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Antitrust M&A Snapshot | Q2 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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DOJ to Devote Substantial Resources to Investigating and Prosecuting Corporate Crime, Emphasizing Importance of Effective Compliance Programs

In March 3, 2022, speeches at the American Bar Association’s Annual National Institute on White Collar Crime (ABA White Collar Institute), US Attorney General (AG) Merrick Garland and US Assistant Attorney General for the Criminal Division (AAG) Kenneth Polite Jr. addressed the US Department of Justice’s (DOJ) increased commitment to investigating and prosecuting corporate crime.

As a testament to their commitment to these resource-intensive cases, AG Garland discussed plans to hire 120 new prosecutors and 900 new FBI agents; this announcement represents a substantial surge in resources. AG Garland and AAG Polite also addressed specific ways they intend to increase enforcement efforts, including through the expanded use of data analytics. Finally, in addition to outlining substantive enforcement priorities, AG Garland and AAG Polite emphasized DOJ’s focus on individual accountability, with AG Garland reiterating that DOJ’s primary goal is “obtaining individual convictions rather than accepting big-dollar corporate dispositions.”

As AG Garland warned, DOJ’s white-collar enforcement efforts will further “accelerate as we come out of the pandemic” and DOJ’s interest in corporate crime is clearly “waxing again.” Companies must therefore take proactive steps to prepare for this increased enforcement activity.

IN DEPTH

Substantial Additional Resources for Corporate Crime Enforcement

In 2021, DOJ charged 5,521 individuals with “white collar” crimes, which represented a 10% increase over 2020. During his speech, AG Garland announced that DOJ will be devoting even more resources toward its corporate crime enforcement efforts going forward. Specifically, DOJ will seek funding to hire 120 new prosecutors and 900 new FBI agents, all of whom would focus on white-collar crime. If DOJ obtains such funding, those new prosecutors and agents could supercharge DOJ’s enforcement efforts. For example, 120 prosecutors is more prosecutors than there are in many US Attorneys’ Offices (including in the District of Massachusetts, a district that is already active in corporate enforcement, particularly in the resource-intensive healthcare space). Adding 900 new FBI agents—a number that is similarly larger than many existing FBI field offices—could allow DOJ to pursue thousands of new corporate criminal investigations.

Expanded Use of Data Analytics

For the past two years, DOJ and other federal agencies have increasingly relied on sophisticated data analytics tools to identify and prosecute corporate crime. AG Garland specifically identified data analytics as another “force-multiplier” for DOJ. DOJ’s use of data analytics will undoubtedly expand going forward. Among other things, AG Garland announced that a new squad of FBI agents has been embedded within the Criminal Division’s Fraud Section to “further strengthen [DOJ’s] ability to bring data-driven corporate crime cases nationwide.” As DOJ increasingly relies on “big data,” including vast amounts of data from other state and federal agencies, companies must ensure that they are proactively using data analytics to further their own internal compliance efforts.

DOJ’s Priority Enforcement Areas

AG Garland and AAG Polite mentioned several of DOJ’s specific white-collar criminal enforcement priorities during their remarks. In addition to traditional areas such as healthcare fraud, securities fraud and [...]

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Mitigating Antitrust Risk in Defense Deals Amid Scrutiny

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.

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Antitrust M&A Snapshot | Q4 2021

In the United States, antitrust agencies have now filled senior leadership positions, although the Federal Trade Commission (FTC) awaits the appointment of a fifth commissioner. Challenges to mergers continue apace at both the FTC and the Department of Justice (DOJ). The agencies challenged two mergers in the fourth quarter and a third transaction was abandoned. Additionally, nine consent orders were approved. The FTC is also including prior approval provisions in consent orders across industries, requiring parties seeking to settle merger disputes to agree to provide the FTC with greater rights to reject potential future deals.

The European Commission (Commission) imposed interim measures for the first time in the context of the Commission’s determination that Illumina’s acquisition of GRAIL was premature. The Commission conditionally cleared, in Phase I, Veolia’s acquisition of Suez—a transaction involving two French incumbents in the water and waste sectors—following comprehensive commitments. IAG withdrew from its proposed acquisition of Air Europa following the Commission’s decision not to approve the transaction absent further concessions.

In the United Kingdom, the Competition & Markets Authority (CMA) imposed a record fine of £50.5 million on Facebook for breaching an initial enforcement order related to its acquisition of Giphy, and ultimately required Facebook to sell Giphy. The CMA also updated its merger guidance in parallel with the entry into force of the UK National Security and Investment Act, published a new template for initial enforcement orders and updated its guidance on interim measures.

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Antitrust M&A Snapshot | Q3 2021

In the United States, the US Department of Justice’s (DOJ) challenge of American Airlines and JetBlue’s “Northeast Alliance” after the joint venture’s approval by the US Department of Transportation earlier this year demonstrates the Biden administration’s commitment to aggressive antitrust enforcement. US President Joe Biden issued an Executive Order calling for tougher antitrust enforcement, including “encouraging” the DOJ and Federal Trade Commission (FTC) to modify the horizontal and vertical merger guidelines to address increasing consolidation. At the same time, the FTC, under Chair Lina Khan, continues its rapid pace of change to the merger review process.

Under a new interpretation of Article 22 of the EU Merger Regulation (EUMR), the European Commission (Commission) asserted jurisdiction over Illumina’s acquisition of GRAIL and Facebook’s acquisition of Kustomer, even though the transactions did not meet the Commission or Member State filing thresholds. The EU General Court confirmed a significant gun-jumping fine imposed on Altice for breach of the EUMR notification and standstill obligations.

In the United Kingdom, the UK government published plans to update antitrust rules, including revising its jurisdictional thresholds and expanding the “share of supply” test to allow the CMA to more easily capture vertical and conglomerate mergers, as well as acquisitions of startups. And the Competition & Markets Authority’s (CMA) handling of the Veolia/Suez transaction demonstrates the CMA’s willingness to engage with parties to seek practical interim solutions while it is investigating a consummated transaction for potential antitrust concerns.

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Antitrust M&A Snapshot | Q2 2021

In the United States, aggressive antitrust enforcement is likely to continue with the appointment of Lina Khan as Federal Trade Commission (FTC) Chair and the nomination of Jonathan Kanter to lead the Department of Justice’s (DOJ) Antitrust Division. The premerger notification landscape continues to shift as filings reach another record high. Technology companies remain in the “hot seat” as legislators in the US House of Representatives introduced five antitrust reform bills that would change the enforcement landscape for digital platforms, including seeking to preclude large digital platform companies from acquiring smaller, nascent competitors. And the US Department of Justice is making good on President Biden’s pledge to regulate “Big Ag” by challenging Zen-Noh Grain Corporation’s proposed acquisition of 38 grain elevators from Bunge North America, Inc.

Meanwhile, in Q1 2021, the European Commission (Commission) published its Guidance on Article 22 of the EU Merger Regulation. The Guidance encourages the EU Member States to refer certain transactions to the Commission even if the transaction is not notifiable under the laws of the referring Member State(s). In Q2, not long after the issuance of the Guidance, the Commission received its first referral request to assess the proposed acquisition of GRAIL by Illumina. In light of the growing global debate on the need for more effective merger control, EU Competition Commissioner Margrethe Vestager confirmed that the Commission will not soften EU merger policy going forward. The Commission’s statement was made despite the fact no deals have been blocked by the Commission in about the last two years.

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Executive Order Encourages FTC, DOJ to Address Hospital Consolidation, Vigorously Enforce Antitrust Laws

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.

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Government Contractor Pleads Guilty to Bid-Rigging and Procurement Fraud

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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Senate Passes Bill to Substantially Increase HSR Merger Filing Fees for Deals Greater Than $5 Billion

On June 6, 2021, the US Senate passed the Merger Filing Fee Modernization Act of 2021. The bill is co-sponsored by Senator Amy Klobuchar (D-MN), the Chairwoman of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights; and Senator Chuck Grassley (R-IA).

The bill amends the premerger notification provisions of 15 U.S.C. § 18a and substantially increases the Hart-Scott-Rodino Act (HSR) filing fees for large mergers, while also effectuating a slight decrease in HSR filing fees for smaller mergers. The text of the bill can be found here.

The adjusted HSR filing fees are as follows:

The proposed HSR filing fees are subject to annual increases based on the Consumer Price Index (CPI), unless the CPI increase is less than 1%. Any changes must be published by the Federal Trade Commission (FTC) each year (no later than January 31). The HSR filing fee thresholds themselves will remain correlated to Gross National Product (GNP).

The competition agencies also stand to directly gain from the passage of this bill. Section 3 of the bill authorizes the appropriation of increased funds for both the Department of Justice Antitrust Division (DOJ) and the FTC. The bill appropriates $252 million to the DOJ and $418 million to the FTC, substantially increasing the resources at the disposal of the regulatory agencies and even exceeding the FTC’s requested budget for FY 2022.

The bill is still subject to approval in the House of Representatives and by President Biden. But given the bipartisan support for this bill, its passage appears likely, and it raises the potential for additional bipartisan antitrust legislation in the future.




Expect More Criminal Enforcement & What You Can Do to Minimize Your Risk

OVERVIEW

Antitrust cartel and related collusive scheme enforcement is poised to increase. Several factors support this: (1) the Antitrust Division (the Division) has a 10% budget increase for Fiscal Year (FY) 2021; (2) proposed legislation that would increase its budget by $300 million; (3) Democratic administrations have traditionally been more aggressive in enforcing antitrust laws; (4) according to the US Department of Justice (DOJ), last year the Division opened the most grand jury investigations in almost 20 years and by the end of 2020 had the most open grand jury investigations in a decade; (5) increased coordination with international law enforcement agencies, including the Division recently signing a number of cross-border agreements, maintaining active memberships in multilateral organizations dedicated to cross-border antitrust enforcement cooperation and a DOJ official recently noting they have been working at strengthening their relationships with international law enforcement agencies during the pandemic and they expect this to benefit international coordination on investigations and (6) as pandemic limitations on in-person investigative tactics subside (including search warrants and knock and talk interviews, among others), expect a return to overt tactics related to open grand jury investigations.

Historically, cartel enforcement has increased following economic downturns and substantial federal stimulus packages. For example, after the 2008 financial crisis and the 2009 Recovery Act, the DOJ filed 60% more criminal cases than in prior years. We expect this trend to continue in the wake of the unprecedented government stimulus packages passed in 2020 and 2021 and additional potential government spending on infrastructure. In addition to the increased resources, the Division has stepped up its criminal enforcement program with the creation and recent expansion of the Procurement Collusion Strike Force (PCSF), the expansion of criminal investigations and prosecutions into labor markets, higher expectations for corporate cooperators and new potential benefits for corporate entities with compliance programs addressing antitrust violations.

Below we discuss the sectors most likely to be implicated by increased criminal antitrust enforcement, the PCSF and what steps can be taken to prepare and minimize risk in this environment.

EXPECTED INDUSTRY FOCUS

Based on the trends described above and our recent experience at the DOJ, we expect antitrust criminal enforcement to focus in at least the following industries:

  • Healthcare – The DOJ remains active in this sector with its ongoing generics investigations and prosecutions and other cases relating to market allocation and labor markets. In fact, all of the charged labor market cases thus far have been in the healthcare industry. The DOJ has stated that investigations and prosecutions for violations in the healthcare sector remain its top focus and stimulus spending will likely serve to increase the DOJ’s attention to healthcare markets. Although healthcare compliance policies have often focused on other fraud and abuse issues, such as the Anti-Kickback Statute and Stark Law, compliance with antitrust laws – including for human resources – is now more critical than ever. In addition, the recently signed Competitive Health Insurance Reform Act significantly narrows the exemption [...]

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