Bloomberg Law
Jan. 4, 2023, 9:00 AM

Federal Antitrust Enforcement Will Gain Steam and Delay Mergers

Jamillia Ferris
Jamillia Ferris
Freshfields Bruckhaus Deringer
Meghan Rissmiller
Meghan Rissmiller
Freshfields Bruckhaus Deringer
Megan Yeates
Megan Yeates
Freshfields Bruckhaus Deringer

Early January is time to take stock of recent antitrust enforcement trends and consider what they mean for 2023. Here’s what parties should keep in mind to effectively navigate the evolving landscape of antitrust enforcement.

In 2022, agencies pushed the boundaries of antitrust enforcement, resulting in a string of court losses in the US. However, at least in the short run, these results have not shown any signs of deterring agencies in their active enforcement strategy.

Against this backdrop, holistic planning and an international strategy to close deals remains fundamental. Although certain sectors are likely to remain in the spotlight, especially tech and life sciences, no sector can expect to fly under the radar.

Novel Theories of Harm = Longer Timelines

Parties should continue to anticipate novel theories of harm in merger assessments, particularly related to labor and forward-looking competitive effects. Deal-makers need to prepare for agencies to look closely at transactions for their potential effects on labor.

Authorities recently focused merger enforcement on monopsony in labor markets. Labor was specifically called out in President Joe Biden’s Executive Order on Promoting Competition in the American Economy.

And the Department of Justice recently blocked Penguin Random House’s acquisition of Simon & Schuster, which was focused on this theory of harm.

Other novel and innovative theories of harm will continue to be tested by the authorities, although these may ultimately be rejected by courts, which are more likely to rely on established merger precedent.

Parties have also successfully pointed to commercial realities in court to push back against the approach taken by authorities—on narrow market definitions, or to highlight areas such as countervailing buyer power.

Vertical deals will continue to be scrutinized closely, such as Illumina/Grail and UnitedHealth/Change Healthcare. Conglomerate effects are in vogue and are expected to remain so—the Federal Trade Commission is considering them in its assessment of Broadcom/VMware. Authorities will also closely look at nascent and future competition, broader innovation, and the role of data.

This will all lead to longer and more complex reviews, which should be factored into deal timelines.

Parties Will Look to ‘Fix-it First’

Despite skepticism from agency leadership about remedies, judges have not had the same doubts. We should expect to see more use of “fix it first” or “litigating the fix” strategies in 2023.

Recent questioning in the ongoing Assa Abloy/Spectrum Brands case suggests the court may be inclined to follow the approach in UnitedHealth/Change Healthcare, where the judge found the “fixes” rejected by the DOJ were in fact sufficient. We expect parties to consider potential fixes as part of a robust and strategic defense—there may be multiple opportunities for the courts to weigh in.

Agencies Will Use All Resources

Agencies will look to use all the tools available to them in the context of antitrust enforcement, as articulated by DOJ Assistant Attorney General Jonathan Kanter and FTC Chair Lina Khan.

Federal agencies have recently reinvigorated use of Section 8 of the Clayton Antitrust Act, which prohibits interlocking directorships of competitors. We expect agencies to continue to take a hard look at board composition, particularly in sectors where they have concerns about a general trend towards consolidation.

In Booz Allen/EverWatch, the DOJ used Section 1 of the Shearman Antitrust Act in an M&A context to allege that mere entry into the transaction agreement could already harm competition. Although ultimately unsuccessful in court, this is a new angle that parties should consider as they engage in transactions.

The new Federal Trade Commission Act Section 5 policy statement on unfair methods of competition foreshadows an expansive approach to FTC enforcement in 2023. Businesses should carefully consider if conduct might constitute an “unfair method of competition” despite being lawful under the traditional antitrust laws.

New legislation with a particular focus on tech is also being pushed forward in the US and abroad, which requires companies active in certain sectors to re-evaluate existing business practices.

Enforcement in 2023 will not just happen at the federal level. Parties should expect state attorneys general to continue to take a proactive role in deals that affect their markets or in other antitrust enforcement with local effects.

International Strategy Key to Success

Ultimately the success of any deal requires success globally. US-centric deals can be derailed by international enforcers even where parties may be pre-revenue, with no overlap and no mandatory filings. In 2022, Illumina/Grail was blocked in the EU despite the FTC’s administrative law judge’s rejection of the FTC’s complaint to block and no EU turnover.

Authorities will continue to share information and theories and collaborate. This collaboration can be particularly powerful as a number of jurisdictions have aggressive enforcers and no court approval is required to block a transaction.

Parties should plan for longer timelines to allow for in-depth investigations and potentially litigation, and consider international risks, and importantly, international strategies, on every deal.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Write for Us: Author Guidelines

Author Information

Jamillia Ferris is a partner at Freshfields in the antitrust, competition and trade group and a member of the firm’s global antitrust leadership team.

Meghan Rissmiller is a partner at Freshfields in the firm’s antitrust, competition and trade practice.

Megan Yeates is an associate at Freshfields in the firm’s antitrust, competition and trade group.

Freshfields attorneys Tom Morgan and Lauren Vaca contributed to this article.