Antitrust regulators in the United States and Europe were very active in the final quarter of 2019. The FTC and DOJ continue to investigate and challenge M&A transactions in a variety of industries. Events of this quarter highlight the importance of states in merger enforcement. As well, recent FTC activity highlights the regulators’ focus on preventing monopolists from buying nascent competitors.

In Europe, the UK CMA continues to expand its role as a key jurisdiction in the merger clearance process, which will only accelerate with Brexit. The EC agreed to clear, subject to conditions, acquisitions in the aluminum production and battery industries as well as in the wholesale supply and retail distribution of TV channels after conducting Phase II reviews. Moreover, the EC opened new in-depth investigations into transactions in the copper refining and engineering sectors.

Access the full issue.

Today the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) released joint guidance concerning competition for biologics, including biosimilars. The joint guidance seeks to enhance competition for biologics and reduce manufacturers’ use of false or misleading statements or promotional communications concerning the efficacy or safety of biosimilars and other biologics. This guidance appears to be part of the Trump administration’s effort to reduce the cost of medications for consumers, as it is aimed at increasing the level of competition biosimilars can offer and raising awareness of the safety and efficacy of biosimilars.

Continue Reading Anticompetitive Conduct in Biologics – An Enforcement Priority with FTC and FDA

McDermott’s Annual European Competition Review summarizes key developments in European competition rules. During the previous year, several new regulations, notices and guidelines were issued by the European Commission. There were also many interesting cases decided by the General Court and the Court of Justice of the European Union. All these new rules and judicial decisions may be relevant for your company and your day-to-day practice.

In our super-connected age, we can be inundated by information from numerous sources and it is difficult to select what is really relevant to one’s business. The purpose of this review is to help general counsel and their teams to be aware of the essential updates.

This review was prepared by the Firm’s European Competition Team in Brussels and Paris. Throughout 2019 they have monitored legal developments and drafted the summary reports.

Access the full report.

The Federal Trade Commission (FTC) is considering a rulemaking to address the use of non-compete provisions in employment contracts. On January 9, 2020, the FTC held a day-long workshop to start a public conversation on whether it should use its rulemaking power to take on this issue. The two Democratic Commissioners have expressed strong support for an FTC rulemaking, while the Republican Commissioners appear less open to a rulemaking effort.

If the FTC were to regulate non-competes, this would be a significant development in an area traditionally governed by state law. It remains unclear whether the FTC will move forward with a rulemaking and what a potential FTC rule would look like. However, the FTC workshop highlights growing concern about non-competes and their impacts on workers and labor markets.

Continue Reading FTC Considers Taking on Non-Competes in the Workplace Through Rulemaking

The US Federal Trade Commission today announced increased thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.

Notification Threshold Adjustments

The US Federal Trade Commission (FTC) announced revised thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) pre-merger notifications on January 28, 2020. These increased thresholds will become effective on February 27, 2020. These new thresholds apply to any transaction that closes on or after the effective date.

Continue Reading Notification Threshold Under the Hart-Scott-Rodino Act Increased to $94 Million

Two recent US antitrust class action settlements drew additional scrutiny from federal judges, showing that the allocation of settlement funds between a proposed class and their attorneys will be carefully reviewed for fairness to class members.

Continue Reading Close Scrutiny for Class Settlements Where Plaintiff Attorneys Take Lion’s Share

The US antitrust regulators continue to challenge consummated transactions. On January 3, 2020, the FTC filed an administrative complaint against Axon Enterprise, Inc., challenging its consummated acquisition of VieVu, a body-worn camera competitor, from Safariland. The FTC also challenged non-compete agreements that Axon and Safariland signed in connection with the acquisition. The complaint demonstrates the FTC’s continued focus on challenging consummated transactions, and on defining “price discrimination markets” around sets of customers with unique needs. The FTC’s challenge also shows that merging parties should avoid signing non-compete agreements that are not reasonably limited in scope and duration. If these agreements are not appropriately tailored to achieving a legitimate business interest, the FTC may challenge them as anticompetitive.

Continue Reading FTC Challenges Axon’s Consummated Acquisition of Body-Worn Camera Competitor

California Attorney General Xavier Becerra (AG Becerra) announced on Friday, December 20, 2019, the terms of a comprehensive settlement agreement reached with Sutter Health (Sutter), the largest hospital system in Northern California.

Continue Reading California Attorney General Announces Historic $575 Million Settlement of Antitrust Suit Against Sutter Health

For the first time since the Department of Justice Antitrust Division (DOJ) published non-horizontal merger guidelines in 1984, the DOJ and Federal Trade Commission (FTC) issued updated Vertical Merger Guidelines to explain how the antitrust agencies analyze vertical mergers. The guidelines were published in draft on January 10, 2020, and are now open for a 30-day public comment period.


The DOJ and FTC released draft guidelines outlining the principal analytical techniques, practices and enforcement policies the antitrust agencies will use to analyze vertical mergers and acquisitions. Vertical mergers combine firms or assets that operate at different stages of the same supply chain. For example, vertical mergers or acquisitions could combine companies such as:

  • a satellite maker and a payload provider;
  • an automaker and an aluminum supplier;
  • an automaker and an automotive retailer;
  • a filmmaker and a cable television company; or
  • a pharmaceutical company and a chemical company making active pharmaceutical ingredients.

The merging companies do not compete with each other, but rather work with each other through the supply of inputs, distribution or other business services. The draft guidelines are relatively limited in scope and do not significantly expand the theories and issues that US antitrust regulators have been applying to vertical mergers for several years. That said, having these theories on paper will provide helpful guideposts in assessing potential transactions. At the FTC, the two Democratic Commissioners abstained from voting to release the guidelines, issuing Dissenting Statements instead.

The draft guidelines rely on the well-established principles in the Horizontal Merger Guidelines on how to define product markets and measure concentration levels. The guidelines establish a safe harbor if the companies have a share of less than 20% in the relevant market(s), but set no presumption of anticompetitive harm if market shares are higher than that. The focus of these new draft vertical merger guidelines is on the competitive effects analysis and not on shares or any formulaic assessment. The basic concern is whether combining two companies at different levels in a supply chain will enable the combined company to lessen competition at one of the levels.

Unilateral Effects

First, the guidelines discuss potential unilateral anticompetitive effects from vertical mergers under two theories: (1) foreclosure/raising rivals’ costs and (2) access to competitively sensitive information.

  1. Raising rivals costs / foreclosure. The first theory suggests that “[a] vertical merger may diminish competition by allowing the merged firm to profitably weaken . . . one or more of its actual or potential rivals in the relevant market by changing the terms of those rivals’ access to one or more related products.” Alternatively, the merged firm could refuse to supply rivals altogether, foreclosing their access to a necessary product or service. The guidelines lay out the following key conditions for a foreclosure theory:
  • The foreclosure makes it more difficult for the company that is foreclosed to compete effectively.
  • The newly merged firm is likely to win more business if it denies or disadvantages the input to its rival.
  • The merger makes the foreclosure strategy profitable, when it would not have been premerger.
  • The impact is meaningful and not de minimis.
  1. Information sharing. The second theory suggests that in a “vertical merger, the combined firm may, through the acquisition, gain access to and control of sensitive business information about its upstream or downstream rivals that was unavailable to it before the merger.” The mere fact of information access is not sufficient to cause competitive concern, but where the exchange of information may lead a company to reduce R&D spending or take other actions that lessen competition, then the exchange can be viewed as having an anticompetitive effect. This is a common issue the regulators have historically resolved by imposing a consent decree requiring firewalls to prevent anticompetitive effects. The continued viability of these types of firewalls is in question because the DOJ has made it a firm policy to insist on structural remedies (i.e., divestitures) rather than conduct remedies such as firewalls.

Today, these are already the two primary theories that antitrust regulators analyze when determining if a vertical merger raises competitive issues. With respect to foreclosure and raising rivals’ costs, the guidelines note that that there are different models to measure competitive effects and that these effects do not depend on product market definition. This focus on competitive effects continues the theme from the horizontal merger guidelines of looking at outcomes to help define the product market.

Coordinated Effects

Second, the vertical merger guidelines discuss how vertical mergers may reduce competition through coordinated effects by, for example, enabling the sharing of confidential information. This could occur if a manufacturer of components (e.g., aluminum body sheet) and maker of final products (e.g., an automaker) merged and the component manufacturer supplies rival makers of final products. The merged entity would have access to information about its competitor’s output levels, costs of key inputs and perhaps other sensitive details. As a result, this confidential information could facilitate the forming of a tacit agreement between rivals and could make detecting any deviation from an agreement easier to detect. As with unilateral effects, the regulators often address this type of concern through a firewall remedy. As noted above, it is unclear, in light of the DOJ’s general opposition to behavioral remedies, whether firewalls remain a viable solution for vertical mergers with competitive concerns, especially at the DOJ.

The guidelines further discuss a coordinated effects theory that is relatively novel: how a transaction might “eliminate or hobble” a “maverick” firm that acts as a particularly disruptive influence that has an outsized role in ensuring a competitive market. Under this theory, if the merged entity now has control over a key input that a maverick competitor requires, the merged entity can use this power to raise prices to this maverick and lessen its ability to act as a disruptive force, thus leading to higher prices in the market in which the maverick competes.  Nevertheless, the guidelines also state that a vertical merger may make coordination less likely by increasing the merged entity’s incentive to “cheat on a tacit agreement.”


Finally, the guidelines emphasize that vertical mergers often create efficiencies and pro-competitive benefits because a vertical merger brings together assets at different levels in the supply chain. One specific example given in the guidelines is the elimination of double marginalization. Double marginalization occurs when different firms in the same industry, at different vertical levels in the supply chain, apply their own markups in prices. The draft guidelines recognize that one potential benefit of vertical integration is eliminating double marginalization which can provide more incentive or ability for the merged entity to reduce prices from premerger levels. The agencies will not challenge a merger if the net effect of eliminating double marginalization shows that the transaction is unlikely to be anticompetitive. The elimination of double marginalization, however, will only be recognized if cognizable and merger specific—the same requirements set forth in the horizontal merger guidelines and generally applicable to all claimed efficiencies.

Dissenting Statements

The two Democratic Commissioners at the FTC abstained from the vote releasing the new draft guidelines. They agreed with the need to update and replace the 1984 guidelines, and in their “dissenting statements” explained that these draft guidelines are too narrow and should go further. In their view, the guidelines should identify other potential anticompetitive theories of harm and should create a presumption that a vertical merger is anticompetitive if one of the parties is in an oligopoly.


At a high level, these guidelines embody principles the regulators have already been applying to vertical merger situations. The guidelines put these principles on paper, providing a useful reference point and transparency.

The two Democratic FTC Commissioners abstained from voting to release the new guidelines and issued statements criticizing the scope of the guidelines. This bears watching if there is a change in the administration this fall. Under a Democratic presidency, these new Vertical Merger Guidelines may shortly change given the views of the Democratic Commissioners and given comments of Democratic presidential candidates about general concerns of overly high market concentrations in many areas of the economy.

The draft guidelines are now open to public comment for 30 days, at which point the agencies will review the comments received prior to issuing final vertical merger guidelines.

Three recent antitrust merger reviews involving nascent competition demonstrate enforcers are paying close attention to acquisitions by industry leaders of emerging, but early-stage competitors. The US antitrust agencies have been criticized for allowing leading technology companies to extend their entrenched positions to multiple markets or technologies through acquisitions. We are now seeing regulators increasing their scrutiny of acquisitions of nascent competitors that were positioning themselves to challenge an entrenched, strong rival.

Continue Reading Recent Merger Reviews Demonstrate Increased FTC and DOJ Focus on Acquisitions of Nascent Competitors