Antitrust Anxiety Abounds

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The Shift: Antitrust Anxiety Abounds

We have written extensively about the fact that regulation enforcement is up, but one of the most intense areas of regulatory focus is around antitrust.

When one thinks about antitrust, you can't help but automatically think of Big Tech—and for good reason—Big Tech is being hit hard from all angles: M&A, data privacy, AI and ESG. However, as much as all these areas are currently being targeted, it is the M&A and ESG space that seems to be creating the most headaches.

The Conversation

As the tech industry knows, the Federal Trade Commission has been aggressively pursuing enforcement actions to rein in tech giants, specifically to block mergers it views as anticompetitive. And that is obviously something that keeps Jennifer Newstead, chief legal officer of Meta, on her toes.

“In the antitrust and competition realm in the U.S, we’ve seen some actions taken in the last few years toward us and other companies where I think there are what feel like efforts to shift the legal landscape and legal standards that govern how mergers are permitted to proceed or not,” said Newstead.

“I think this effort to shift the standards of law on antitrust issues have real risks to innovation and to the value of the M&A ecosystem that fuels innovation in the tech sector. We are obviously going to respond to any direction that the government wants to take its policymaking, but I do think it is concerning.”

In addition, antitrust attorneys are sounding the alarm over seemingly innocuous collaborations within industries to develop best practices and common standards related to environmental, social and governance issues as federal and state regulators are stepping up scrutiny over whether the arrangements constitute collusion and thus violate antitrust laws.

“So now—if companies want to create new ESG standards, goals, or benchmarks—there is not any guidance on how to do that safely. And if competitors wanted to collaborate directly, the 20% market share safe harbor seems to no longer be valid because the policy articulating the principle has been withdrawn,” said Jeetander Dulani, a partner at Stinson in Washington, D.C.

The Significance

These issues are coming to the fore partly because of draft merger guidelines the DOJ and FTC rolled out in July that may deem more companies to have dominant market positions, a determination that carries consequences beyond M&A.

The 13 “principles” in the guidelines essentially would codify the antitrust views of FTC chair Lina Khan and DOJ antitrust chief Jonathan Kanter, both of whom believe the longstanding approach of limiting the use of antitrust law to challenging practices that raise consumer prices is inadequate.

It doesn’t help that companies already were rattled by stepped-up antitrust enforcement under the Biden administration. Antitrust attorneys say the DOJ and FTC are taking a harder line on what constitutes a violation than they have in the past 40 years.

This is partly because Khan and Kanter view the rise of the tech giants as a byproduct of past flawed thinking—excusing Amazon, for instance, from scrutiny of potentially anticompetitive practices because it sells goods at low prices. They argue courts should also consider a range of other factors, including whether business practices negatively affect labor markets in various ways, such as by depressing wages paid in certain industries.

This shift is “heightening standards for cooperation, remediation, and expectations of compliance departments,” said Jaime Raich, executive counsel of global investigations at GE.

The Information

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The Forecast

Companies need to be proactive and super-responsive to investigators to manage regulatory risks in this area of hyper-aggressive enforcement, according to participants on a recent panel at ALM Global’s General Counsel East in New York City.

“Regulatory agencies are following the lead of the administration’s policies, which are strong on regulation and strong on law enforcement,” said Eduardo Santiago-Acevedo, vice president and senior counsel of regulatory law at Prudential Financial.

Gurbir Grewal, director of the SEC’s Division of Enforcement, has been “pretty explicit … that he doesn’t view penalties as the cost of doing business. So we’re seeing a very aggressive stance in this administration, where penalties that the SEC is assessing now really aren’t tied to precedent, and they’re much larger than they’ve been in the past,” said Kelly Gibson, a Morgan, Lewis & Bockius partner.

In turn, the panelists say that all the major regulators—from the SEC and DOJ to the Financial Industry Regulatory Authority—are emphasizing the importance of self-reporting and cooperation.

Heather D. Nevitt is the Editor-in-Chief of Corporate Counsel, Corporate Counsel Advance and Global Leaders in Law. Email her at hnevit@alm.com and find her on Twitter @HeatherDNevitt