Deep policy disagreements among U.S. antitrust regulators mean corporate actors face potentially conflicting legal standards. In the year ahead, expect to see continued evolution of U.S. (and other) legal standards, together with increasingly complex pre-closing deal processes and compliance requirements in the U.S. and abroad. International concerns about big tech and digital markets will also stay in the foreground.
In 2019, U.S. antitrust enforcers increasingly disagreed about policy and enforcement and tussled over who would investigate which big tech companies.
In the U.S., businesses can’t take state attorneys general for granted as enforcers, or assume that either the Department of Justice or the Federal Trade Commission speaks for enforcers more broadly. The practical impact is that private companies must navigate regulators’ competing agendas and priorities and think carefully about who is impacted by a deal and how they can voice concerns to regulators.
No-Poach Agreements. The DOJ has repeatedly said it will be bringing criminal no-poach cases soon. But in 2019, it filed statements in ongoing private litigation saying no-poach provisions in franchise agreements should be reviewed under the rule of reason. State AGs, in particular Washington’s AG, disagreed on that position publicly and filed against the DOJ in those same private lawsuits.
Patent Tie-Ups. The FTC sued Qualcomm Inc. for allegedly using its standard-essential patents to hold handset chip markets hostage. DOJ publicly disagreed with that theory, eventually filing statements against the FTC’s position in the case. The DOJ also filed an appellate brief against the FTC’s trial court victory.
The T-Mobile/Sprint Merger. The DOJ cleared the merger of Sprint into T-Mobile. Several state AGs have signed on, but AGs from 14 states and D.C. have sued to block the deal. Almost half of U.S. consumers live in states suing to block the deal, and it is unclear that the merger could survive if it can be implemented only in the non-objecting state markets.
Big Tech Investigations. The FTC and DOJ each have investigations into whether the big technology companies have monopolized or distorted markets. Most all state AGs are also investigating. It’s unclear to what extent there is coordination or information sharing among these investigations.
Procedural Thicket Deepens
Procedural costs are increasing, which may threaten smaller deals not rich enough to withstand the hassle. The Committee on Foreign INvestment in the United States (CFIUS) creates a whole second regulatory hurdle some deals must clear. There are headwinds against those trends reversing in 2020.
Issues to watch:
The role of pre-notification negotiation with the antitrust enforcers in the U.S. and abroad is growing. The time from announcement to filing of a deal seems to be increasing for big mergers.
More countries are demanding extensive internal documents related to mergers. Australia is an example of an enforcer ramping up its use of mandatory disclosures in merger review.
A U.S. court, for the first time, forced the DOJ to defend a negotiated consent order in a merger case in a trial-like hearing before signing off on the deal. The process stretched to almost a year after CVS Health Corp. and Aetna Inc. inked a consent order with the DOJ ending its review of the merger.
DOJ and FTC have tweaked procedures to boost efficiency of their merger reviews, but investigated deals are not moving faster overall.
Worldwide, enforcers increasingly punish procedural violations like “gun jumping” (acting like a merged entity before clearance is granted) and failure to file for review of a deal. Less falls under the radar.
CFIUS jurisdiction has expanded drastically. This parallel process can also scuttle deals and drain resources. New rules issued in September impact more deals.
Compliance Costs Growing
Every year more countries criminalize cartel violations. Compliance in cross-border businesses gets more vital annually as a result. The quality of compliance, and reviewing a target’s compliance during due diligence, are growing concerns. Integrating compliance systems and training may warrant more deal resources.
The DOJ in 2020 will credit compliance programs in cartel enforcement, a new development announced in July 2019. The goal is to create incentives for effective compliance, reducing violations and ending them sooner. Will this impact leniency applications?
Meanwhile, as companies digitize, they will look to recover that investment by mining the resulting data. Accumulating data presents opportunities, but also new regulatory risks. Specialists who mine and protect data, and lawyers who parse these issues, can look forward to more work in 2020.
As for the rest of the world, most developed countries are struggling with the intersection of privacy, data security, and competition law. Against this backdrop, compliance has growing value—but real costs. Watch for data parsing to become a more vital part of the efforts of competition regulators to find violations and measure remedies, and of compliance officers to keep the company on track.
Read about other trends our analysts are following as part of our Bloomberg Law 2020 series.
—With assistance from Grace M. Burnett.