M&A Today - The New Antitrust Environment
The United States, Europe, and other jurisdictions around the globe are in the midst of an antitrust inflection point. Governments and the public at large increasingly view antitrust enforcement as a priority. This new antitrust environment affects mergers and acquisitions. Gary Zanfagna, Chair of the Paul Hastings Antitrust and Competition group, Immediate Past Chair of the Antitrust Law Section of the ABA, former Chief Antitrust Counsel of a Fortune 50 company, and former Assistant Director for Policy at the FTC; Michael Murray, Paul Hastings partner and former Principal Deputy Assistant Attorney General of the Antitrust Division of the U.S. Department of Justice; and Camille Paulhac, Paul Hastings partner and expert in European competition law, including multijurisdictional merger filings, abuse of dominance and cartel cases—discuss how companies should understand and plan for this new antitrust environment.
The first aspect of the new antitrust environment that companies should recognize is that it is simply not business as usual for antitrust law in the United States. President Biden’s Executive Order on Promoting Competition in the American Economy establishes a whole-of-government approach to enforcing the antitrust laws. It orders the Antitrust Division and the Federal Trade Commission to prioritize key markets, such as technology, life sciences, pharmaceuticals, health care, financial services, energy, and transportation. It calls upon the agencies to reevaluate existing guidelines on both horizontal and vertical mergers and reiterates the ability of agencies to challenge consummated mergers. This Executive Order comes with congressional tailwinds as well, as multiple members of Congress of both U.S. political parties have called for passage of bills aimed at strengthening the antitrust laws.
The second aspect of the new antitrust environment that companies should grapple with concerns the identity and priorities of key personnel. President Biden has appointed pro-enforcement and aggressive officials to key positions within his administration. Special Assistant to the President Tim Wu has called for a return to the 1970s era of antitrust enforcement, which he views as a heyday. Federal Trade Commission Chair Lina Khan comes from the progressive school of antitrust, which distrusts the traditional consumer welfare standard and traditional ways of understanding antitrust enforcement. In the Antitrust Division, President Biden has nominated Jonathan Kanter for the role of Assistant Attorney General. Although he hails originally from a big law firm practice representing the targets of antitrust enforcement, he most recently has enhanced his stature by representing critics of large technology companies. These key personnel have made their priorities known. Federal Trade Commission Chair Lina Khan already has rescinded the vertical merger guidelines, signaling a concern with vertical integration, “self-preferencing,” and “conflicts of interest.” The agencies are increasingly concerned with the acquisition of nascent competitors by established industries players, and the FTC has also begun asking merging parties questions concerning the effect of a merger on labor issues, such as unionization, and ESG issues. The implication for merging parties is that they must carefully plan for and set time aside for clearing agency review.
Another aspect of the new antitrust environment that companies should consider concerns European regulators. The European Commission has simplified merger control rules to focus on the most complex deals, by notably subjecting deals that were not previously caught to in-depth investigations under new referral rules (article 22 EUMR). Overall, deals may now be subject to multiple reviews in Europe, instead of the one-stop shop that previously characterized European competition law. In addition, the European Commission increasingly seeks extensive and complex remedies with respect to transactions. It recently imposed severe fines in the case of early implementation of deals, also known as gun jumping. In addition, the European Union, like the United States, is considering revisions to antitrust laws, including reversing the burden of proof in big tech acquisitions of start-ups. These developments make the European competition law regime more complex to navigate than in previous years.
Although the new antitrust environment in the United States and Europe poses challenges to mergers and acquisitions, they are hardly insurmountable. Indeed, deal volume is significant at this point. Consequently, the need to focus early in the transaction process with the help of competent counsel has never been more pressing.
These insights were shared during our latest webinar, M&A Today: The New Antitrust Environment and its Impact on M&A Deals.