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Heard on Day Two and Three of 2022 Antitrust Law Spring Meeting

by Lisa P. Rumin, Han Cui, Claire Danberg, Anthony S. Ferrara, Graham Hyman and Zachary Sproull | Apr 12, 2022 | Cartel Enforcement, Consumer Protection/Privacy, DOJ Developments, FTC Developments, Healthcare Antitrust, Joint Ventures/Competitor Collaboration, Mergers & Acquisitions, Monopolization/Abuse of Dominance

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 [...]

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Heard on Day One of 2022 Antitrust Law Spring Meeting

by Lisa P. Rumin, Anthony S. Ferrara, Reese Poncia, Alexandra Lewis, Graham Hyman, Joshua W. Eastby and Han Cui | Apr 7, 2022 | Cartel Enforcement, DOJ Developments, FTC Developments, Healthcare Antitrust, Joint Ventures/Competitor Collaboration, Mergers & Acquisitions, Monopolization/Abuse of Dominance

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 [...]

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Cartel Corner | March 2022

by Justin P. Murphy, Paul M. Thompson, Han Cui, Joshua W. Eastby, Anthony S. Ferrara, Alexandra Lewis and Reese Poncia | Mar 21, 2022 | Agriculture, Cartel Enforcement, Consumer Protection/Privacy, DOJ Developments, FTC Developments, Healthcare Antitrust, Monopolization/Abuse of Dominance

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.

Access the full report.

Recent Treasury Department Report Emphasizes Fostering Competition in Labor Markets

by Joshua W. Eastby and Stephen Wu | Mar 15, 2022 | Agriculture, Cartel Enforcement, DOJ Developments, Healthcare Antitrust, Joint Ventures/Competitor Collaboration, Monopolization/Abuse of Dominance

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.”

Kanter Signals DOJ to Follow FTC Lockstep, Calls for Substantial Change to Competition Enforcement Approach

by Graham Hyman and Gregory E. Heltzer | Mar 14, 2022 | Cartel Enforcement, DOJ Developments, FTC Developments, Monopolization/Abuse of Dominance

In remarks delivered on January 18, 2022, and January 24, 2022, Jonathan Kanter, the Assistant Attorney General (AAG) for the US Department of Justice (DOJ) Antitrust Division, laid out the areas where he perceives shortcomings in antitrust enforcement. These speeches signaled that the Division, under Kanter’s direction, will take a more aggressive stance toward perceived anticompetitive conduct, echoing the changes in enforcement priorities at the Federal Trade Commission (FTC).

Overview of AAG Kanter’s Remarks

Kanter intends to shape the regulatory landscape to better reflect dynamic markets. Both speeches featured a cohesive overarching message: Kanter believes that the regulatory and jurisprudential antitrust regime does not reflect and cannot address the market realities that exist today. Kanter believes that the Supreme Court of the United States’ 1992 opinion in Eastman Kodak v. Image Technology Services supports a change in approach because “[l]egal presumptions that rest on formalistic distinctions rather than actual market realities are generally disfavored in antitrust law.”[1] To address widespread increases in market concentration as well as “the economic and transformational technological changes” that define today’s economy, Kanter intends to revise the Division’s approach for analyzing mergers and conduct.[2]
Kanter seeks to revive dormant areas of antitrust enforcement, in particular monopolization cases with a focus on tech “platform” companies. Kanter stated that the Division has failed to adequately address certain areas of antitrust enforcement. He noted that it has been almost 20 years since the Division’s last major monopolization case.[3] Dominant tech platforms have “extracted private data” and “have few, if any, realistic alternatives,” he said.[4] Shortly after Kanter’s comments about prioritizing monopolization cases, Richard Powers, the deputy for criminal enforcement, stated that the Division will now evaluate Section 2 conduct for criminal charges.[5] Powers’s comments signal a dramatic change in enforcement, reversing decades of policy in which Section 2 charges were only brought in the civil context. These statements from Division leadership mirror those of FTC Chair Lina Khan, who has repeatedly called for more robust antitrust enforcement, and indicate that Kanter intends to reshape the Division, both in terms of resource allocation and approach to anticompetitive conduct, from a civil and criminal perspective.
Kanter laid out the Division’s overarching priorities clearly in his remarks. The Division intends to take a more aggressive stance on vertical merger enforcement, reformulate the Horizontal and Vertical Merger Guidelines to better reflect market realities (in the government’s view), enter into fewer consent decrees and instead litigate cases to generate judicial opinions and advance the relevant case law, and bring more civil and criminal conduct cases.

Vertical Merger Enforcement to Become a Focal Point for Regulators

Kanter stated that agency enforcement of vertical mergers has been lacking. Kanter believes that the Division has placed too much value on the potential efficiencies of vertical mergers without identifying the relevant theories of harm presented by such transactions.
The Division intends to [...]

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Mitigating Antitrust Risk in Defense Deals Amid Scrutiny

by Jon B. Dubrow, Lisa P. Rumin and Anthony S. Ferrara | Mar 8, 2022 | DOJ Developments, FTC Developments, Joint Ventures/Competitor Collaboration, Mergers & Acquisitions

As the Biden administration calls for tougher antitrust enforcement, the aerospace and defense (A&D) industry faces increased antitrust scrutiny. In this Law360 article, McDermott’s Jon Dubrow, Lisa Rumin and Anthony Ferrara explain how policy changes by the Federal Trade Commission, the Antitrust Division of the US Department of Justice and the US Department of Defense may affect A&D industry participants in various aspects of their businesses, including mergers and acquisitions, teaming agreements and labor practices. The authors also offer suggestions to help these companies mitigate antitrust risk arising from heightened antitrust scrutiny of the industry.

Former Government Contractor Executive Convicted of Procurement Fraud

by Justin P. Murphy and Lisa P. Rumin | Feb 2, 2022 | DOJ Developments

On February 1, 2022, a federal jury found a former engineering firm executive guilty of conspiring to rig bids and defraud the North Carolina Department of Transportation (NCDOT) of hundreds of public works contracts worth more than $23 million. From at least 2009 through fall 2018, Brent Brewbaker was responsible for crafting and submitting bids to NCDOT on behalf of Contech Engineered Solutions LLC, an engineering firm that makes products used in bridge construction, water drainage and other public works projects.

Read more here to learn how companies can minimize the risk that they are investigated by the Procurement Collusion Strike Force (PCSF).

FTC “Prior Approval” Policy for Future Transactions Raises Antitrust Risks for Buyers and Sellers

by Jon B. Dubrow and Noah Feldman Greene | Jul 22, 2021 | FTC Developments, Mergers & Acquisitions

The US Federal Trade Commission (FTC) voted July 21, 2021, to repeal a 1995 policy statement that eliminated prior approval and prior notice provisions from most merger settlements. In repealing this longstanding policy—and likely insisting on the inclusion of such provisions in future settlements—the FTC will have significantly greater authority to review and block future transactions of companies who enter into consent orders with the FTC. This policy change will have significant implications for the negotiation of antitrust risk provisions in transaction agreements.

WHAT HAPPENED:

In its 1995 Policy Statement Concerning Prior Approval and Prior Notice Provisions in Merger Cases, the FTC announced that it would no longer routinely require prior approval of certain future acquisitions in consent orders entered in merger cases.
- Prior to this statement, FTC consent orders to settle merger reviews routinely required parties to seek and receive the FTC’s prior approval for future acquisitions in the relevant product and geographic markets at issue in the first challenge/consent order for a 10-year period. In some cases, the FTC also included a prior notice provision obligating companies to notify the FTC of any intended transactions that were not subject to the premerger notification and waiting period of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).
On July 21, 2021, the FTC voted 3-2 to rescind its 1995 policy statement, opening the door to requiring prior approval and prior notice provisions in future merger consent orders.

WHAT THIS MEANS:

This policy change substantially increases the FTC’s merger enforcement authority for companies that settle investigations with a consent order and become subject to prior approval requirements.
- Prior approval provisions place the burden on companies to demonstrate that their transactions are not anticompetitive.
- The FTC can deny approval for these future transactions with very little—if any—limits on its discretion.
- This differs significantly from the enforcement regime under Section 7 of the Clayton Act, where the FTC has the burden of proving that a transaction will substantially lessen competition or tend to create a monopoly.
Prior notice provisions require companies to provide the FTC with advanced notice of certain transactions—even smaller transactions that typically would fall under the HSR threshold (e.g., transactions valued below $92 million). The notification requirement increases the likelihood of FTC investigation for these transactions.
By rescinding the 1995 policy statement, the FTC may seek to impose such provisions in its orders as a routine matter. It remains to be seen under what circumstances the FTC will insist on prior approval or prior notice (or how broad they will be crafted). In supporting the repeal, FTC Chair Lina Khan stated that the FTC will employ these provisions based on “facts and circumstances of the proposed transaction.”
- These prior approval and/or notice provisions, when previously employed, generally lasted for the term of the order—typically 10 years.
- Generally, the scope of these provisions was limited to the geographic and product market in which the FTC determined that the [...]
  
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Executive Order Encourages FTC, DOJ to Address Hospital Consolidation, Vigorously Enforce Antitrust Laws

by Ashley Fischer, Katharine M. O'Connor and Noah Feldman Greene | Jul 15, 2021 | DOJ Developments, FTC Developments, Healthcare Antitrust, Mergers & Acquisitions

President Biden recently issued an executive order affirming his administration’s policy of enforcing the antitrust laws to “combat the excessive consolidation of industry” and cited healthcare markets as one of several priorities. The Federal Trade Commission (FTC) and US Department of Justice (DOJ) already have been actively enforcing the antitrust laws in provider consolidation matters. The FTC is currently challenging the proposed merger of two health systems in New Jersey, and in the past year unsuccessfully challenged the combination of Jefferson Health and Einstein Health in Philadelphia and successfully challenged the proposed combination of two health systems (Methodist Le Bonheur and Saint Francis) in Memphis.

The executive order follows a proposed bill to increase budgets for the FTC and DOJ, FTC resolutions on compulsory process in healthcare investigations, congressional calls to investigate the use of COVID-19 Provider Relief Fund payments for acquisitions, the FTC physician practice acquisition retrospective and other health antitrust developments.

Access the article.

Government Contractor Pleads Guilty to Bid-Rigging and Procurement Fraud

by Justin P. Murphy and Lisa P. Rumin | Jun 25, 2021 | Cartel Enforcement, DOJ Developments

On June 7, 2021, as part of the US Department of Justice’s (DOJ) continuing commitment to prosecuting cases where the government is a victim, a government contractor pleaded guilty to one count of bid-rigging and one count of conspiracy to commit mail and wire fraud in connection with the DOJ’s ongoing investigation into public works contracts for the North Carolina Department of Transportation (NCDOT).

Ohio-based Contech Engineered Solutions LLC (Contech) entered its plea of guilty before a federal judge in the US District Court for the Eastern District of North Carolina and was sentenced to pay a $7 million criminal fine. Contech was also ordered to pay an additional $1,533,988 in restitution to the NCDOT. Notably, the DOJ did not impose a term of probation on Contech because Contech agreed to improve its compliance program to prevent recurrence of anticompetitive conduct. Contech, however, is required to cooperate with the DOJ, including producing documents and making witnesses available for interviews or testimony.

Contech and its former executive were indicted in October 2020 on six counts of alleged bid-rigging, conspiracy to commit fraud and mail and wire fraud in connection with a decade-long conspiracy involving public works projects in North Carolina.

This prosecution highlights the DOJ’s ongoing commitment to the Procurement Collusion Strike Force (PCSF) and its efforts to scrutinize public procurements and combat collusion and related fraud in government contracting.

The PCSF has conducted extensive training of law enforcement officers and procurement officers, among others, to help identify scenarios and situations where collusion is more likely to occur. The PCSF is also utilizing data analytics to advance its investigations, building on technological advancements and more useable data sets to target and prosecute anticompetitive conduct.

Importantly, the PCSF has recently doubled in size and has gone global just as the United States has approved unprecedented stimulus spending in response to the global COVID-19 pandemic and as the Biden administration is poised to approve a new infrastructure plan. The PCSF has provided tools that allow any individual to report suspected collusion via email or an online tip center. Enforcers’ renewed commitment to procurement collusion—coupled with increased government spending—will likely lead to more investigations and additional prosecutions in 2021.

Contech, a manufacturer of aluminum and other products, conspired with its supplier in bidding on numerous NCDOT public works projects. According to the indictment, the former Contech executive would obtain (or direct his subordinate to obtain) the supplier’s total bid price in advance. Using that information, Contech then submitted bids to be intentionally higher than its supplier. The indictment also alleged that Contech submitted false certifications that its bids were competitive and free of collusion throughout the conspiracy.

The indictment alleged bid-rigging between a manufacturer and its supplier, which is typically a vertical relationship and generally subject to the Rule of Reason rather than per se criminal analysis. Under the Rule of Reason, antitrust enforcers balance the anticompetitive effects of the conduct in question against the procompetitive benefits. Certain anticompetitive conduct, however, [...]

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