ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
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Kanter Signals DOJ to Follow FTC Lockstep, Calls for Substantial Change to Competition Enforcement Approach

by and | Mar 14, 2022 | , , ,

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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DOJ to Devote Substantial Resources to Investigating and Prosecuting Corporate Crime, Emphasizing Importance of Effective Compliance Programs

by , , , , and | Mar 9, 2022 | ,

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

by , and | Mar 8, 2022 | , , ,

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

by , , , and | Feb 1, 2022 | , , , , ,

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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FTC Announces 2022 Reviews of Key Guides and Rules

by and | Dec 20, 2021 | ,

The US Federal Trade Commission (FTC) has announced a series of new reviews scheduled for 2022 regarding key FTC guides and rules. Consumer-facing businesses should pay close attention to these reviews. While FTC reviews are periodic and can be routine, they can also result in fundamental changes to how the FTC approaches enforcement of key issues. Review periods can also provide an opportunity for impacted businesses to submit public comment and opinion to the FTC for consideration.

The FTC’s ongoing and upcoming reviews were highlighted in the Biden administration’s recently released Fall 2021 Unified Agenda of Regulatory and Deregulatory Actions; this publication highlights federal agencies’ regulatory action plans for the coming year. The FTC’s Statement on Regulatory Priorities announced that the agency will undertake a thorough review and examination of the guidance provided in, and the enforcement of, the following key guides and rules:

  • Guides Against Deceptive Pricing: These Guides address types of pricing representations, such as marketer representations that a price is a “sale” or “discount,” comparisons to others’ prices or manufacturers’ retail prices and representations about special prices based on the purchase of other goods or services (e.g., “buy-one-get-one” offers).
  • Guide Concerning Use of the Word ‘Free’ and Similar Representations: This Guide sets forth requirements when using the promotional device of offering “free” merchandise or services. When making such offers, the Guide requires all terms and conditions be set forth clearly and conspicuously at the outset of the offer to avoid any reasonable probability that the terms might be misunderstood.
  • Guides for the Use of Environmental Claims (Green Guides): The Green Guides provide the general principles applying to all environmental marketing claims; how consumers will likely interpret certain claims and how marketers can substantiate such claims; and how marketers can qualify such claims to prevent deception of consumers.
  • Business Opportunity Rule: This Rule requires business opportunity sellers to give prospective buyers particular information to aid in their evaluation of a business opportunity. The FTC intends to initiate review of this Rule by late 2021.
  • Amplifier Rule: This Rule creates uniform test standards and disclosures for consumers to make more meaningful comparisons of amplifier equipment performance attributes. The FTC plans to submit a recommendation for further Commission action on review of this Rule by February 2022.

In addition to those newly announced reviews, the report also discussed the following ongoing FTC reviews:

  • Children’s Online Privacy Protection Rule (COPPA): COPPA imposes requirements on operators of websites or online services directed to children under age 13 as well as on operators of websites or online services that have actual knowledge that they are collecting personal information online from a child under age 13. FTC staff is continuing to analyze and review the public comments; however, the period for comment on COPPA ended in late 2019.
  • Guides Concerning the Use of Endorsements and Testimonials in Advertising (Endorsement Guides): These guidelines are designed to help businesses and other advertisers of TV, print, radio, blogs, [...]

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Antitrust M&A Snapshot | Q3 2021

by , , , and | Nov 1, 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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Enforcement Agencies Announce Moratorium on Early Termination Program for Merger Reviews

by , and | Feb 9, 2021 | , ,

The US Federal Trade Commission (FTC) released a joint statement with the Department of Justice (DOJ) on February 4, 2021, signaling comprehensive changes to the merger review process. In a significant development, the agencies declared a moratorium on the early termination program for merger reviews. This policy shift signals a potential sea change in antitrust enforcement under the Biden administration.

The Hart-Scott-Rodino (HSR) Premerger Notification program imposes an initial 30-day waiting period, prior to merger consummation, during which the enforcement agencies have an opportunity to evaluate the likely effects of the proposed merger and decide whether to investigate further by issuing a Second Request or ending the HSR review by letting the initial 30-day waiting period expire.

A third potential outcome of the initial 30-day waiting period is early termination. The early termination program under the HSR Act was originally established as an exception to an HSR review if the relevant parties demonstrated a “special business reason.” This policy was reversed after Heublein v. FTC (1982) and since that time early termination of the initial 30-day waiting period has become commonplace if the merger does not merit further review (in 2019 early termination was requested in 74.2% of transactions and granted in 73.5% of those instances). Further review would be merited, if the enforcement agencies determined the transaction posed a risk of a substantial lessening of competition under the Clayton Act.

Pursuant to the moratorium on early terminations, merging parties must now refrain from consummating any proposed transaction for the full initial 30-day waiting period—early termination is not a potential outcome.

The joint statement regarding the early termination moratorium provided the following justifications:

  • The early termination review was precipitated because of the transition to a new presidential administration as well as an “unprecedented volume” of HSR filings;
  • The above factors warrant the use of the full 30-day window to allow the agencies to do “right by competition and consumers;”
  • The suspension of the early termination program “will be brief.”

Past pauses in early terminations coincided with extraordinary circumstances such as the move to an e-filing system at the Premerger Notification Office (PNO) at the outset of the COVID-19 pandemic (paused from March 13, 2020, until March 30, 2020) or during periods of government shutdown. However, this current pause appears likely to endure longer than these past instances, given that this pause is driven by the confluence of a number of factors, beyond what was indicated in the joint statement, such as:

  • A longstanding agency funding drought resulting in understaffing
  • Transitioning to a new presidential administration
  • A desire to engage in more expansive investigations under the new Biden administration
  • A large influx in HSR filings in recent months (on pace for a 60% increase in 2021)

From the agencies’ point of view, these changes are necessary to meet their mandate of preventing unfair competition and anticompetitive practices. With agency resources stretched thin due to budget constraints, in addition to an increased [...]

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