United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 24, 2015 Decided June 9, 2015

No. 14-5182

PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF 

AMERICA,

APPELLANT

v.

FEDERAL TRADE COMMISSION,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:13-cv-01974)

Evan A. Young argued the cause for appellant. With him 

on the briefs were Aaron M. Streett, Shane Pennington, Wm. 

Bradford Reynolds, Joseph A. Ostoyich, and James F. Rill.

Michele Arington, Assistant General Counsel, Federal 

Trade Commission, argued the cause for appellee. With her 

on the brief were William J. Baer, Assistant Attorney General, 

U.S. Department of Justice, Kristen C. Limarzi, Chief, 

Appellate Section, Robert J. Wiggers, Attorney, Jonathan E. 

Nuechterlein, General Counsel, Federal Trade Commission, 

David C. Shonka, Principal Deputy General Counsel, and Joel 

Marcus, Assistant General Counsel. John F. Daly, Attorney, 

Federal Trade Commission, appeared as trial counsel.
2

Before: GRIFFITH, Circuit Judge, MILLETT, Circuit Judge, 

and EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

EDWARDS.

EDWARDS, Senior Circuit Judge: The Hart-Scott-Rodino 

Antitrust Improvements Act of 1976 (the “Act” or “HSR 

Act”) was passed by Congress “[t]o improve and facilitate the 

expeditious and effective enforcement of the antitrust laws.” 

Pub. L. No. 94-435, 90 Stat. 1383, 1383 (codified as amended 

at 15 U.S.C. § 18a). The Act added Section 7A to the Clayton 

Antitrust Act of 1914, 15 U.S.C. § 12 et seq., to establish 

notification and waiting requirements for large acquisitions 

and mergers. The principal purpose of the Act is to facilitate 

Government identification of mergers and acquisitions likely 

to violate federal antitrust laws before the proposed deals are 

consummated. The Federal Trade Commission (“FTC” or 

“Commission”), with the concurrence of the Assistant 

Attorney General for the Antitrust Division, has extensive 

authority under the Act to define terms in the HSR Act and to 

promulgate regulations necessary to carry out the purposes of

the Act. 

In 2013, following notice and comment rulemaking, the 

FTC modified its reportable asset acquisition regulations to 

clarify that, even if patent holders retain limited 

manufacturing rights or co-rights, transfers of patent rights 

within the pharmaceutical industry constitute reportable asset

acquisitions if all commercially significant rights are 

transferred (the “Rule”). Premerger Notification; Reporting 

and Waiting Period Requirements (“Notice of Final 

Rulemaking”), 78 Fed. Reg. 68,705, 68,706–07 (Nov. 15, 

2013). Before the adoption of this Rule, the FTC had 
3

considered a transfer of patent rights to be a reportable asset 

acquisition only if all rights to make, use, and sell the patent 

were passed to the acquiring person. The FTC’s 2013 

rulemaking action clarified that reportable asset requirements 

apply to transactions in the pharmaceutical industry in which 

the licensor transfers exclusive patent rights but retains

limited manufacturing rights or co-rights to the patent. The 

FTC explained that the Rule focuses on the pharmaceutical 

industry because the agency had not found any other industry 

that relied on this type of patent transfer arrangement. The 

Commission made it clear, however, that if other industries 

adopted patent transfer practices of the sort found in the 

pharmaceutical industry, “such exclusive patent licenses 

remain potentially reportable.” Id. at 68,709.

In 2013, Appellant, Pharmaceutical Research and 

Manufacturers of America (“PhRMA”), filed suit in District 

Court challenging the FTC’s Rule. The District Court granted 

summary judgment for the FTC, Pharm. Research & Mfrs. of 

Am. v. FTC, 44 F. Supp. 3d 95 (D.D.C. 2014), and PhRMA 

now appeals. PhRMA’s appeal to this court rests on several 

causes of action arising under Section 706 of the 

Administrative Procedure Act (“APA”), 5 U.S.C. § 706. First,

PhRMA contends that the Rule should be overturned under 

Chevron U.S.A. Inc. v. Natural Resources Defense Council, 

Inc., 467 U.S. 837 (1984), either because it is precluded by

the plain meaning of the Act or because it is based on an 

impermissible interpretation of the Act. Second, PhRMA 

argues that the FTC’s action in adopting the Rule was

arbitrary and capricious and therefore the Rule should be 

vacated pursuant to the commands of Motor Vehicle 

Manufacturers Association of the United States, Inc. v. State 

Farm Mutual Automobile Insurance Company (“State 

Farm”), 463 U.S. 29 (1983), and its progeny. We find no 

merit in these claims.
4

It is noteworthy that PhRMA does not challenge the 

FTC’s authority to regulate the pharmaceutical industry or the 

particular patent transfers at issue in the Rule. Indeed, 

PhRMA has made no argument in this appeal that the Rule 

would be inconsistent with the Act or violate the APA if it 

applied generally. As a result there is no claim before the 

court that the FTC erred in its determination that the patent 

transfers identified by the Rule are reportable asset 

acquisitions under the HSR Act. PhRMA merely challenges 

the form of the Rule in that it focuses on the pharmaceutical 

industry.

We affirm the judgment of the District Court because 

none of PhRMA’s claims has merit. Nothing in the plain 

meaning, context, or legislative history of the Act 

unambiguously precludes the FTC from promulgating a rule, 

the substance of which is clearly within its delegated 

authority, merely because the rule focuses on a specific 

industry that is the sole source of the problem being 

addressed. Congress did not address the “precise question at 

issue” here, but it did “explicitly [leave] a gap [in the statute] 

for the agency to fill.” Chevron, 467 U.S. at 843. Therefore,

the only “question for the court is whether the agency’s 

answer is based on a permissible construction of the statute.”

Id. We answer that question in the affirmative. The Rule is

obviously consistent with the purpose of the Act, which is to 

improve the enforcement capabilities of the FTC and the 

Department of Justice by facilitating their review of large 

acquisitions before they are consummated. And the FTC’s 

explanation for its promulgation of the Rule is perfectly 

reasonable and supported by the record.

We also reject PhRMA’s arguments that the FTC’s 

adoption of the Rule was arbitrary and capricious. The 
5

Commission reasonably explained and supported its position

during the rulemaking process, and PhRMA was in no way

prejudiced by any alleged lack of opportunity to comment on 

the proposed rule.

I. BACKGROUND

A. The HSR Act

As noted above, the Act fosters Government 

identification of mergers and acquisitions likely to violate 

federal antitrust laws before the proposed transactions are

consummated. Pharm. Research, 44 F. Supp. 3d at 100 (citing 

S. REP. NO. 94-803, at 1 (1976); H.R. REP. NO. 94-1373, at 5 

(1976); Mattox v. FTC, 752 F.2d 116, 119–20 (5th Cir. 

1985)). The statute states in part that,

[e]xcept as exempted pursuant to subsection (c) of this 

section, no person shall acquire, directly or indirectly, 

any voting securities or assets of any other person, unless 

both persons (or in the case of a tender offer, the 

acquiring person) file notification pursuant to rules under 

subsection (d)(1) of this section and the waiting period 

described in subsection (b)(1) of this section has expired

. . . .

15 U.S.C. § 18a(a). A merger or acquisition triggers the Act’s 

requirements if one of the parties “is engaged in commerce or 

in any activity affecting commerce” and one of the threshold 

financial values defined in the Act is met. Id. § 18a(a)(1), (2).

The HSR Act does not define “asset[],” “acquire,” or 

“person.” It does, however, list a number of exempt 

transactions, id. § 18a(c), none of which are relevant here.
6

The Commission’s delegated authority under the Act is 

extensive. The Act provides in relevant part that:

The Federal Trade Commission, with the concurrence of 

the Assistant Attorney General and by rule in 

accordance with section 553 of Title 5, consistent with 

the purposes of this section—

(1) shall require that the notification required under 

subsection (a) of this section be in such form and 

contain such documentary material and information 

relevant to a proposed acquisition as is necessary 

and appropriate to enable the Federal Trade 

Commission and the Assistant Attorney General to 

determine whether such acquisition may, if 

consummated, violate the antitrust laws; and 

(2) may—

(A) define the terms used in this section; 

(B) exempt, from the requirements of this 

section, classes of persons, acquisitions, 

transfers, or transactions which are not likely 

to violate the antitrust laws; and 

(C) prescribe such other rules as may be 

necessary and appropriate to carry out the 

purposes of this section.

Id. § 18a(d).

The Act also provides enforcement mechanisms for the 

FTC and the Assistant Attorney General. The FTC or the 

Assistant Attorney General may apply to the United States
7

district courts to “order compliance” or “grant such other 

equitable relief as the court in its discretion determines 

necessary or appropriate.” Id. § 18a(g)(2)(A), (C). It also 

provides for civil penalties of up to $10,000 for each day 

against “[a]ny person, or any officer, director, or partner 

thereof, who fails to comply with any provision of this 

section.” Id. § 18a(g)(1).

B. The Rule

The FTC’s disputed Rule is premised on certain 

undisputed assumptions: the Act covers asset acquisitions; a 

patent is an asset; therefore, the acquisition of a patent is 

potentially reportable under the Act. See Premerger 

Notification; Reporting and Waiting Period Requirements 

(“Notice of Proposed Rulemaking”), 77 Fed. Reg. 50,057,

50,058 (Aug. 20, 2012). Prior to the adoption of the Rule, the 

FTC had determined that a transfer of rights to a patent was a 

reportable asset acquisition only if all of the rights to “make, 

use, and sell” a patent or part of a patent were exclusively 

transferred to the licensee. This was because “[a]n exclusive 

license is substantively the same as buying the patent or part 

of the patent outright, and carries the same potential 

anticompetitive effects.” Notice of Final Rulemaking, 78 Fed. 

Reg. at 68,706. 

Transactions in the pharmaceutical industry caused the 

FTC to reconsider its position regarding when transfers of 

patents are reportable asset acquisitions. In the rulemaking 

leading to the new Rule, the FTC explained:

In recent years . . . it has become more common for 

pharmaceutical companies to transfer most but not all of 

the rights to “make, use, and sell” under an exclusive 

license, such that the “make, use and sell” approach is no 
8

longer adequate in evaluating the reportability of 

exclusive licenses in the pharmaceutical industry for 

HSR purposes. A licensor will often, for example, retain 

the right to manufacture under the patent, but under the 

agreement the licensor can only manufacture for the 

licensee. In such a case, under the [FTC’s Premerger 

Notification Office’s (“PNO’s”)] “make, use, and sell” 

approach, the retention of the right to manufacture would 

render the transaction non-reportable even though the 

licensor would not be manufacturing for its own 

commercial use, but exclusively for the licensee. . . . This 

rule addresses when an exclusive patent license to a 

pharmaceutical patent or part of a patent constitutes an 

asset transfer under the HSR Act.

The “all commercially significant rights” test in the 

rule captures more completely what the “make, use, and 

sell” approach was a proxy for, namely whether the 

license has transferred the exclusive right to 

commercially use a patent or a part of a patent. 

§ 801.2(g)(3) of the rule provides that the transfer of 

exclusive rights to a patent or a part of a patent in the 

pharmaceutical industry is a reportable asset transfer if it 

allows only the recipient to commercially use the patent 

as a whole, or a part of the patent in a particular 

therapeutic area or specific indication within a 

therapeutic area. The rule codifies the PNO’s longstanding position that the retention of co-rights does not 

render a license to the patent or part of the patent as nonexclusive. The rule also provides that such a reportable 

asset transfer may occur even if the licensor retains the 

limited right to manufacture under the patent or part of a 

patent for the licensee.

Id. at 68,706–07 (footnote omitted). 
9

The Rule includes definitions of “all commercially 

significant rights,” “limited manufacturing rights,” and “corights” when such rights are transferred and/or retained in the 

context of an exclusive transfer of rights to a pharmaceutical 

patent. Id. at 68,712–13. The Rule also provides that a 

“transfer of patent rights [to a pharmaceutical patent] 

constitutes an asset acquisition” if “all commercially 

significant rights” are transferred even if the licensor retains 

“limited manufacturing rights” or “co-rights.” Id. at 68,713. 

The Rule was adopted as proposed on November 15, 2013, 

and became effective on December 16, 2013. Id. at 68,705–

06. 

The FTC’s determination that an exclusive transfer of 

rights to a patent or part of a patent, in a situation in which the 

licensor retains “limited manufacturing rights” or “co-rights,” 

is a reportable asset acquisition under the HSR Act is not in 

dispute in this case. PhRMA merely challenges the Rule’s 

focus on the pharmaceutical industry. 

C. The FTC’s Rulemaking

During the rulemaking proceedings, PhRMA opposed the 

FTC’s Rule on the grounds that it “burdens . . . only a single 

industry to the exclusion of all others” and that it constitutes

“discriminatory treatment of the pharmaceutical industry” 

because the Rule applies only to that industry. Comments of 

PhRMA on Notice of Proposed Rulemaking, reprinted in

Joint Appendix (“JA”) 12–13. In support of its position, 

PhRMA submitted the declaration of an economic consultant, 

Dr. Varner, which purported to refute the FTC’s observation 

that the types of transactions at issue were limited to the 

pharmaceutical industry. Varner Declaration, reprinted in JA 

28–47. Representatives of PhRMA also met with FTC 
10

Commissioners to discuss the Rule. It does not appear that, in 

its written comments and in its meetings with the 

Commission, PhRMA ever disputed the FTC’s determination 

that the exclusive license agreements that were covered by the 

Rule were asset acquisitions that were properly subject to the 

Act’s reporting requirements.

The FTC responded in detail to each of PhRMA’s 

objections. See 78 Fed. Reg. at 68,707–12; see also Pharm.

Research, 44 F. Supp. 3d at 106–10 (describing in detail 

PhRMA’s objections and the FTC’s response to each of 

them). As relevant to the issues raised on appeal, the FTC 

elaborated on the reason why the Rule focused on the 

pharmaceutical industry: 

For the five-year period ending December 31, 2012, the 

PNO received filings for 66 transactions involving 

exclusive patent licenses, and all were for pharmaceutical 

patents. The PNO has not found other industries that rely 

on these types of arrangements. . . . In addition, requests 

for guidance on the treatment of exclusive patent 

licensing transactions have generally been limited to the 

pharmaceutical industry. Accordingly, the Commission 

has not found a need for a rule applicable to other 

industries. Moreover, the Commission’s experience with 

such transactions in the pharmaceutical industry allows it 

to develop a rule that is tailored to exclusive patent 

licenses in the pharmaceutical industry, defining the 

relevant scope of the transfer of part of a patent by 

reference to the therapeutic area or specific indication 

within a therapeutic area.

Notice of Final Rulemaking, 78 Fed. Reg. at 68,708. The FTC 

stated further that, “[b]ased on HSR filings and requests for 

advice on the reportability of transactions, the PNO has found 
11

that exclusive patent licensing agreements that transfer all of 

the rights to commercially use a patent or part of a patent 

almost solely occur in the pharmaceutical industry.” Id. The 

Commission made it clear, however, that to the extent that 

comparable agreements might exist in other industries, the 

“exclusive patent licenses [in those other industries would] 

remain potentially reportable.” Id. at 68,709.

The FTC explained that the licensing agreements cited in 

the Varner Declaration were not the same as the transactions 

the FTC had seen in the pharmaceutical industry. On this 

point the agency said:

The agreements cited by Comment 2 are not the kind of 

agreements that are the subject of the rule. They are 

exclusive distribution agreements, which convey to the 

licensee only the exclusive right to distribute the patented 

product. In exclusive distribution agreements, the 

licensor retains not just the right to manufacture but all 

commercially significant rights to the patent, such that no 

reportable asset acquisition takes place.

Id.

The FTC additionally addressed PhRMA’s comment that 

the agency lacked statutory authority to promulgate the Rule. 

The FTC said that its action was justified by its authority to 

define terms and to prescribe rules “as may be necessary and 

appropriate to carry out the purposes of this section.” Id. at 

68,709. The FTC rejected PhRMA’s “all-or-nothing 

approach,” explaining that it had the discretion to “proceed 

incrementally” in promulgating rules that were designed to 

address known problems. Id. at 68,709–10 & n.30 (citing 

cases).
12

PhRMA filed suit in the District Court, arguing “that the

limited application of the Rule to the pharmaceutical industry 

exceeds the FTC’s grant of statutory authority under the HSR 

Act, in violation of 5 U.S.C. § 706(2)(C), and was arbitrary 

and capricious, in violation of 5 U.S.C. § 706(2)(A).” Pharm.

Research, 44 F. Supp. 3d at 114 (citations omitted). The 

parties filed cross-motions for summary judgment. In a very 

thorough opinion, the District Court found no merit in 

PhRMA’s claims and granted summary judgment in favor of 

the FTC. 

II. ANALYSIS

A. Standard of Review

On appeal from a grant of summary judgment, our review 

is de novo. See Jicarilla Apache Nation v. U.S. Dep’t of 

Interior, 613 F.3d 1112, 1118 (D.C. Cir. 2010). “In a case like 

the instant one, in which the District Court reviewed an 

agency action under the APA, we review the administrative 

action directly, according no particular deference to the 

judgment of the District Court.” Holland v. Nat’l Mining 

Ass’n, 309 F.3d 808, 814 (D.C. Cir. 2002).

PhRMA claims that the FTC action violates Section 

706(2)(C), which states that a court may “hold unlawful and 

set aside agency action, findings, and conclusions found to be 

. . . in excess of statutory jurisdiction, authority, or limitations, 

or short of statutory right.” 5 U.S.C. § 706(2)(C). In

addressing this claim, we apply the familiar Chevron

framework. The first step is to determine whether Congress 

has directly addressed the “precise question at issue.” 

Chevron, 467 U.S. at 842. If not, we then proceed to Chevron

Step Two. Under this step, “[i]f Congress has explicitly left a 

gap for the agency to fill, there is an express delegation of 
13

authority to the agency to elucidate a specific provision of the 

statute by regulation. Such legislative regulations are given 

controlling weight unless they are arbitrary, capricious, or

manifestly contrary to the statute.” Id. at 843–44. 

As is often the case, our review here of the FTC’s 

interpretation of its authority under Chevron Step Two 

overlaps with our arbitrary and capricious review under 5 

U.S.C. § 706(2)(A). See EDWARDS, ELLIOTT, & LEVY,

FEDERAL STANDARDS OF REVIEW 217–18 (2d ed. 2013)

(discussing the interplay of Chevron Step Two and arbitrary 

and capricious review). Section 706(2)(A) provides that a 

court may “hold unlawful and set aside agency action, 

findings, and conclusions found to be . . . arbitrary, 

capricious, an abuse of discretion, or otherwise not in 

accordance with law.” In this case, in light of the claims 

raised by PhRMA, arbitrary and capricious review requires us 

to consider whether the FTC action is supported by reasoned 

decisionmaking, Allentown Mack Sales & Serv., Inc. v. NLRB, 

522 U.S. 359, 374 (1998); whether the agency “relied on 

factors which Congress [did] not intend[] it to consider,” State 

Farm, 463 U.S. at 43; and whether the Rule was promulgated 

in “observance of procedure required by law,” 5 U.S.C. 

§ 706(2)(D).

B. The FTC’s Rule Does Not Violate the Plain Terms of

the Act (Chevron Step One)

It is axiomatic that, “[b]efore a court may invoke 

Chevron Step One, it must find that ‘the intent of Congress is 

clear,’ meaning that the statutory provision at issue is 

‘unambiguous[]’ with respect to the question presented.”

EDWARDS, ELLIOTT, & LEVY, supra, at 174 (quoting Chevron, 

467 U.S. at 842–43) (second alteration in original). We look 

to the “text, structure, purpose, and history” of the statute for 
14

evidence of congressional intent on the precise question at 

issue. See Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 

581, 600 (2004). Here, the “precise question” before the court 

is whether the Act unambiguously precludes the FTC from 

promulgating a rule, the substance of which is clearly within 

its delegated authority, merely because the rule focuses on a 

specific industry that is the sole source of the problem being 

addressed. Given the relevant terms of the statute, the answer 

is no.

The Act provides that “[e]xcept as exempted pursuant to 

subsection (c) of this section, no person shall acquire, directly 

or indirectly, any voting securities or assets of any other 

person, unless both persons . . . file notification pursuant to 

rules under subsection (d)(1) of this section [and satisfy the 

prescribed waiting period].” 15 U.S.C. § 18a(a). “Person” is 

not defined. However, 

 Subsection (d)(2)(A) authorizes the FTC to “define the 

terms used in this section”;

 Subsection (d)(1) says that the FTC “shall require that 

the notification required under subsection (a) of this 

section be in such form and contain such documentary 

material and information relevant to a proposed 

acquisition as is necessary and appropriate to enable 

the Federal Trade Commission and the Assistant 

Attorney General to determine whether such 

acquisition may, if consummated, violate the antitrust 

laws”; and

 Subsection (d)(2)(C) authorizes the FTC to “prescribe 

such other rules as may be necessary and appropriate to 

carry out the purposes of this section.” 
15

Id. § 18a(d). Taken together, these statutory provisions give 

the FTC, with the concurrence of the Assistant Attorney 

General, great discretion to define statutory terms and to

promulgate rules to facilitate Government identification of 

mergers and acquisitions likely to violate federal antitrust 

laws before the mergers and acquisitions are consummated. 

PhRMA has not identified any statutory language that 

unambiguously limits the FTC’s great discretion in any way 

relevant to this case.

It is true that Section 18a(c) lists certain “classes of 

transactions” that are exempt from the filing requirements of 

the Act, but the exemptions do not, as PhRMA claims,

purport to limit or otherwise define “person” in the phrase “no 

person shall acquire” in Section 18a(a). Rather, the reference 

to “no person shall acquire” reasonably can be construed to 

refer to persons who are not exempt and who are otherwise 

subject to the regulations promulgated by the FTC to enforce 

the terms of the Act. The Commission was not obliged to 

“exempt” any industries when it adopted the Rule. Indeed, the 

record indicates that the FTC did not mean to exempt other 

industries from the Rule because it recognized that the 

problem uncovered in the pharmaceutical industry might one 

day appear in other industries and remain potentially 

reportable.

This view of the statute is reinforced by the provisions of 

Subsection (d), which addresses “Commission rules.” 15 

U.S.C. § 18a(d). The statute makes it clear that the 

Commission “may” “exempt . . . classes of persons, 

acquisitions, transfers, or transactions which are not likely to 

violate the antitrust laws.” Id. § 18a(d)(2)(B) (emphasis 

added). However, as noted above, the statute also makes it 

clear that the Commission “may” “prescribe such other rules

as may be necessary and appropriate to carry out the purposes 
16

of this section.” Id. § 18a(d)(2)(C) (emphasis added). In other 

words, the Act does not compel the FTC to cabin regulated 

“persons” solely by resorting to exemptions from generally 

applicable rules.

Given this reasonable view of the Act, it is fairly plain 

that the statute did not unambiguously prohibit the FTC from 

focusing on the pharmaceutical industry in its 2013 

rulemaking action. The Rule at issue was adopted to address a 

problem that was specific only to the pharmaceutical industry. 

And the FTC acted within the compass of the statutory

authority given to the agency pursuant to Section 18a(d)(2)(C)

when it adopted a rule focused on that group.

Furthermore, the Rule is perfectly consistent with the 

purposes of the Act. The HSR Act was enacted to assist the 

FTC in enforcing other provisions of the Clayton Act, and to 

give the FTC and the Department of Justice a tool to identify 

problematic mergers and acquisitions before they were 

consummated. S. REP. NO. 94-803, at 1, 7 (stating that the 

purpose of the Act “is to support and invigorate effective and 

expeditious enforcement of antitrust laws, to improve and 

modernize antitrust investigation and enforcement 

mechanisms,” and “to facilitate [the antitrust authorities in] 

enjoining illegal mergers before they are consummated.”); 

H.R. REP. NO. 94-1373, at 8–10 (explaining the difficulties for 

the government in challenging anti-competitive mergers after 

they have been completed and stating that the advance 

notification requirements will both improve enforcement 

efficacy and save resources wasted in post-merger 

enforcement proceedings). Given these purposes, it would 

have made no sense for Congress to restrict the FTC from 

focusing on review of particular types of transactions that the 

agency determines occur only in one industry. 
17

PhRMA advances an entirely unconvincing argument 

that the FTC’s action should be vacated because the agency

acted outside the bounds of its delegated authority when it 

promulgated the Rule. The argument is specious because it 

wrongly assumes that Congress intended to compel the FTC 

to issue only rules of general applicability across industries 

except when exempting certain industries from coverage. As 

shown above, this is not what the statute says. The Act is at 

worst ambiguous on this point, but the provisions of 15 

U.S.C. § 18a certainly do not unambiguously limit the 

authority of the FTC in the way that PhRMA contends. And, 

as the Supreme Court has made clear, a court must defer 

under Chevron to an agency’s reasonable interpretation of a 

statutory ambiguity that concerns the scope of the agency’s 

statutory authority. City of Arlington v. FCC, 133 S. Ct. 1863 

(2013). We do so here.

In another vain effort to support its argument that the 

statute precludes the Rule, PhRMA asserts that the Rule 

“imposes notification requirements on persons in the 

pharmaceutical industry who propose certain transactions but 

not on persons in other industries proposing identical 

transactions.” Br. for Appellant 19. This assertion finds no 

support in the record. The Rule focuses on the pharmaceutical 

industry because that was the only industry in which the FTC 

had seen such arrangements. Moreover, as noted above, the 

Commission has repeatedly explained that if such 

arrangements arise in other industries, they too will be 

potentially reportable under the Act. Notice of Final 

Rulemaking, 78 Fed. Reg. at 68,706, 68,709. 

PhRMA also argues that the statute viewed in context 

supports its view that the Rule violates the plain terms of the 

Act. According to PhRMA, “the HSR Act is a component of a 

far larger, and quite complex, antitrust statutory scheme, 
18

which includes many industry-specific statutes.” Br. for

Appellant 24. “Congress was thus aware of extant industryspecific antitrust laws when it drafted the HSR Act and 

intentionally imposed a general notification requirement.” Id.

at 25. We disagree. As explained above, the provisions of 15 

U.S.C. § 18a simply do not support this construction of the 

Act. To prevail on its Chevron Step One argument, PhRMA 

has to do better than concoct an interpretation purportedly 

based on the statute’s context. PhRMA “must show that the 

statute unambiguously forecloses the [agency’s] 

interpretation.” Vill. of Barrington v. Surface Transp. Bd., 636 

F.3d 650, 661 (D.C. Cir. 2011). PhRMA’s “context” 

argument fails to do this.

PhRMA additionally contends that the legislative history 

of the Act demonstrates Congress’s intent to restrict the 

FTC’s authority to impose reporting requirements upon 

specific industries to the exclusion of others. It attempts to 

support this claim by arguing that a Senate bill that was 

before Congress, which did not pass, would have given the 

FTC “carte blanche power to impose or withhold notification 

requirements.” Br. for Appellant 30 (citing S. 1284, 94th 

Cong. § (b)(3) (1975)). According to PhRMA, the law that 

was enacted is less sweeping in its terms than the Senate bill 

that did not pass, and “[t]his history demonstrates that 

Congress specifically contemplated – and declined – giving 

FTC the authority that it now illicitly claims as its own.” Id. at 

31. The District Court thoroughly and convincingly debunked 

PhRMA’s legislative history argument, finding that the 

legislative history shows only Congress’s concern that small 

businesses and mergers not be burdened with the notification 

requirements. Pharm. Research, 44 F. Supp. 3d at 119–22; 

see also Earl W. Kintner et al., The Hart-Scott-Rodino 

Antitrust Improvements Act of 1976: An Analysis, 46 GEO.

WASH. L. REV. 1, 13 n.72 (1977). 
19

The most telling response to PhRMA’s legislative history 

argument is that the enacted provisions of 15 U.S.C. § 18a, 

read together, did not preclude the FTC from adopting the 

Rule. By expressly granting the FTC the authority to “define 

the terms used in this section” and to “prescribe such other 

rules as may be necessary and appropriate to carry out the 

purposes of this section,” 15 U.S.C. § 18a(d)(2)(A), (C), 

Congress “explicitly left . . . gap[s] for the agency to fill.” 

Chevron, 467 U.S. at 843. PhRMA’s claim that the Act 

unambiguously bars the FTC from promulgating a rule, which 

in substance is within its delegated authority, if the rule 

focuses on a specific industry that is the sole source of the 

problem being addressed is fanciful. We therefore reject 

PhRMA’s invocation of Chevron Step One.

C. This Court Owes Deference to the FTC Because the

Contested Rule Embodies a Permissible Construction of 

the Act (Chevron Step Two)

If, as we have found in this case, “the statute is silent or 

ambiguous with respect to the specific issue, the question for 

the court is whether the agency’s answer is based on a 

permissible construction of the statute.” Chevron, 467 U.S. at 

843. And if, as we have found, “Congress has explicitly left a 

gap for the agency to fill, there is an express delegation of 

authority to the agency to elucidate a specific provision of the 

statute by regulation. Such legislative regulations are given 

controlling weight unless they are arbitrary, capricious, or 

manifestly contrary to the statute.” Id. at 843–44. Thus, at 

Chevron Step Two, our focus is on “whether the [agency] has 

reasonably explained how the permissible interpretation it 

chose is rationally related to the goals of the statute.” Vill. of 

Barrington, 636 F.3d at 665 (internal quotation marks

omitted). 
20

There is no doubt that the Commission’s action was taken 

pursuant to express delegations of authority. The Act grants

the FTC the authority to act by rulemaking, 15 U.S.C. 

§ 18a(d), to “define the terms used in this section,” and to 

“prescribe such other rules as may be necessary and 

appropriate to carry out the purposes of this section,” id.

§ 18a(d)(2)(A), (C). Given the terms of the Act, and for the 

reasons enunciated in part II.B and articulated below, we have 

little trouble in concluding that the Rule is not “manifestly 

contrary to the statute.” Chevron, 467 U.S. at 844.

There is also no doubt that the Commission clearly and 

reasonably explained why it adopted the Rule. The FTC 

importantly noted that it was “not expanding the HSR [Act’s]

requirements to parties or transactions not covered by the 

Act,” but “simply clarifying the types of transactions that 

constitute asset transfers for which the Act requires prior 

notification.” Notice of Final Rulemaking, 78 Fed. Reg. at 

68,709. The FTC determined that the Rule reflected a

necessary and important clarification of its regulatory policy 

because, “due to the evolution of pharmaceutical patent 

licenses, the ‘make, use, and sell’ approach [was] no longer 

adequate to evaluate the HSR reportability of exclusive patent 

licenses in the pharmaceutical industry.” Id. at 68,707. Such 

exclusive patent licenses, the FTC explained, are reportable 

asset acquisitions under the Act “even if the licensor retains 

the limited right to manufacture under the patent or part of a 

patent for the licensee.” Id.

The FTC further explained that, in its experience, these 

types of arrangements had only occurred in the 

pharmaceutical industry. Specifically, in the five years prior 

to the rulemaking, 
21

the [FTC’s Premerger Notification Office] received filings 

for 66 transactions involving exclusive patent licenses, 

and all were for pharmaceutical patents. The PNO has not 

found other industries that rely on these types of 

arrangements. . . . In addition, requests for guidance on 

the treatment of exclusive patent licensing transactions 

have generally been limited to the pharmaceutical 

industry.

Id. at 68,708. 

Finally, the Commission explained that the agency’s 

“experience with such transactions in the pharmaceutical 

industry allow[ed] it to develop a rule that is tailored to 

exclusive patent licenses in the pharmaceutical industry, 

defining the relevant scope of the transfer of part of a patent 

by reference to the therapeutic area or specific indication 

within a therapeutic area.” Id.

The FTC’s interpretation of the Act reflected in the Rule 

is obviously “rationally related to the goals of” the statute. See 

Vill. of Barrington, 636 F.3d at 665 (internal quotation marks 

omitted). And the Commission’s explanation for focusing on 

the pharmaceutical industry is perfectly reasonable. See 

Animal Legal Def. Fund v. Glickman, 204 F.3d 229, 235 

(D.C. Cir. 2000) (“[W]e accord agencies broad deference in 

choosing the level of generality at which to articulate rules.”). 

It is not the role of this court to second-guess the agency on 

these matters.

PhRMA contends that the FTC’s interpretation of its 

authority under the Act is not entitled to deference under 

Chevron Step Two because “[i]n thirty-seven years of 

administering the HSR Act, [the] FTC not only never claimed 

authority to impose the notification requirements in an 
22

industry-targeted manner, but rejected that heretofore 

undiscovered carte blanche grant of authority from § 18a.” Br. 

for Appellant 37 (internal quotation marks omitted). This 

argument cannot carry the day. PhRMA quotes language from 

a 1978 FTC notice of final rules implementing the pre-merger 

notification requirements of the HSR Act, in which the FTC 

declined to exempt joint ventures in specific industries from 

the Act’s reporting requirements. Id. at 37–38 (quoting 

Premerger Notification; Reporting and Waiting Period 

Requirements, 43 Fed. Reg. 33,450, 33,496 (July 31, 1978)). 

However, the FTC’s reasoning in this notice regarding its 

exemption authority says nothing about the FTC’s 

interpretation of its separate authority to define when an asset 

acquisition is reportable under the Act; thus, we are hardly 

persuaded by PhRMA’s argument that the Rule represents a 

departure from past practice. The record does not indicate that 

the FTC has ever previously indicated that it lacked the 

authority to act as it did when it promulgated the Rule.

Furthermore, even if the FTC had viewed its authority 

under the Act differently in the past and then expressed an 

intention to embrace a different construction of the Act when 

it adopted the Rule, the prior interpretation of the Act would 

not foreclose it from changing its position. Rust v. Sullivan, 

500 U.S. 173, 186–87 (1991) (the Supreme Court “has 

rejected the argument that an agency’s interpretation ‘is not 

entitled to deference because it represents a sharp break with 

prior interpretations’ of the statute in question”). That is not 

the situation in this case, however, because the position that 

PhRMA now attempts to attribute to the FTC is not one that 

the agency has ever expressed. Thus, PhRMA’s argument 

rests on nothing more than the faulty suggestion that, although 

this is the first time that the FTC has taken a position on the 

matter in dispute, it was precluded from adopting the Rule by 

a “past practice” emanating from prior agency inaction. This 
23

is an absurd proposition and it certainly finds no support in 

the law.

D. The Commission’s Action Also Survives Review Under 

the Arbitrary and Capricious Standard

Section 706(2)(A) of the APA provides that a reviewing 

court shall “hold unlawful and set aside agency action, 

findings, and conclusions found to be . . . arbitrary, 

capricious, an abuse of discretion, or otherwise not in 

accordance with law.” 5 U.S.C. § 706(2)(A). “[T]he 

touchstone of arbitrary and capricious review is reasoned 

decisionmaking.” EDWARDS, ELLIOTT, & LEVY, supra, at 203. 

Normally, an agency rule would be arbitrary and 

capricious if the agency has relied on factors which 

Congress has not intended it to consider, entirely failed to 

consider an important aspect of the problem, offered an 

explanation for its decision that runs counter to the 

evidence before the agency, or is so implausible that it 

could not be ascribed to a difference in view or the 

product of agency expertise.

State Farm, 463 U.S. at 43.

The analysis of disputed agency action under Chevron

Step Two and arbitrary and capricious review is often “the 

same, because under Chevron step two, [the court asks] 

whether an agency interpretation is ‘arbitrary or capricious in 

substance.’” Judulang v. Holder, 132 S. Ct. 476, 483 n.7 

(2011) (citing Mayo Found. for Med. Educ. & Research v. 

United States, 562 U.S. 44, 53 (2011) (quoting Household 

Credit Servs., Inc. v. Pfennig, 541 U.S. 232, 242 (2004))).

Therefore, the analysis in part II.C, supra, rejecting PhRMA’s 
24

Chevron Step Two arguments applies here as well in our 

rejection of PhRMA’s claims resting on Section 706(2)(A).

PhRMA raises a number of points in support of its claim 

that the FTC’s adoption of the Rule was arbitrary and 

capricious. First, PhRMA argues that there is no rational basis 

for the Rule because the FTC only invoked its “experience” as 

justification for “target[ing]” transactions in the 

pharmaceutical industry, without describing or explaining 

what that experience was. Br. for Appellant 39–40. Along 

these same lines, PhRMA also contends that “the Rule is 

arbitrary and capricious because it is based on considerations

[i.e., the “prevalence” of the transactions in the 

pharmaceutical industry] which Congress has not intended 

[the FTC] to consider.” Id. at 47 (internal quotation marks 

omitted). These claims are unconvincing. The FTC’s basis for 

the Rule was its unchallenged determination that patent

transfers covered by the Rule are asset acquisitions under the 

Act. See Notice of Final Rulemaking, 78 Fed. Reg. at 67,706–

07. As explained earlier in this opinion, the FTC adequately 

explained why the Rule focused on the pharmaceutical

industry. We need not cover this ground again. The FTC’s 

cumulative experience with filings and fielding informal 

requests for guidance was a valid basis for its decision to 

promulgate a rule focused on the pharmaceutical industry. See 

Nat’l Classification Comm. v. United States, 779 F.2d 687, 

695 (D.C. Cir. 1985) (“It is beyond dispute that an agency 

may provide the factual predicate for a finding by taking

‘official notice’ . . . of matters known to the agency through 

its cumulative experience and consequent expertise.” 

(citations omitted)).

PhRMA additionally asserts that the “FTC offered no 

reasoned basis for departing from its own longstanding 

views.” Br. for Appellant 41. As discussed above, we reject
25

PhRMA’s claim that the Rule constitutes an impermissible

departure from past agency practice. Moreover, West 

Deptford Energy, LLC v. FERC, which PhRMA relies on, is 

inapposite. See 766 F.3d 10, 20–21 (D.C. Cir. 2014) (FERC’s 

sudden departure from “unbroken Commission practice,”

without explanation and relying on patently unsupportive 

agency precedent, was unjustified). In contrast to that case, 

here, the FTC explained its reasons for crafting the Rule with 

an industry-specific focus.

PhRMA makes two final arguments attacking the FTC’s 

rulemaking process. First, PhRMA argues that “[b]y 

withholding . . . source information, [the] FTC impeded 

PhRMA’s ability to challenge the agency’s basis for the Final 

Rule and the courts’ ability to meaningfully review it.” Br. for 

Appellant 48. Specifically, PhRMA objects that the FTC did 

not produce the 66 filings received by the PNO that the FTC 

described as involving exclusive patent licensing 

arrangements in the pharmaceutical industry, and that the 

FTC’s public database of informal requests is unhelpful 

because it is incomplete and “heavily redacted.” Id. at 48–53. 

Second, it argues that the FTC did not respond to the Varner 

Declaration. Id. at 55. Both of these arguments fail.

The FTC’s response to PhRMA’s objection that it did not 

have access to the 66 filings is telling:

PhRMA also suggests in passing that the 

Commission should have divulged the 66 individual HSR 

filings that it cited for the observation that 

pharmaceutical patents accounted for every single 

instance over the preceding five years in which parties 

filed HSR notification involving exclusive patent 

licenses. The HSR Act, however, makes such filings 

confidential. It provides that “[a]ny information or 
26

documentary material filed . . . pursuant to this section 

shall be exempt from disclosure . . . and no such 

information or documentary material may be made 

public,” except in circumstances not present here. 15 

U.S.C. § 18a(h); see JA 349–51 [citing the District Court 

opinion, Pharm. Research, 44 F. Supp. 3d at 131–32]. 

The FTC thus had no lawful basis for revealing these 

reports to PhRMA, and PhRMA does not even contend 

otherwise on appeal.

In any event, keeping these HSR filings confidential 

did nothing to prejudice PhRMA, and that lack of 

prejudice is itself fatal to PhRMA’s APA challenge. HSR 

filings do not represent the type of “technical studies and 

data” that aggrieved parties might wish to contest and 

that an agency might thus be required to make available 

for close scrutiny. And the Commission did not rely on 

these HSR filings to make a technical judgment or 

establish a technical standard. It used them only as a 

general source of background experience to inform its 

judgment that, in fact, exclusive patent licenses arise 

overwhelmingly in the pharmaceutical industry. The 

filings were relevant only because they involved 

exclusive licenses in the pharmaceutical industry, not 

because of their particular content.

Br. for FTC 42–43 (citations omitted). PhRMA’s briefs to the 

court do not even address the disclosure exemption in 15 

U.S.C. § 18a(h), and its Reply Brief offers no effective 

rebuttal to the FTC’s additional points concerning the 66 

filings.

Furthermore, the agency’s database of informal guidance 

is available online and searchable. Although the names and 

contact information are redacted, the context of a guidance 
27

document is often quite clear from reading the documents. See

FEDERAL TRADE COMMISSION, PREMERGER NOTIFICATION 

PROGRAM: INFORMAL INTERPRETATIONS, available at

www.ftc.gov. “Not only is the database publicly available, but 

PhRMA itself actually used it in formulating its comments on 

the Rule. JA 22.” Br. for FTC 41 (citing PhRMA’s comments 

on proposed Rule). Thus, it is clear that PhRMA had access to 

the guidance requests and its claims to the contrary are 

spurious. 

On the record here, there is nothing to indicate that 

PhRMA was denied information to which it was entitled to

participate in the rulemaking proceeding. Indeed, the record 

strongly reflects that PhRMA had ample opportunity to 

comment during the rulemaking proceeding, and its views 

were fully considered and addressed by the FTC. PhRMA 

submitted an expert’s declaration with its comments. The 

comments and declaration purported to show that the kinds of 

exclusive rights transfers covered by the Rule also occurred in 

other industries. Comments of PhRMA on Notice of Proposed 

Rulemaking, JA 12–58. As noted above, the Commission 

reasonably rejected the expert’s claims as being off point. 

Notice of Final Rulemaking, 78 Fed. Reg. at 68,708–09. 

PhRMA’s representatives also met personally with FTC 

Commissioners four times to discuss their concerns about the 

Rule. See JA 65–70. Yet, PhRMA produced nothing to rebut 

the FTC’s findings that, in its experience, the types of 

transactions covered by the Rule had arisen only in the 

pharmaceutical industry.

The cases cited by PhRMA involving agencies’ failures

to reasonably respond to public comment are readily 

distinguishable. Business Roundtable v. SEC is inapposite 

because the statute in that case expressly required the agency 

to consider “the economic effects of a new rule,” which the 
28

agency failed to do. See 647 F.3d 1144, 1148–49 (D.C. Cir. 

2011). In both Louisiana Federal Land Bank Association v. 

Farm Credit Administration, 336 F.3d 1075, 1080 (D.C. Cir. 

2003), and PSEG Energy Resources & Trade LLC v. FERC, 

665 F.3d 203, 210 (D.C. Cir. 2011), the agency acknowledged 

the commenters’ objections but provided no other response to 

them. The FTC did much more in this case in receiving and 

responding to PhRMA’s objections.

Finally, some of PhRMA’s arguments to this court might 

be read to suggest that the FTC was less than forthcoming 

during the rulemaking proceeding. As we have explained, the 

record belies any such contention. “Because a presumption of 

procedural regularity and substantive rationality attaches to 

final agency action, aggrieved parties bear the burden of 

demonstrating to a reviewing court that challenged agency 

action merits reversal.” Nat’l Small Shipments Traffic 

Conference, Inc. v. ICC, 725 F.2d 1442, 1455 (D.C. Cir. 

1984). PhRMA has offered no good reason to rebut the 

presumption of procedural regularity in the agency’s handling 

of this case.

The FTC action is supported by reasoned 

decisionmaking; the agency did not rely on factors which 

Congress did not intend for it to consider; and the Rule was 

promulgated in observance of procedures required by law. In 

sum, there is nothing in the record to support PhRMA’s 

claims that the FTC violated 5 U.S.C. § 706(2)(A) or (D)

when it promulgated the Rule.

III. CONCLUSION

For the reasons set forth above, we affirm the judgment 

of the District Court.

So ordered.