New FTC commissioner calls for 'a return to fairness' in antitrust enforcement

The newest member of the U.S. Federal Trade Commission, in his first major public speech on antitrust regulation, said Thursday that enforcement must shift from an emphasis on maximizing efficiency, which often benefits large companies, to policing unfair practices.

FTC Commissioner Alvaro Bedoya said that despite Congress repeatedly passing antitrust laws demanding fairness for small businesses — especially those in rural areas — enforcement in the past four decades has moved toward protecting efficiency.

This has helped big companies secure regulatory approval for mergers by promising to deliver lower prices to consumers through economy of scale, Bedoya said. Yet for many years, "it was not a mainstream idea that those predicted price reductions could offset the harm of a merger that increases market power," he said in a speech at Open Book in downtown Minneapolis.

"Today, it is axiomatic that antitrust does not protect small business. And that the lodestar of antitrust is not fairness, but efficiency," he said. "How did this happen? ... I think it is time to return to fairness."

Bedoya, who was appointed by President Joe Biden, cited the case of a child with cancer in West Virginia whose pharmaceutical benefits manager (PBM) blocked a prescription from being filed at a local independent pharmacy.

The PBM, which Bedoya did not identify, wanted the medication dispensed by its own mail-order specialty pharmacy, even though the patient might have to wait up to two weeks. Ultimately, state regulators intervened and the local pharmacy dispensed the medicine.

"It may be efficient [from the company's perspective] to send a child home to wait two weeks for their cancer medicine," Bedoya said. "We all know it isn't fair."

The FTC announced in June an inquiry into the PBM industry with compulsory orders sent to six companies, including Minnetonka-based UnitedHealth Group and Eagan-based Prime Therapeutics.

In an interview with the Star Tribune, Bedoya said commissioners "voted out 5-0 — so a bipartisan vote — to investigate the pharmacy middleman industry. ... It is my personal top priority to make sure that it is conducted as rigorously as possible."

The FTC is led by five commissioners nominated by the president and confirmed by the Senate. No more than three commissioners can be of the same political party — currently three of five were named by Democrats.

Bedoya was confirmed by the Senate in May and sworn in for a term that ends in 2026. Previously, he taught law at Georgetown University and was chief counsel to former U.S. Sen. Al Franken, D-Minn.

Clearly there are situations where antitrust review should consider efficiency, Bedoya told the Star Tribune, but Congress has mandated that the FTC's job is to protect against unfair methods of competition.

"Can we say that [efficiency] is the goal of antitrust? No," he said. "And then separately, I think this assumption that small business is inefficient is completely wrong."

In his speech, Bedoya said consolidation has had a range of consequences, including the loss of independent pharmacies in rural Minnesota and fewer options for ranchers to process their meat or buy fertilizer, seeds and grain.

He told the story of an independent South Dakota grocer who pays more for several products than big box retailers. The grocer had to drive 50 to 100 miles to those very big box stores, so he could buy products the large manufacturers weren't sending to his store during the pandemic.

On PBMs, Bedoya said, the industry has evolved over the past two decades from a mix of 39 companies to three large, vertically integrated companies — meaning they not only sell pharmacy benefits management but offer other related services, too, including operating pharmacies and clinics, and providing health insurance.

One of the big three is UnitedHealth Group, according to a footnote in the written version of Bedoya's speech.

"The idea took hold within enforcement agencies [in the 1970s and '80s] that mergers, particularly vertical ones, were presumptively good for the economy and good for consumers," Bedoya said. "This idea was given the greatest weight for vertical mergers, the kind of mergers that help make it so that a pharmacy middleman has an interest in steering a patient to their own pharmacy."

From 2003 to 2018, residents of 30 rural ZIP codes in Minnesota lost their only pharmacy, he said.

Bedoya seconded a call from FTC Chair Lina Kahn for enforcement of the Robinson-Patman Act, a 1936 law passed to protect small-town grocers against competition from large companies that received "secret payoffs from their suppliers."

He said he supported Kahn's "goal to reactivate enforcement under our unfairness authority and to issue a policy statement setting out the scope of that authority."

The comments came during a half-day event co-sponsored by the Open Markets Institute, a Washington, D.C.-based nonprofit, and Minneapolis-based Institute for Local Self-Reliance.