ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
Mergers & Acquisitions
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2023 Regulatory Forecast: Antitrust & Competition

by , and | Jan 10, 2023 | , , ,

The Federal Trade Commission (FTC) and the US Department of Justice (DOJ) pursued aggressive antitrust and competition enforcement agendas this past year and show no signs of slowing down in 2023. Prepare for the year ahead by reviewing our 2023 Regulatory Forecast for the antitrust and competition space.

Click the links below to download a one-pager of takeaways for each area.

Antitrust & Competition | Merger Control: The Biden administration prioritized aggressive antitrust merger enforcement in 2022, especially in the healthcare, labor, consumer and technology sectors. Learn how this trend will continue in 2023 as the FTC and DOJ expand their toolbox to challenge transactions.

Antitrust Litigation: In 2022, the DOJ and FTC took boundary-shifting antitrust enforcement positions and proved they are not afraid to pursue novel legal theories. The DOJ alone has more open grand jury investigations and charged more cases in 2022 than it has in decades. The DOJ and the FTC also requested historic budget increases to support their aggressive agendas. Additional resources mean more regulators are available to investigate and litigate alleged anticompetitive conduct. Find out more about the aggressive enforcement by the antitrust agencies and private plaintiffs that is expected to continue in 2023.

Consumer Protection: Enforcement by the FTC, among other consumer protection regulators, was particularly vigorous in 2022 and the trend is expected to continue in 2023. In light of the increased regulatory focus on social media, marketing and advertising, businesses should be aware of the ever-evolving guidance in this realm. Read about the proposed rulemaking and revisions on the horizon this year.



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EU Foreign Subsidies Regulation Enters Into Force in 2023

by , and | Jan 9, 2023 | ,

On December 23, 2022, Regulation (EU) 2022/2560 of December 14, 2022 on foreign subsidies distorting the internal market (FSR) was published in the Official Journal of the European Union. The FSR introduces a new regulatory hurdle for M&A transactions in the European Union (EU), in addition to merger control and foreign direct investment screening. The FSR’s impact cannot be overstated as it introduces two mandatory pre-closing filing regimes and it gives the Commission wide-reaching ex officio investigative and intervention powers. Soon, the Commission will also launch a public consultation on a draft implementing regulation that should further detail and clarify a number of concepts and requirements of the FSR.

The bulk of the FSR will apply as of July 12, 2023. Importantly, the notification requirements for M&A transactions and public procurement procedures will apply as of October 12, 2023.

We highlight the key principles of the FSR below and provide guidance to start preparing for the application of the FSR. We refer to our On The Subject article ‘EU Foreign Subsidies Regulation to Impact EU and Cross-Border M&A Antitrust Review Starting in 2023’ of August 2, 2022 for a more detailed discussion of the then draft FSR. We also refer to our December 8, 2022 webinar on the FSR. Given the importance of the FSR, we will continue to report any future developments.

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Congress Overhauls Merger Filing Fees and Thresholds

by , , and | Dec 23, 2022 | , , ,

Congress has passed—and President Biden is expected to sign into law today—the Merger Filing Fee Modernization Act, which will significantly change antitrust merger notification regulations under the Hart-Scott-Rodino Act (HSR Act), 15 U.S.C. § 18a.

Included in the changes is language substantially altering the framework for the filing fee amounts and the deal value thresholds triggering those HSR filing fees.

Per a press release from Senator Amy Klobuchar (D-MN), the changes will go into effect in 2023. We will update when we have more clarity on timing.

In addition to the filing fee changes, the legislation imposes a new obligation to report with an HSR filing information on foreign subsidies from certain foreign governments, noted as “adversaries.” We will have to see how the Federal Trade Commission (FTC) and the US Department of Justice implement this requirement in a revision to the HSR form and instructions.

Notably and perhaps more significantly, while not part of this legislation, FTC Chair Lina Khan has indicated that the agencies also are working on revisions to the HSR rules that will require more substantive disclosures of information to assist in the agency review process. Overall, the legislation and expected proposed changes to the HSR form, as well as the anticipated new Merger Guidelines, likely will significantly change HSR practice moving forward.

DETAILS REGARDING FILING FEES AND THRESHOLDS

The new deal value thresholds and filing fee amounts are as follows:

The new thresholds and fees will be adjusted annually at the beginning of each year.

For an understanding of how this legislation changes the prior threshold and fee framework, the following table shows the impact of the legislation on prior HSR filing fees:

 



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DOJ Publishing Win May Mean More Labor, Salary Challenges

by and | Nov 30, 2022 | , ,

US District Judge Florence Pan’s decision to block Penguin Random House LLC’s planned $2.2 billion acquisition of Simon & Schuster represented the US Department of Justice (DOJ) Antitrust Division’s first major merger win following a string of losses this fall. Judge Pan’s decision is significant because she accepted the DOJ’s theory that the merger would lead to lower compensation for best-selling authors. This decision may embolden the DOJ and Federal Trade Commission (FTC) to challenge more transactions based on the impact on labor and salaries rather than the impact on consumer prices.

In this Law360 article, McDermott’s Alexandra Lewis, Glenna Siegel and Joel Grosberg discuss the implications of the ruling and what it might mean for other industries.

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Antitrust M&A Snapshot | Q3 2022

by , , , and | Nov 18, 2022 | , , , , ,

In the United States, the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) lost four merger challenges (Illumina/GRAIL, UnitedHealth/Change Healthcare, U.S. Sugar/Imperial Sugar and Booz Allen/EverWatch) in September. The losses demonstrate that parties willing to litigate can have success in court. The absence of “smoking gun” documents and lack of a presumption of anticompetitive effects (based on market shares and concentration) made these cases very difficult for the government. The judges in these cases tended to credit structural and behavioral remedies that the government felt were insufficient and were persuaded by real-world testimony from executives and third parties contradicting the government’s theories of changed economic incentives from the transactions.

In July 2022, the European Parliament published the final text of the European Union’s upcoming instrument to address distortive foreign subsidies, following a provisional political agreement reached between the EU lawmakers in June (Foreign Subsidies Regulation). The Foreign Subsidies Regulation introduces a new mandatory screening mechanism including notification obligations and the European Commission’s right of ex officio investigations, which will have a considerable impact on M&A transactions and procurement procedures.

The Foreign Subsidies Regulation will enter into force once it is formally adopted by EU lawmakers and published in the Official Journal. It will become directly applicable across the European Union six months after entry into force. The notification obligations will start to apply nine months after entry into force. The Commission also is currently drafting procedural rules on how to notify transactions, how to calculate time limits, and the process for preliminary reviews and in-depth probes when there is a suspicion of distortive foreign subsidies.

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Why Courts Are Rejecting Agencies’ Merger Challenges

by , and | Oct 24, 2022 | , ,

The US Department of Justice’s and the Federal Trade Commission’s losses in three merger challenges in September and a fourth in October demonstrate that merging parties can close difficult transactions if willing to fight the agencies in court. In this Law360 article, McDermott’s Jon B. Dubrow, Joel R. Grosberg and Matt Evola discuss these four cases and what they mean for merging parties.

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Antitrust M&A Snapshot | Q2 2022

by , , , , and | Sep 26, 2022 | , , , , , , ,

In the United States, parties continue to be cautious in litigating challenged transactions. Since January 2021, the US Federal Trade Commission (FTC) and Department of Justice (DOJ) filed lawsuits (or threatened to sue) to block 16 transactions. Of those transactions, 12 were abandoned and six are in various stages of litigation. The data suggest that the FTC’s and DOJ’s aggressive merger enforcement policy is raising the stakes for parties to potential mergers and acquisitions, including an increased willingness by the agencies to litigate potentially problematic transactions.

Between May 6 and June 3, 2022, the European Commission (Commission) held a public consultation to seek views on the draft revised Merger Implementing Regulation (Implementing Regulation) and the Notice on Simplified Procedure. This consultation was launched in the context of the Commission’s review process of the procedural and jurisdictional aspects of EU merger control.

On April 20, 2022, the UK government proposed new measures to boost consumer protection rights and competition rules. In particular, the UK government’s reforms aim to strengthen the Competition & Markets Authority’s (CMA) powers and alleviate burdens on smaller companies.

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International News Spotlight on Competition Law

by | Sep 21, 2022 | , , , , , , , , , ,

In line with the evolution of the economy and the ongoing growth of online business and global trade, we’re seeing a corresponding increase in competition regulation and a rise in enforcement across all authorities. In our latest International News, we take a deep dive into the issues at play.

The growth of the online economy has triggered the US Federal Trade Commission’s (FTC) update of its 20 year old .com Disclosures: How to Make Effective Disclosures in Digital Advertising guide, and the development of an analytical framework for all digital distribution across the European Union. In just one seismic shift under the new EU Vertical Block Exemption Regulation 2022/720, dual-pricing, i.e., setting different wholesale prices for online/offline sales by the same distributor, is no longer considered a hardcore restriction unless its purpose is to prevent the effective use of the internet to sell the goods or services.

In the United States, there is an increased focus on anticompetitive mergers and acquisitions (M&A). The Biden Administration, the Department of Justice Antitrust Division, and the FTC have all stated that the regulatory landscape needs to be reshaped to better reflect dynamic markets, and their priority is the aggressive pursuit of litigation against offending parties rather than the granting of consent decrees. The tendency to “sin first and beg forgiveness later” will emphatically no longer work, as a recent French gun-jumping case demonstrates.

Both the United States and the European Union have also turned their attention to investigating wage fixing and no-poach labour market violations that are not connected with M&A or business collaborations. It’s clear that competition/antitrust authorities are determined to expand their remit.

Read our full Spotlight on Competition Law here.



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DOJ to Merging Parties: The Time of “Underenforcement” is Over; Fix-It-First or Risk Being Challenged

by , and | Sep 20, 2022 | , ,

WHAT HAPPENED

During a conference last week, Ryan Danks, Director of Civil Enforcement at the US Department of Justice’s Antitrust Division (DOJ), suggested that merging parties—not the antitrust enforcement agencies—should devise fixes for allegedly anticompetitive transactions.

Danks stated “that something is broken about the way that the antitrust community talks about remedies in the context of mergers, where parties will bring in a three-to-two or four-to-three or even a two-to-one [transactions] and say ‘now we want you, government, to work with us to figure out how to fix this’ . . . that’s not our job. Our job is to maintain competition.”

Danks added that merging parties bear the responsibility for remedying their anticompetitive transactions and have more information on the businesses, allowing them to formulate strong solutions. Such “fix-it-first” approaches may allow merging parties to complete their transactions quicker, avoiding lengthy merger reviews and consent decree negotiations.

Danks also suggested that “the simplest remedy . . . is to just stop an anticompetitive transaction from occurring,” strongly hinting that today’s DOJ would rather challenge an entire transaction than work with the parties on devising a remedy to address specific competitive concerns in limited product or geographic markets.

Jonathan Kanter, Assistant Attorney General for the Antitrust Division, conveyed similar views in two speeches last week, making it clear that merger enforcement at the DOJ will become even more vigorous.

On September 13, 2022, Kanter:

  • Warned that “[c]ompanies considering mergers that may harm competition should know that the Antitrust Division will not back down from a fight so long as that threat remains.”
  • Emphasized that the Clayton Act’s “expansive definition of antitrust liability” requires the government only to prove that a transaction’s effect “may be substantially to lessen competition.” According to Kanter, antitrust agencies have, for too long, “underenforced a statute that was meant to be prophylactic” by focusing on concrete evidence of a merger’s effect on prices.

On September 16, 2022, Kanter said that antitrust enforcers “can no longer be so cautious to avoid overenforcement that [they] intentionally underenforce the law.”

Moving away from negotiating settlements that allow transactions to proceed while resolving anticompetitive issues is part of a trend of dramatic policy and procedural changes at both the DOJ and Federal Trade Commission (FTC) designed to discourage mergers and acquisitions (M&A), such as:

  • Suspending early termination of the Hart-Scott-Rodino Act (HSR) waiting period for transactions that do not raise competitive issues
  • Sending merging parties “close at your own risk” letters, informing the parties that antitrust investigations are ongoing despite expiration of the HSR waiting period
  • Insisting on inclusion of prior approval/prior notice provisions in all merger settlements
  • Including new topics, such as the impact on labor and environment, in Second Requests and adding additional hurdles to modifying Second Requests.

WHAT THIS MEANS FOR MERGING PARTIES

Merging parties should increasingly consider resolving likely competitive issues with their transaction before the antitrust [...]

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General Court Upholds European Commission’s Power to Review Illumina-Grail Despite Untriggered Turnover Thresholds

by , and | Jul 28, 2022 | , , , ,

In Illumina v Commission, the General Court has confirmed the authority of the European Commission (EC) under Article 22 EU Merger Regulation (EUMR) to examine a transaction that does not have a European dimension, but which is the subject of a referral request made by a Member State – even if the transaction is not notifiable in that Member State.

INTRODUCTION

Article 22 EUMR includes a referral mechanism whereby one or more Member States may request the EC to examine any transaction insofar as it does not have an EU dimension but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request (Article 22 Conditions).

With a view to ensuring that non-notifiable yet potentially problematic mergers do not fly under the radar of merger control review, in March 2021 the EC issued practical guidance (Article 22 Guidance) on when it might be appropriate for a Member State to refer such mergers to the Commission. The EC referred in particular to the digital and pharmaceutical sectors (see our On the Subject on the Article 22 Guidance here).

In Illumina v Commission, which concerns a transaction in the pharma sector, the General Court has confirmed that the EC has the authority to examine transactions that do not have a European dimension nor fall within the scope of the national merger control rules of EU or EFTA Member States.

PROCEDURAL BACKGROUND

On September 21, 2020, Illumina, an American company specializing in genomic sequencing, announced its intention to acquire sole control of Grail, an American biotechnology company which relies on genomic sequencing to develop cancer screening tests, to “Launch New Era of Cancer Detection” (the Transaction).

The EUMR thresholds were not met by the Transaction, nor were any EU or EFTA Member State thresholds. The Transaction was therefore not notified to the EC nor any of the EU or EFTA Member States. However, on December 7, 2020, the EC received a complaint concerning the Transaction and, on investigation, reached the preliminary conclusion that the Transaction appeared to satisfy the Article 22 Conditions for referral to the EC by a national competition authority. The EC subsequently on February 19, 2021 sent a letter to the Member States (the Invitation Letter) to inform them of the Transaction and to invite them to submit a referral request under Article 22. The French competition authority obliged and other Member States subsequently requested, each in its own right, to join.

On March 11, 2021, the EC informed Illumina and Grail of the referral request (the Information Letter) and about a month later, on April 19, 2021, it accepted the referral request, along with the respective requests to join (the Contested Decisions). This prompted Illumina, supported by Grail, to file suit before the General Court (against the Contested Decisions and the Information Letter).

On substance, Illumina argued that (i) the EC lacked the competence to initiate, under Article 22 EUMR, an [...]

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