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 digital space remains front and center, with the designation of the first set of platforms with “gatekeeper” status under the EU Digital Markets Act (DMA) by the European Commission (EC), the ongoing initiative by the U.S. Department of Justice (DOJ) to assess artificial intelligence (AI) and its impact on competition, the UK Competition and Markets Authority (CMA) proposal of principles to guide AI foundations models, and the launch of DOJ’s trial against Google for monopolization in the search space in the U.S. District Court for the District of Columbia. The EC opened two new merger reviews using its recalibrated member state referral mechanism, and Justice Commissioner Didier Reynders was appointed the new Commissioner for Competition while Vice President Margarethe Vestager stepped down to focus on her candidacy for president of the European Investment Bank. Interested? Keep reading.…
Our Take on Top-of-Mind Global Antitrust Issues
First set of “gatekeeper” designations announced: On September 6, the EC announced the first set of “gatekeeper” designations under the DMA. The EC issued six designation decisions based on the submissions it received in early July 2023 from providers whose services meet the quantitative thresholds of the DMA. Consequently, the EC has designated as gateways a total of 22 core platform services (CPS) provided by the six gatekeepers. Additionally, the EC opened four market investigations to assess providers’ submissions that some of their CPS should not qualify as gateways under the DMA even though these platforms met the DMA’s quantitative thresholds.
Why it matters: Under the DMA, “gatekeepers” are defined as platforms that provide an “important gateway” between businesses and consumers in relation to their CPS. The designation decisions include some of the world’s biggest tech companies. The EC's webpage explains that the “new rules will establish obligations for gatekeepers, ‘do’s’ and ‘don’ts’ they must comply with in their daily operations”. In addition, Article 14 of the DMA requires designated gatekeepers to notify the EC of any intended merger or acquisition transaction (regardless of whether a transaction meets the jurisdictional thresholds under Article 1 of the EU Merger Regulation) using the Article 14 DMA Template.
Heightened interest in AI: Generative AI can be enormously beneficial to companies, but its use can also pose antitrust risks. DOJ Assistant Attorney General Jonathan Kanter warned that AI-driven pricing algorithms can facilitate tacit collusion because two or more algorithms may learn to fix prices or engage in market allocation, all potentially without the knowledge of human decisionmakers. Similarly, antitrust enforcers and class action lawyers are pursuing cases where competitors share allegedly competitively sensitive information, including forward-looking information about price, with the same pricing algorithm. And enforcers in the U.S. are not alone in their interest: Studies done by both the UK CMA and the EC deduced that pricing algorithms can be used in ways that reduce competition and harm consumers. Most recently, the CMA published its initial report into AI Foundation Models (FMs) that sets out seven proposed principles that aim to ensure that consumer protection and healthy competition are at the heart of responsible development and use of FMs.
Why it matters: Enforcement in this space is only just beginning, with officials in the U.S., UK, and EU continuing to study and monitor the growing AI industry. As antitrust enforcers and class action lawyers increasingly set their sights on the AI industry, including AI-driven pricing algorithms, business leaders and counsel should carefully consider whether and to what extent they rely on AI for pricing or output decisions and what steps may be taken to limit enforcement and litigation risk.
DOJ begins its landmark trial against Google: The DOJ’s landmark trial against Google, which began on September 12, 2023, in the U.S. District Court for the District of Columbia, evaluates DOJ’s claims that Google created an illegal online monopoly by paying billions of dollars annually to provide the default search engine on several browsers and devices. The trial has been years in the making, beginning with a comprehensive investigation that led to DOJ’s original complaint in October 2020. Prior to the trial, U.S. District Judge Amit P. Mehta previewed two significant issues during an April, 13 2023 summary judgment hearing: (1) asking counsel for Google, “If Google is so confident in the quality of its product, why pay for the defaults?” and (2) asking DOJ’s attorneys why, once Google “crossed the Rubicon” and achieved monopoly power, it should be obliged to tell its counterparties to offer users an upfront choice between its search tool and those of its rivals.
Why it matters: Litigated monopolization cases are rare, so their decisions — and any associated remedies — inform corporate behavior for years to come. When Judge Mehta eventually issues a decision, other companies with large market shares in the U.S. will learn more about the risk levels associated with exclusive contracts similar to those at issue.
EC continues its review of below-thresholds deals: The EC recently increased its activity in its merger review of below-threshold deals under Article 22 of the EU Merger Regulation (EUMR). Article 22 EUMR gives the EC the power to review deals that do not meet notification thresholds set out in the EUMR but affect trade within the EU single market and threaten to significantly affect competition within the territory of the EU member state that refers the deal to the EC for review. In the space of five days in August 2023, the EC accepted two separate referrals, each from several EU member states, under Article 22 EUMR. The parties will now have to formally notify the deals to the EC.
Why it matters: Following the EC’s 2021 guidance on Article 22 EUMR, the EC seemed to focus its Article 22 EUMR review activities on cases relating to Big Tech and the pharmaceutical sector. With these recent cases, the EC is using its powers in other sectors such as automotive and energy. With the EC accepting jurisdiction over two new deals in a short timeframe, companies active in nonreportable mergers are advised to keep the EC’s renewed focus and risk of referrals in mind.
Temporary appointment of new Commissioner for Competition: On September 5, the EC appointed Justice Commissioner Didier Reynders as the new Commissioner for Competition following the withdrawal of Commissioner Margarethe Vestager from the her role as Commissioner for Competition. The EC appointed Belgian politician Reynders to (temporarily) take Vestager’s place for the duration of Vestager’s campaign for the presidency of the European Investment Bank (EIB). Reynders has been the EC’s Commissioner for Justice since 2019, where he oversaw policies concerning data protection, fundamental rights, and consumer protection. Before joining the EC, Reynders was Belgium’s minister for foreign affairs for eight years.
Why it matters: The EC is composed of 27 Commissioners — one from each of the member states of the EU. Together, the Commissioners represent the EC’s political leadership during a five-year term. Each Commissioner is assigned to a responsibility for a specific policy area. Reynders will take over Vestager’s competition portfolio at a critical time as the DMA enters into force. If Vestager’s candidature to the EIB is unsuccessful, she will return to her position as Commissioner for Competition through the remainder of her term (end of 2024). If Vestager is elected president of the EIB, Denmark will have to propose a new Danish Commissioner to replace Vestager.
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