The recent Congressional hearings with senior officers of Amazon, Apple, Facebook, and Google (so-called Big Tech) highlight an increasing political focus on antitrust and a growing bipartisan consensus for greater enforcement. A cohort led by academics and the majority of the House Judiciary Committee echoes the need for greater enforcement and supports statutory changes. This change is not limited to the United States. The United Kingdom and European Union, among others, have already increased enforcement, especially against alleged conduct by leading and dominant tech firms, and are considering significant legal and regulatory changes that would toughen merger enforcement standards.
In the United States, the coming election will decide the scope and breadth of the change in federal antitrust enforcement. A Democratic Congress will certainly increase funding to expand merger and non-merger enforcement at the Department of Justice Antitrust Division (DOJ) and the Federal Trade Commission (FTC).With the support of a Democratic White House, a Democratic Senate may also enact pro-plaintiff statutory reform. Even if there is no political change in Washington, federal antitrust enforcers will feel increased bipartisan pressure to investigate and challenge acquisitions and conduct by large firms. States will also pick up their enforcement activities, especially where federal agencies decline to investigate or challenge.
Although Big Tech has faced the greatest political and enforcement attention, pharmaceutical, health care and agricultural processing industries will remain a top enforcement priority and receive greater scrutiny. And DOJ and FTC will apply tougher standards across all industries. Therefore, if the enforcement agencies toughen merger and conduct standards to support challenges to Big Tech transactions and activities, those standards will eventually extend to all industries.
Below we discuss the changes that could occur, depending on the results of the election. Any entity involved in strategic transactions—including bolt-ons, roll-ups and firms with significant market shares—should be conscious of the potential changes and plan accordingly. Further, companies should adjust their compliance training to account for changes in law and enforcement policy as they occur.
Even if the Republicans retain control of the White House and the Senate, bipartisan pressure for greater enforcement ensures change. The DOJ and FTC ongoing investigations into, and expected challenges of, Big Tech conduct and past mergers may trigger similar theories of harm against companies in other industries. In particular, the pharmaceutical, health care and agricultural industries can expect an uptick in investigations of conduct designed to limit competition, strategic mergers and various vertical arrangements where one party has a significant share or controls a key input upstream or distribution chain downstream. The FTC Chair recently suggested the agencies may consider lowering reporting thresholds for Big Tech as a result of their investigations into prior acquisitions. If successful, DOJ and FTC could decide to lower thresholds for all market leaders making an acquisition in a concentrated industry. That all said, the agencies are unlikely to get a significant increase in their resources and the resources available would likely be limited to higher profile matters.
If the Republicans retain the White House but lose the Senate, there will be even more pressure on the FTC and DOJ heads to increase enforcement. The Senate would likely vote in favor of increased funding to support those efforts and pass legislation lowering the government’s burden for blocking transactions. The fate of such legislation at the White House will depend on its scope, but it is possible limited legislative changes could be enacted.
If the Democrats win both the White House and control of the Senate, they will likely undertake a significant revamp of antitrust law and enforcement. At the agencies, transactions that reduce the number of players from 5-to-4 that have in recent years often obtained clearance with relative ease would face more intense scrutiny and may require remedies. DOJ and FTC merger reviews would investigate effects on labor markets and possibly inequality and climate change. The new agency heads would likely replace the recently issued joint vertical merger guidelines and DOJ-issued merger remedies guidance. They may also modify the 2010 Horizontal Merger Guidelines to reduce the concentration thresholds that support a challenge. Efficiency claims, which have always had limited impact in merger reviews, would be even less effective at offsetting potential competitive effects, and may even be a negative if the efficiencies involve layoffs or other payroll reductions. The agencies will receive greater resources, likely funded in part by merger filing fee increases and perhaps lower reporting thresholds for market leaders.
In Congress, legislation will almost certainly pass that will reduce the government’s burden for challenging a merger and may also ease a plaintiff’s burden for proving illegal exclusionary conduct. Finally, enforcement policy with regard to intellectual property will return to the Obama-era position that is more pro-implementer. If the Democrats do not regain control of the Senate, the Senate is less likely to pass significant legislative changes, though it may approve more limited changes. The Senate, however, will not be in a position to prevent the agencies from revamping guidelines or following the new administration’s enforcement priorities.
Changes Regardless of the Election Results
While U.S. antitrust enforcement and policy has seen little change over the last three decades, other jurisdictions, led by the European Commission, have moved toward increased enforcement .The European Commission, which is already considerably more pro-enforcement on mergers and exclusionary conduct, is considering both legislative and guidelines changes that would materially toughen its enforcement. The United Kingdom has increased its enforcement activities in anticipation of Brexit and has already shown itself to be an aggressive enforcer. Other jurisdictions, including Germany, South Korea and perhaps others, may well follow.
In the United States, state attorneys general have already become more active and will continue to do so, particularly if they do not perceive increased enforcement at the federal level. New York is considering pro-plaintiff statutory changes that would make it easier to bring exclusionary conduct claims against market leaders under state law than currently permitted under federal law and, if enacted, may cause other states to follow.
There will be more antitrust enforcement after the election, regardless of its results. Companies need to plan for these likely changes and be ready to update strategic plans and compliance training accordingly. Failure to follow developments and adjust to them could result in very serious consequences, including failed transactions, conduct investigations and litigation.