Reg. 6132 (1993). This publication is helpful both as a guide to the issues that should be discussed and as a guide to the information that should be submitted in a request to either agency.
      1. With respect to joint ventures, the following information should be supplied:
         1. Name, address, legal form and ownership structure of the venture;
         2. Participants in the venture and the nature of their business and contributions to the venture;
         3. Purpose of the venture and any limitations on its activities;
         4. All products and services to be offered by the venture;
         5. Extent to which participants already produce the products or services to be offered by the venture;
         6. Identity and significance of competitors to the venture;
         7. Any restrictions on the ability of the participants to compete with the venture;
         8. Any restrictions on the exchange of information among the participants;
         9. The projected ten largest customers for products or services to be offered by the venture and the projected volume of their purchases;
         10. Entry conditions in the market in which the venture will operate;
         11. The efficiencies to be achieved through the venture;
         12. Documents relating to the legal structure of the venture or its competitive and legal implications, and business plans of the venture and its participants.
      2. With respect to information exchanges, the following information should be supplied:
         1. The participants to the information exchange;
         2. Purposes of the exchange;
         3. Nature of the information to be exchanged;
         4. Method of exchange of information;
         5. Characteristics of the market;
         6. Identity and significant of competitors of the participants;
         7. The ten largest customers in the relevant geographic market for any products or services involved in the exchange and an estimate of their annual purchases;
         8. Safeguards relating the disclosure of firm-specific information;
         9. Efficiencies to be achieved through the exchange; and
         10. Documents on the agreement to exchange information or the competitive or legal implications of the exchange.
6. Practical Realities
   1. The advisory opinion process is best suited to questions concerning the Commission or staff's legal analysis of particular types of conduct, where the facts concerning market definition are fairly clear and market power is not likely to be present.
   2. Where there are difficult factual issues (e.g., market definition), or it is difficult to predict the competitive effects of the proposed conduct, the process is less likely to result in a definitive opinion.
   3. The premise of the FTC advisory opinion rules clearly is that they address legal issues based on recited facts; the rules do not contemplate rendering opinions that require extensive investigation.
   4. In some cases, investigation will be necessary to evaluate claimed efficiencies or to predict competitive effects. This is especially true in merger matters, and the need for extensive investigation may make it impossible for the Agency to provide a definitive opinion in some instances. Because of these factors, the Agencies have not committed to rendering opinions on merger matters falling outside the safety zone in Statement 1 within any predetermined time frame.
   5. We do not routinely investigate to verify information provided to support geographic or product market definition or market share. The conclusions in the opinion letter are expressly conditioned on the accuracy of the factual representations. There are a number of reasons for this: availability of resources, time limits, questions concerning the validity of conclusions that can be drawn based on ad hoc investigation, without process or complainants, of prospective conduct. Thus, in most cases the opinion is only as good as the information provided to support it.
7. Practical Advice
   1. In developing a proposal, focus on what the market demands, not what you think the agency will approve. If the client makes a real effort to determine what the market needs and how to meet that need, you will have a better product and a better basis for arguing that the proposal is procompetitive.
   2. Do your homework. A submission that is complete, organized, forthright, and contains the data necessary for us to evaluate the facts, even if we don't agree with your arguments, will move much faster.
   3. If market data is not available, explain why, what efforts you have made to obtain information, and make clear what information you are relying on.
   4. Focus on the issues that are most important to the client. In some cases, the information needed to do a market analysis simply may not be available. If the crucial issue is whether the venture is likely to possess market power, the agency may not be able to render an opinion. If, on other hand, the principal issue is whether the Agencies would evaluate the conduct under the per se rule or the rule of reason would apply to the conduct, obtaining an opinion may be valuable even if a full market analysis is not possible.
   5. If the product market is one we are not familiar with, or the proposal involves a type of arrangement or types of efficiencies that we have not analyzed before, consider bringing in people "from the field" to explain the proposal directly -- not just the lawyers. This can be extremely valuable.
   6. If the issues are novel or the likelihood of a favorable opinion is seriously in doubt, consider submitting the proposal in draft form or requesting a meeting with staff to discuss the issues in advance of submitting a proposal. This will save time, especially if it is clear that the answer likely will be negative, and it can help you focus your analysis and fact gathering efforts on the critical issues.
   7. Don't try to hide the difficult issues. It you have real doubts about the likely response to a proposal, you can discuss it informally with the staff without revealing the identity of the client. If you file a request in such a matter, focus on gathering facts and refining your arguments on the difficult issues.
   8. If you have questions, call us first.
   9. It is possible to withdraw a request during the process if the client so desires. If our request for more information is not responded to within a reasonable period of time, we will deem the request withdrawn.
8. Sources of Information about Advisory Opinions and Business Reviews
   1. FTC and staff advisory opinions are available from the Public Reference Branch at (202) 326-2222. They also are available on the Internet at http://www.ftc.gov. There is a Health Care Antitrust home page under the Antitrust/Competition Issues heading that contains the text of the Enforcement Policy Statements, a list of enforcement actions, Commission actions, advisory opinions, speeches, and news releases.
   2. DOJ business reviews are available from the Legal Procedure Unit at 202 514-2481 and also are available on the Internet at http://www.usdoj.gov.