Welcome to the Sidley Antitrust Bulletin — thoughts on topics that are top of mind for Sidley’s Antitrust team and why they matter to you. The U.S. Federal Trade Commission (FTC) recently proposed significant amendments to the Hart-Scott-Rodino (HSR) premerger notification process that will radically overhaul the current system increasing the time and cost of filing. The FTC also recently withdrew two policy statements related to its antitrust enforcement in healthcare markets, and two additional commissioners were nominated to join the FTC. The New York State legislature passed a bill that, if signed by Democratic Gov. Kathy Hochul, would prohibit nearly all noncompete agreements between employers and workers going forward, irrespective of occupation or compensation, and give employees a private right of action to challenge unlawful noncompete agreements. The Court of Justice of the European Union (CJEU) ruled that competition authorities can take into account compliance with EU data protection laws when assessing whether there has been an infringement of competition law, and the Belgian national competition authority imposed interim measures halting integration of a completed transaction even though it fell below its thresholds for notification. Interested? Keep reading.…
Our Take on Top-of-Mind Global Antitrust Issues
FTC proposes dramatic changes to premerger notification process: The FTC has published proposed amendments to the HSR premerger notification process that, among other changes, would greatly expand the scope of documents that parties must disclose along with their premerger notification filings, including certain drafts and ordinary course board documents and ordinary course quarterly or semiannual strategic plans.
Moreover, parties will need to disclose information regarding their motivations for the transaction as part of the notification process and provide other narrative information about the transaction when disclosing the transaction to federal regulators.
Parties would also need to identify all principals, officers, directors, and board observers for all entities they control, not just those within the transaction structure, and would also require identification of any other entity for which these individuals currently serve in similar functions (or have served within the last two years).
The proposed rules are subject to a 60-day notice and comment period, concluding on August 28, 2023.
Why it matters: The proposed premerger notification rules would significantly overhaul and expand the scope of information and documents that parties will be required to produce in their HSR filings. While parties have always potentially been required to produce a vast volume of documents later in the investigation process, this was limited to the relatively small number of transactions that the agencies perceived as potentially anticompetitive, as opposed to all transactions that are notifiable under the premerger notification process as contemplated by the proposed changes. In addition, in the past parties were not required to articulate competitive rationales or synergies as part of the premerger notification process.
As a result, parties will need to involve antitrust counsel at the outset of discussions among businesses, as well as to provide document creation guidance to business leads. This will significantly increase the expense and time associated with putting together the required forms that businesses will need to submit to federal agencies for reportable transactions, along with accompanying documents. Without question, if enacted, the new rules will increase costs and add delay for parties seeking to close ultimately pro-competitive deals. For example, while public companies may ordinarily collect the type of information that they would need to disclose under the proposed rules, they may maintain the information in business units that typically have not previously been involved in the preparation of HSR filings. And nonpublic companies often do not systematically maintain this type of information, so for them the proposed rule would introduce the need for a new tracking and compliance function. Read Sidley’s full client update on the proposed changes here.
President Joe Biden announces two Republican nominations to the FTC: On July 3, President Biden announced his nominations to fill two Republican seats on the FTC: Andrew Ferguson, the current Solicitor General for the commonwealth of Virginia, and Melissa Holyoak, who holds the same role for the state of Utah. If confirmed by the Senate, the nominees would fill two empty seats on the five-person FTC currently controlled by a Democratic majority. Both seats have been vacant since March 2023, when Republican Christine Wilson resigned amidst public critique of Chairwoman Lina Khan’s leadership of the agency. The second seat has been vacant since October 2022, when Republican Noah Phillips resigned.
Why it matters: Although the new Commissioners, if confirmed, would likely do little to sway the policy goals of the current FTC, both nominees may offer dissent to the Democratic majority that has been missing since Commissioner Wilson’s departure. Some expecting an entirely pro-business view, however, may be surprised by the nominees’ antitrust views, particularly with regards to Big Tech. This past year, Ferguson spearheaded Virginia’s role in a joint antitrust lawsuit brought by the Department of Justice (DOJ) and several states against Google over its digital advertising technology. This suggests common ground may exist between the nominee and the Biden administration on the administration’s antitrust priorities.
FTC announces withdrawal of antitrust healthcare guidelines: In a similar move to the DOJ Antitrust Division, on July 14 the FTC announced the withdrawal of two antitrust policy statements related to enforcement in healthcare markets, issued in 1996 and 2011. The FTC’s announcement largely tracked that of the DOJ Antitrust Division and described the policy statements as “outdated” and “no longer reflect[ing] market realities in this important sector of the economy.” Instead, the FTC indicated it intends to rely on “principles of antitrust enforcement and competition policy for all markets” and to proceed on a “case-by-case” approach moving forward.
Why it matters: As we warned upon DOJ’s withdrawal in February, the FTC’s removal of these guidelines creates uncertainty for businesses touching the healthcare industry. For years, companies have relied on the safety zones included in the guidance to develop practices that should survive close antitrust scrutiny. The FTC’s retraction of that guidance may signal a desire to bring information exchange cases against companies in this space. As we indicated in February, trade associations and other business entities should ensure that their practices are fully compliant in light of the retracted guidance and do not otherwise appear anticompetitive.
NY state passes noncompete bill: The New York state legislature recently passed a bill prohibiting nearly all noncompete agreements between employers and workers, irrespective of occupation or compensation, and giving employees a private right of action to challenge unlawful noncompete agreements. While the bill, which has not yet been signed by Gov. Hochul, would not affect existing agreements, it provides for only a few exclusions for employers going forward, including agreements (1) with a prospective or current employee that establish a fixed term of service; (2) prohibiting disclosure of trade secrets, or confidential and proprietary client information; and (3) prohibiting solicitation of clients of the employer that the employee learned about during employment. More details on the bill are available here.
Why it matters: With the FTC’s proposed noncompete rule likely facing a protracted legal process, New York’s bill makes clear that states will not hesitate to take steps of their own to increase antitrust scrutiny of business practices, with a focus on the labor context. Given New York’s importance commercially and as a jurisdiction of choice, if enacted the bill is likely to upend a number of ubiquitous provisions implicating broad swaths of agreements. In particular, the bill has no sale-of-business exception (e.g., permitting a noncompete when purchasing an owner-run business), which is included in both the FTC’s proposed rule and other states’ restrictions (e.g., California), and is commonplace in merger-and-acquisition agreements as a way to incentivize and protect buyers.
CJEU confirms that competition authorities can assess compliance with EU data protection laws: In 2019, the German Federal Cartel Office found that Meta’s processing of data collected outside its social network, Facebook, under its general terms constituted an abuse of dominance. In the context of the appeal, the CJEU has now ruled that while competition and data protection laws pursue different objectives, national competition authorities (NCAs) can find an infringement of the General Data Protection Regulation (GDPR) where that finding is necessary to establish the existence of an abuse of dominance. However, as NCAs themselves neither monitor nor enforce the GDPR, they must consult and cooperate sincerely with the data protection supervisory authorities in reaching findings.
Why it matters: The ruling confirms that European competition authorities may consider compliance with rules other than those directly relating to competition law when determining whether there has been an abuse of dominance. The CJEU emphasized the importance of the access to and ability to process personal data in the digital economy, stating that this has become a significant parameter of competition. This broadens the possibilities for competition authorities to take into account almost any area of law (beyond competition) in assessing dominance and abuse. For example, it cannot be ruled out that compliance with environmental laws, employment laws, or the EU new digital markets rules might be relevant to findings of dominance and abuse in the future.
Belgian competition authority halts deal that did not require mandatory filing: In March 2023, the CJEU confirmed that NCAs can review concentrations under abuse-of-dominance rules, even if those concentrations are not subject to national premerger review (see our client alert here). Shortly after this judgment, the Belgian NCA opened an antitrust investigation into Proximus’s acquisition of its telecommunications rival Edpnet. At the end of June, the Belgian NCA imposed a series of far-reaching interim measures on Proximus to ensure that it keeps Edpnet’s activities separate from its own and that no commercially sensitive information is shared between the companies. It must also maintain Edpnet’s competitiveness by providing Edpnet with sufficient financial resources and refraining from actively recruiting any of its staff members.
Why it matters: In this highly unusual move, an EU NCA has formally pressed the pause button on a deal that fell below the relevant merger filing thresholds. The anticipated duration of the interim measures is 15 months in order to allow the Belgian NCA to complete its antitrust investigation. The measures illustrate that businesses planning deals are advised to map out antitrust concerns holistically and consider that intervention risks may exist even if the formal merger control thresholds are not exceeded.
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