ABOUT | News | September 4, 2009

Management skills required

The Deal Magazine
By Cecile Kohrs Lindell

September 4, 2009

Richard Feinstein often takes to the roads of Washington, running seven-minute miles with Cooper, his energetic Dalmatian.

Feinstein, 57, will benefit from the training: He'll need speed and endurance for his new job as director of the Federal Trade Commission's Bureau of Competition. In the three months since Feinstein took the job managing the lawyers who conduct merger and other antitrust investigations, the competition bureau already has launched three merger challenges. All are in healthcare.

FTC scrutiny of the industry is occurring as debate over changing the healthcare system is reaching a fevered pitch. "We're going to stay aggressive, especially in areas where there is a lot of potential impact for consumers such as healthcare," Feinstein says.

The FTC's concern about healthcare competition isn't new -- the agency has long considered it a core area of importance. Five years ago the FTC and the Justice Department issued their first interagency report about the importance of competition in the sector.

Feinstein says he's a pragmatic lawyer, not an ideologue. "I want the bureau to be efficient and aggressive," he says. "We should look for practical ways to solve problems we identify."

Feinstein returns to government after about a decade as a partner at Boies, Schiller & Flexner LLP, a firm the Clinton Justice Department hired to try the antitrust case against Microsoft Corp.

Before joining the private sector, Feinstein worked at the DOJ's antitrust division and more recently the FTC. In the late 1990s under Democratic Chairman Bob Pitofsky, Feinstein headed the FTC's healthcare shop, which investigates violations of antitrust law in the sector, though not usually mergers.

But it was at the DOJ where Feinstein gained the managerial tutelage that has fueled his career. His mentor was Donald Flexner, a former deputy assistant attorney general. Flexner is known as an excellent manager who is adept at handling complex litigation, and Feinstein learned from those skills, says Donald Russell, a partner at Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP. According to lawyers at the FTC, new Chairman Jon Leibowitz short-listed Feinstein to run the competition bureau because of Feinstein's reputation as a good manager.

"My highest priority as a manager is to keep things moving," says Feinstein. Although investigations all proceed at different speeds, it's critical that each has a schedule, a deadline and milestones for the commission to rule promptly, Feinstein says.

Possible staff delays prompted some of the agency's dirty laundry to be aired when Endocare Inc. in June abandoned its acquisition of Galil Medical Ltd. Commissioner Tom Rosch, a Republican, publicly chastised staff for moving slowly on the case and called on them to run more efficient investigations. Other commissioners, including Leibowitz, countered that the companies hampered the investigation by not providing requested information.

While Feinstein won't discuss that investigation, he worries about the issue raised by Rosch. To speed things up, Feinstein has ordered staff members to limit their recommendations on antitrust investigation to 50 pages.

Feinstein is also forging a relationship with Bureau of Economics Director Joseph Farrell and Farrell's deputy, Howard Shelanski, both well-known antitrust economists. Feinstein says they have already provided compelling economic analysis for court cases.

A key issue for antitrust lawyers is the prospect of the FTC's interest in expanding the use of Section 5 of the 1914 legislation that created the agency, which gives it the authority to challenge unfair competition without defining the activity that might be unfair.

While the chairman has discussed the value of harnessing the potential of the law, the antitrust bar says it could create uncertainty for clients, and place another burden on the federal courts.

The DOJ can only use the Sherman Act, which prevents illegal agreements and monopolization, and the FTC's efforts to expand antitrust enforcement with a separate tool could continue to widen the gulf between the two agencies, subjecting some industries to a heavier regulatory scheme. Feinstein says he sees potential in Section 5.

"I would be most inclined to recommend Section 5 in circumstances where it appears there is potential for substantial harm to consumers," he says. "Ultimately, the use of Section 5 is up to the commission, but it is on the radar screen at the FTC."


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