Mergers and acquisitions will continue to face strong headwinds at the Federal Trade Commission and the US Department of Justice under new proposed Merger Guidelines released on July 19, 2023. The Proposed Guidelines embody the antitrust agencies’ aggressive posture toward merger enforcement under the Biden administration. This On the Subject highlights the most significant changes in the Proposed Guidelines and what steps companies contemplating mergers and other transactions should take in the face of these changes.
With growing consumer demand for environmentally friendly products and services, businesses are ramping up their “green” advertising endeavors to showcase eco-friendly credentials like carbon emissions reductions, renewable energy and recycled materials. In light of this surge in “going green” marketing, the Federal Trade Commission (FTC) has proposed revisions to its Guides for Use of Environmental Marketing Claims (Green Guides). The aim is to furnish companies with supplementary guidance on the types of environmental claims that can be made and the necessary substantiation required to steer clear of legal disputes, penalties or unfavorable public perception. These revisions could significantly impact advertisers that make “green” claims by requiring more specificity and more substantiation than before.
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.
At a September 15, 2022, speech at New York University School of Law, US Deputy Attorney General (Deputy AG) Lisa Monaco announced several new policies intended to further the aggressive stance the US Department of Justice (DOJ) has taken under the Biden administration to corporate criminal enforcement.
The DOJ’s landmark new policies are focused on encouraging and enticing companies to self-report criminal violations and cooperate in DOJ investigations. They include:
First, for the first time, every DOJ component that prosecutes corporate crime will have to develop a formal program to incentivize voluntary self-disclosure. Importantly, the DOJ will not seek a guilty plea when a company has voluntarily self-disclosed, cooperated in the DOJ’s investigation and remediated misconduct.
Second, companies seeking cooperation credit need to come forward and disclose important evidence to the DOJ quickly. Companies—and prosecutors evaluating those companies—will now be “on the clock.” Undue or intentional delay in providing information and documents will result in a reduction or outright denial of cooperation credit.
Third, the DOJ will now formally encourage companies to hold in escrow or claw back compensation from executives and employees responsible for wrongdoing.
Deputy AG Monaco provided additional guidance with respect to significant changes announced in October 2021, including on how prior criminal, civil and regulatory misconduct by companies will be evaluated when deciding an appropriate resolution, and how and when monitors should be imposed.
Deputy AG Monaco also announced that the DOJ would seek an additional $250 million in targeted resources for corporate criminal enforcement and other corporate crime initiatives.
IN DEPTH
While Deputy AG Monaco continued to emphasize—as she did in speeches in October 2021 and March 2022—that the DOJ’s No. 1 priority remains individual “accountability” and prosecutions, the recent announcement is the latest in a series of ambitious steps taken by the DOJ under the Biden administration to further the Department’s ongoing and increasing emphasis on misconduct at the corporate level. Taken collectively, the mixture of carrots, sticks and potential additional resources demonstrates the DOJ’s continued focus on pursuing corporate wrongdoing and the need for companies to proactively assess their compliance programs and ensure they are well-positioned to respond to the DOJ’s boundary-shifting approaches.
NEW DOJ-WIDE VOLUNTARY SELF-DISCLOSURE PROGRAM
Among the more significant changes, every DOJ component that prosecutes corporate crime will, for the first time, be required to have a documented policy that incentivizes voluntary self-disclosure. Deputy AG Monaco highlighted the success of a handful of self-disclosure programs that several DOJ components have already developed, such as the long-standing Antitrust Division Leniency Program and the Foreign Corrupt Practices Act (FCPA) unit’s self-reporting program. She also stated that if a DOJ component does not have such a formal, documented policy, they must draft one. In support of this policy, she noted that the DOJ’s “goal is simple: to reward those companies whose historical investments in compliance enable voluntary self-disclosure and to incentivize other companies to make the same investments going forward.”
Without question, 2022 has been a remarkably busy time for the US Department of Justice’s (DOJ’s) Antitrust Division (Division). Over just a few months, the Division rolled out meaningful revisions to its leniency policy aimed at encouraging prompt reporting of criminal violations, announced that it will (for the first time in nearly 50 years) bring criminal monopolization cases under Section 2 of the Sherman Act, continued to increase enforcement resources, and brought a number of new cases and obtained multiple guilty pleas.
However, activity does not always mean success. If there is any theme that defines the Division’s efforts over the last quarter, it is this: If at first you don’t succeed, try, try again. That is exactly what the Division has done. It tried two labor markets cases, ultimately losing both on a new and untested legal theory. And, over strong objections from a district court, the Division pursued an unprecedented third trial against those in the broiler chicken industry, resulting in a full acquittal for all defendants. None of this, however, has deterred the Division from continuing to pursue new investigations and bring new cases under novel legal theories.
In this installment of Cartel Corner, we examine recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key enforcement priorities. If the past is prologue, we are bound to see more aggressive antitrust enforcement in the months to come, testing the boundaries of current antitrust law. Whether the Division can ultimately shift those boundaries, however, remains to be seen.
In a landmark case of first impression, the US Department of Justice’s (DOJ) Antitrust Division (Division) indicted and brought to trial a federal criminal prosecution alleging agreements between DaVita, Inc., its former CEO Kent Thiry and other companies not to solicit each other’s employees. The case was the first criminal trial of its kind in the Division’s recent efforts to expand Sherman Act liability under Section 1 to include so-called no-poach and non-solicit agreements. Following an eight-day jury trial and two days of deliberation, a Denver jury acquitted Thiry and DaVita on all counts of the unprecedented “no-poach” conspiracy. As the district judge himself succinctly put it to the jury: this case was “a unique case in the field of antitrust law.”
This criminal prosecution in the labor markets reflects a novel and aggressive stance on expanding Sherman Act criminal liability. In pursuit of this policy shift, the Division is trying to jam a square peg into a round hole by characterizing non-solicit and no-poach agreements as per se market allocation agreements. The per se rule creates a judicial shortcut of sorts that makes it easier for the government to prosecute classic cartel conduct such as price-fixing and bid rigging. This case, and related cases, are the first time the per se shortcut has been used in a so-called labor market allocation case. This unprecedented litigation created a watershed moment for the Division’s views that non-solicit and no-poach agreements are per se illegal. The complete acquittal of both defendants and the rulings of the district judge before trial cast doubt on whether the per se standard is appropriate for “no-poach” agreements and whether such agreements should be prosecuted criminally at all.
WHERE DID THIS COME FROM?
Historically, the Division pursued enforcement of alleged anticompetitive labor market practices in the civil context, meaning fines for companies and individuals. In fact, that was the approach the Division took with no-poach and no cold call agreements entered into by major technology and railway companies. The Division engaged in a volte-face and declared it would criminally prosecute such labor market agreements for the first time in October 2016. Without an intervening act of Congress, executive order or ruling by any court, the Division warned that going forward it intended to proceed criminally against “naked wage-fixing or no-poach agreements” between horizontal competitors in the labor market. The Division declared that investigating alleged “naked wage-fixing or no-poach agreements” was a top priority. Ignoring concerns related to the separation of powers, the Division unilaterally cited its discretion and put the full weight of the government into labor market no-poach agreements. That momentum accelerated in December 2020 and continued throughout 2021, with the Division bringing 12 criminal cases against nine individuals and three companies. In short, aggressive and expansive antitrust enforcement from the DOJ is now the new normal.
DOJ SEEKS TO CREATE A NEW CATEGORY OF PER SE LIABILITY AND USES DAVITA AND THIRY AS A TEST CASE
The Division returned a superseding indictment against DaVita, Inc. and Kent Thiry on November 4, [...]
On April 7 and 8, 2022, the American Bar Association’s Antitrust Law Section wrapped up its annual Spring Meeting. The event featured updates and remarks from several antitrust enforcers, including FTC Chair Lina Khan and US Assistant Attorney General for the Antitrust Division Jonathan Kanter. In this post, we share key takeaways from the final two days of the Spring Meeting.
FTC and DOJ Will Stay Focused on Litigation: Top officials at both US antitrust agencies highlighted the agencies’ full dockets and noted that litigation to enforce the antitrust laws will remain a top priority.
Three Directors from the Federal Trade Commission (FTC)—Holly Vedova, the Director of the Bureau of Competition; Samuel A.A. Levine, Director of Bureau of Consumer Protection; and Elizabeth Wilkins, Director of Office of Policy Planning—all emphasized that the FTC will work as one team and will not hesitate to initiate litigation.
Vedova noted the FTC’s recent success in several transactions being abandoned after the FTC initiated litigation. She expressed that the Bureau of Competition’s main focus will be litigation, where she believes her bureau will be most effective. Khan echoed these sentiments while speaking on a separate panel, emphasizing that two recently abandoned transactions were in the context of challenges to vertical transactions and that such challenges will continue to be a priority at the FTC.
Likewise, Kanter noted that the Department of Justice (DOJ) is not afraid to take on big cases or big companies and will not be afraid to litigate. He said the DOJ is just getting started and reiterated that the DOJ has more active cases than it has had in recent years.
Agencies Will Closely Scrutinize Potential Remedies in M&A: Both FTC and DOJ officials emphasized they will continue to examine the effectiveness of remedies and will only pursue strong remedies.
Kanter said that divestiture remedies will be the rare exception and will no longer be the norm. He further cautioned merging parties to avoid engaging in “regulatory arbitrage” and trying to leverage investigation outcomes in one jurisdiction against another because global cooperation among antitrust enforcers is high.
Vedova also indicated that the Bureau of Competition has no appetite for weak or uncertain settlements, especially those involving behavioral remedies, which have proven ineffective. The FTC will require meaningful structural relief to resolve competition concerns regarding a transaction.
Parties should also not expect the FTC to engage in long settlement discussions due to the unprecedented volume of merger reviews. Vedova noted that staff’s time is valuable and is much better spent preparing for litigation rather than negotiating remedies. She further indicated that the FTC will not engage in remedy discussions unless the Hart-Scott-Rodino (HSR) clock is stopped and timing agreements are tolled.
State attorneys general will similarly evaluate remedies and, if necessary, pursue additional remedies than those sought by federal antitrust enforcers. For example, in a recent dialysis acquisition, the state of Utah sought divestiture of a fourth clinic above the three divestitures required to [...]
This week, the American Bar Association’s Antitrust Law Section kicked off its annual Spring Meeting in Washington, DC, which features updates from the antitrust enforcers and substantive discussions on today’s most pressing antitrust issues. In this post, we share key takeaways from the first day of the Spring Meeting.
Agencies Continue to Be Hostile to M&A: Republican Federal Trade Commission (FTC) Commissioners Noah Phillips and Christine Wilson emphasized that the prevailing view under Democratic leadership at the antitrust agencies is that mergers provide no value and only carry costs.
Progressive leadership wants to “throw sand in the gears” to prevent deals from being proposed altogether. Recent policy changes are aimed at creating uncertainty, heightening risk and raising the transaction costs of doing deals to slow the pace of M&A activity.
Despite this, there was a precipitous drop in the number of FTC merger enforcement actions in the final year of the Trump administration (31) compared to the first year of the Biden administration (12).
There is no indication that early termination for Hart-Scott-Rodino (HSR) pre-merger notification filings will be reinstated.
“Close At Your Peril” letters are another tactic the agencies are using to heighten deal risk and deter parties from pursuing or consummating transactions, even though the antitrust agencies have always had the authority to investigate and challenge consummated transactions.
Many panelists commented on the lack of transparency between agency staff and merging parties on recent transactions. If the lack of transparency persists, it may create due process issues and problems for timing agreements that merging parties typically negotiate with staff.
The antitrust agencies are increasingly skeptical of the efficacy of structural and behavioral remedies to resolve competition concerns regarding a transaction. The Department of Justice (DOJ) Antitrust Division’s Principal Deputy Assistant Attorney General Doha Mekki said merging parties should expect the DOJ to reject “risky settlements” more often and instead seek to block transactions outright. Mekki said literature has shown that many merger settlements failed to protect competition.
Increased Antitrust Litigation Is on the Horizon: DOJ officials said companies should expect an increase in antitrust litigation on both civil and criminal matters.
The DOJ Antitrust Division has more cases in active litigation than it has had at any time in recent history. It currently has six active litigations involving civil matters and 21 ongoing litigations involving criminal matters.
The Antitrust Division is not considering cost as a gating factor for bringing new cases. Instead, it is bringing cases where it deems necessary to uphold the law and preserve competition. The DOJ is hiring more attorneys and using shared DOJ resources to support the increased rate of litigation.
The DOJ is also seeking faster access to the courts. Mekki indicated that in cases where potential anticompetitive harm resulting from a transaction is clear, the agency may file suit while an investigation remains pending and before merging parties have certified substantial compliance.
Updated Merger Guidelines Are Coming: Officials from both the FTC and [...]
The US Department of Justice’s (DOJ) Antitrust Division (Division) has continued to actively investigate and pursue alleged criminal violations of antitrust laws and collusive activity in government procurement. US Attorney General Merrick Garland noted in a March 2022 speech at the ABA Institute on White Collar Crime that the Division ended last fiscal year “with 146 open grand jury investigations—the most in 30 years.” As we near the end of the first quarter of 2022, the Division has a record number of criminal cases either in trial or awaiting trial.
In this installment of Cartel Corner, we examine and review recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key priorities for enforcement. For 2022 and beyond, those priorities are—and likely will remain—identifying and aggressively pursuing alleged violations involving the labor markets, consumer products, government procurement, and the generic pharmaceutical industry.
Continuing the recent string of actions across the Biden administration in response to the July 2021 Executive Order on “Promoting Competition in the American Economy,” on March 7, 2022, the US Treasury Department (Treasury) released a report titled “The State of Labor Market Competition,” and on March 10, 2022, the US Departments of Justice (DOJ) and Labor (DOL) announced a Memorandum of Understanding (MOU) to strengthen and coordinate enforcement efforts in labor markets. These developments highlight the administration’s continuing focus on anticompetitive conduct in the labor markets at both the local and national levels and warrant careful attention by employers of all sizes and in all industries.
Treasury Report In Depth
Treasury’s report sets out to “summarize the prevalence and impact of uncompetitive firm behavior in labor markets.”
It focuses on both inter-employer conduct—such as the sharing of wage information, entering into no-poach agreements and outright conspiracies to fix wages—and employer-employee conduct—like forcing workers to sign non-compete agreements, mandatory arbitration agreements and class action waivers, misclassification of employees as independent contractors and opacity surrounding employees’ compensation rates—as being potentially anticompetitive and contributing to the imbalance of power between employers and employees in labor markets.
The structures of various labor markets, including overall low rates of unionization, “fissuring” of workplaces as a wide variety of job functions (e.g., janitorial or food services) are outsourced from in-house employees to external contractors, and occupational licensing requirements imposed by federal, state, and/or local governments, are highlighted as having overall negative effects on the competitiveness of various labor markets.
The report estimates that employers’ market power is responsible for approximately 20% lower wages compared to a fully competitive labor market, and notes that the harms that flow from a lack of labor market competition disproportionately impact lower-income occupations, women and people of color.
The report concludes by emphasizing that adverse effects on workers as a result of limited competition in labor markets have broader effects on the labor markets, the firms that participate in them and the economy as a whole.
Finally, the report specifically examines the labor markets in the healthcare, agricultural and minor-league baseball industries, and it outlines the Biden administration’s efforts to increase competition and deter and punish anticompetitive conduct in labor markets across the country.
The Memorandum of Understanding (MOU)
The DOJ and DOL’s MOU likewise emphasizes the shared “interest in protecting workers who have been harmed or may be at risk of being harmed as a result of anticompetitive conduct,” as Assistant Attorney General Jonathan Kanter noted in the joint press release announcing the MOU, “[p]rotecting the right of workers to earn a fair wage is core to the work of both our agencies, and it will continue to receive extraordinary vigilance from the Antitrust Division.”
The MOU states the DOJ’s and DOL’s intent to “share enforcement information, collaborate on new policies, and ensure that workers are protected from collusion and unlawful employer behavior.”
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