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The Paul, Weiss Antitrust Practice advises clients on a full range of global antitrust matters, including antitrust regulatory clearance, government investigations, private litigation, and counseling and compliance. The firm represents clients before antitrust and competition authorities in the United States, the European Union, the United Kingdom and other jurisdictions around the world.
The State of U.S. Antitrust Enforcement at the Beginning of 2024
- Bial, Joseph J
- Brachman, Paul D.
- Dearborn, Meredith R.
- Finch, Andrew C.
- Forrest, Katherine B.
- Isaacson, William A.
- Michael, William B.
- Phillips, Jessica E.
- Rubin, Jacqueline P.
- Sher, Scott A.
- Soven, Joshua H.
- St. Matthew-Daniel, Eyitayo “Tee”
- Synnott, Aidan
- Tannenbaum, Brette
- Hahn, Todd
- Kelly, Marta P.
- Knypinski, Zuzanna
- Nagley, Jared P.
- Sobel, Yuni Yan
January 29, 2024 Download PDF
- 2023 was a consequential year for antitrust enforcement, with significant developments at the policy level as well as in individual matters.
- The DOJ and FTC released new merger guidelines, but did not fare well in litigated merger challenges – though the FTC appears to have gained momentum with two litigation victories at the end of the year.
- The DOJ suffered several setbacks in its high-priority criminal “no-poach” enforcement program but its Procurement Collusion Strike Force had a productive year.
- In the coming year, we may get a decision in one of the agencies’ pending conduct cases and the FTC will likely release final rules on HSR filing requirements and employer-worker non-compete agreements. We might also begin to see how courts react to the new merger guidelines.
Last year the DOJ and FTC released draft and then final Merger Guidelines. The new guidelines could lead the government to challenge certain deals that in the past would not likely have faced agency action. For example, they lower the threshold market concentration level at which the agencies would presume a horizontal merger to be illegal and take a broader view of ways in which “non-horizontal” deals could potentially harm competition. Now that the much-anticipated guidelines have been issued, we can expect the agencies to routinely cite to these guidelines in litigation challenging mergers. But many questions linger about the new guidelines. Will courts continue to find the agencies’ guidelines persuasive? Will they find the guidelines’ case law citations useful? Will they agree with the guidelines’ theories of competitive harm? It will likely take several years and a number of litigated merger cases to get a real sense of whether the guidelines reflect the current state of merger law as interpreted by the courts – a practical guide for judges, agency lawyers, and company lawyers and their clients – or whether they are a normative set of policy preferences.
We have two early potential data points. The first is a recent decision from the Fifth Circuit late last year in Illumina v. FTC. This is one of relatively very few appellate court opinions dealing with a vertical merger challenge. Here, the FTC challenged Illumina’s vertical acquisition of Grail. Illumina manufactures next-generation gene sequencers which are used to run the multi-cancer early detection tests that Grail has developed. In its opinion, the court affirmed the viability of a vertical harm theory, set out a standard for evaluating certain types of deal “fixes,” and included a discussion of factors relevant to defining antitrust markets involving research and development. The court’s opinion is consistent with the new guidelines. For example, both recognize potential competitive harm that could arise from a merger resulting in a vertically integrated firm having the ability and incentive to harm its rivals by limiting access to a necessary product. (Perhaps not coincidentally, the final guidelines were released three days after the Fifth Circuit handed down its opinion, which is cited in the guidelines.) However, this is also consistent with the old Vertical Merger Guidelines and the court was not confronted with one of the broader non-horizontal theories from the new guidelines. The court found that “substantial evidence” supported the FTC’s factual findings but that it erred in evaluating the deal “fix” and sent the matter back to the Commission. However, Illumina subsequently announced that it will divest Grail.
The second data point is the recent decision in FTC v. Iqvia Holdings, in which the district court granted the FTC’s request for a preliminary injunction against the acquisition of DeepIntent by IQVIA, which would have, according to the FTC, combined two of the “three leading firms in the relatively young [health care professionals] programmatic advertising industry.“ The FTC argued, in line with the new guidelines and the Supreme Court’s 1963 opinion in United States v. Philadelphia National Bank, that a transaction resulting in a firm with market share of 30% or higher and an “undue increase in concentration” is presumed to lessen competition substantially. Defendants argued that the 30% market share threshold had been “repudiated.” The court, however, concluded that “the 30% threshold remains valid as a matter of law.” Surely the agencies will cite this going forward, but it should be noted that the 30% figure was not outcome-determinative. The court found that the FTC also “met its burden to establish a prima facie case based on” market concentration thresholds from the old merger guidelines.
The ultimate impact of the new merger guidelines on merger clearance outcomes remains to be seen, as this will depend on whether courts’ interpretations of the law align with the guidelines. However, the new guidelines together with the proposed changes to the Hart-Scott-Rodino Act rules could have a significant impact on the merger clearance process in the United States as HSR filings become more burdensome and theories of potential competitive harm expand, adding time and complexity into many deals. Strategic and logistical preparation will be more important than ever to keep deal timelines on track.
Prior to victories in Illumina and Iqvia, the FTC was not faring well in its litigated merger challenges. The Microsoft-Activision case, like the Illumina case, was another FTC vertical merger challenge. Here, the FTC argued that the combination of Microsoft’s Xbox video game console and Activision’s Call of Duty video game franchise would give the merged firm the ability and incentive to withhold Call of Duty from rival consoles, including Sony’s PlayStation, and harm competition. As in Illumina, the parties proposed a post-complaint “fix” in the form of a written offer (the details of which are redacted in the public version of the court’s opinion). And as in Illumina, the FTC argued that this fix should be considered only at the remedy stage after liability had been determined. The court, however, did not find support in the case law for this approach and instead evaluated the fix at the liability stage, ultimately deciding that the FTC failed to show that the court should issue a preliminary injunction to prevent Microsoft and Activision from completing their merger while a separate FTC administrative action challenging the merger was pending. The FTC’s appeal is pending.
Earlier in the year, the FTC lost another request for a preliminary injunction in its challenge to Meta Platforms’ proposed acquisition of Within Unlimited. In that case, the FTC argued that the acquisition may substantially lessen potential competition in a market for “VR dedicated fitness apps” by eliminating an actual or at least perceived potential competitor in this market. The court found that the FTC failed to establish that it was likely to succeed on the merits in light of the evidence presented. Nevertheless, the court accepted that, properly proven, actual potential competition or perceived potential competition by an acquiror in the market in which a target operates could be bases for viable claims of harm to competition under Section 7 of the Clayton Act.
Notably, the DOJ settled its case challenging ASSA ABLOY’s proposed acquisition of Spectrum Brand Holdings’s hardware and home improvement division mid-trial when the parties agreed to asset divestitures. This was the first (and heretofore only) divestiture remedy in a merger case subject to Tunney Act review agreed to by the DOJ in the current administration. In early 2024, the district court held that the proposed merger of JetBlue and Spirit Airlines, “as it stands, would substantially lessen competition in violation of the Clayton Act.” The defendants are appealing.
Last year, the agencies made several moves with particular potential significance for private equity. In June, the FTC settled a matter involving private equity sponsored acquisitions of veterinary clinics. Here, in addition to divestitures, the FTC imposed “robust” provisions for prior approval and prior notice of the firm’s future veterinary clinic acquisitions depending on the location of the clinic to be acquired. According to the FTC, the provisions were included out of a concern that private equity firms “increasingly engage in roll up strategies that allow them to accrue market power off the Commission’s radar” (i.e., that are not reportable under the HSR Act) and the consent order “will ensure the Commission has full visibility into future consolidation and the ability to address it.”
In September, the FTC challenged a series of private equity sponsored acquisitions of anesthesiology practices in Texas. The FTC’s complaint alleges that U.S. Anesthesiology Partners, Inc. and its private equity sponsor executed an anticompetitive roll-up strategy. The FTC is seeking broad relief, including divestitures and an injunction against the private equity firm engaging in “similar and related conduct” that could potentially hinder the firm’s ability to make future acquisitions in other markets. In December, the DOJ, FTC, and HHS announced that they will examine the role of private equity in competitive conditions in the healthcare sector and will work together to identify potentially anticompetitive roll-up transactions involving health care entities.
Anticompetitive Conduct Enforcement
In January 2023, the FTC proposed a rule to ban employer-worker non-compete clauses, and to require employers to rescind existing non-compete agreements and actively inform workers subject to such agreements that they are no longer in effect. We expect a final rule to be released sometime in the coming year. The rule proposal was subject to a public comment period and is likely to attract legal challenges to the FTC’s authority to issue the rule. If finalized in its current form, the rule would displace many less restrictive state laws and result in a fundamental change in federal antitrust law that for decades has required a fact-specific analysis into the effects of non-compete agreements.
In February 2023, the DOJ announced the withdrawal of its support for what it characterized as “outdated antitrust policy statements related to enforcement in healthcare markets.” The DOJ’s focus in withdrawing these three policy statements was on their guidance regarding information sharing among competitors. While the policy statements at issue concerned the healthcare industry, companies in many sectors had relied on the statements when designing information-sharing programs. By withdrawing support for these statements, the DOJ signaled more aggressive enforcement actions based on competitor information sharing in all industries. The FTC also withdrew its support for these policy statements in July 2023. The agencies have not signaled any intentions to issue new guidance or policy statements on information sharing.
Following the DOJ’s announcement, in May 2023, the DOJ entered into a consent decree with a poultry processor that requires, among other things, the company “cease sharing competitively sensitive information about poultry processing plant workers’ compensation.” The DOJ entered into similar consent decrees with other poultry processors. In another case involving information sharing, the DOJ sued Agri Stats in September 2023, alleging that the company “organiz[ed] and manag[ed] anticompetitive information exchanges among broiler chicken, pork and turkey processors,” including “by collecting, integrating and distributing competitively sensitive information related to price, cost and output among competing meat processors.”
Two DOJ settlements in conduct cases in 2023 involved companies agreeing to terminate certain practices allegedly affecting labor markets. One involved allegations that a poultry processor’s termination penalties in agreements with poultry growers were anticompetitive because they “discourag[ed] growers from switching to [its] competitors.” The consent decree requires the processor to, among other things, inform growers that it will not enforce the termination penalty provisions, reimburse previous penalty payments and refrain from including termination penalties in future contracts for the next seven years. A consent decree in another labor-related case prohibits two e-sports leagues from imposing a “competitive balance tax” which allegedly penalizes teams for exceeding compensation ceilings.
The FTC’s case against Meta Platforms alleging that the company monopolized a purported market for “personal social networking services” in the United States is moving forward. A separate but similar complaint filed by a group of state attorneys general was dismissed without leave to re-plead because the court found that the claims were barred by the doctrine of laches. The court of appeals affirmed the dismissal in April 2023.
Last fall, the court held a bench trial in the case brought against Google by the DOJ and a coalition of state attorneys general alleging that Google has maintained monopolies in general search services, search advertising, and general search text advertising. A decision is expected later this year. The DOJ filed a second suit against Google in early 2023 in the Eastern District of Virginia with claims relating to alleged ad-tech monopolization.
In August 2023, the DOJ resolved criminal antitrust charges against Teva and Glenmark with deferred prosecution agreements (DPAs) rather than plea agreements, which is rare. The DPAs include an “extraordinary remedy” requiring Teva Pharmaceuticals and Glenmark Pharmaceuticals to divest business lines involved in some of the conduct at issue.
The DOJ labor market prosecutions continue to falter at trial. The court presiding over the no-poach trial in the aerospace industry took the unusual step of granting the defendants’ motions for acquittal in April 2023 before a jury could deliberate. The court found during trial that “hiring among the relevant companies was commonplace, throughout the alleged agreement,” therefore “the agreement here cannot be said to allocate the market to any meaningful extent” and was “not a market allocation agreement as a matter of law.” Defendants in another no-poach case brought by DOJ against four managers of home healthcare agencies charged with wage fixing and labor market allocation were acquitted by a jury. By contrast, criminal fines and imprisonment were imposed on companies and individuals prosecuted by the DOJ’s Procurement Collusion Strike Force (PCSF). The PCSF is focused on “deterring, detecting, investigating and prosecuting antitrust crimes, such as bid-rigging conspiracies and related fraudulent schemes, which undermine competition in government procurement, grant and program funding” and it is set to play a central role in the DOJ’s push for trilateral coordination with the Canadian and Mexican authorities in 2024.
The DOJ continued to emphasize particular investigative tools in its criminal matters. For example, international cooperation and coordination appears to be on an upswing. According to one senior official, in the past year the DOJ has “cooperated on 13 cross-border criminal matters with 10 jurisdictions, and engaged in consultations covering a wide range of criminal enforcement topics with over 15 jurisdictions.” The DOJ is also increasingly turning to wire taps to secure evidence in cartel investigations. For example, in December 2023 the DOJ announced bid rigging, territorial allocation and fraud charges arising out of a PCSF wire-tap investigation. The DOJ is also providing additional carrots, separate from the leniency policy, to encourage companies to disclose wrongdoing. Under a new department-wide safe harbor policy, companies who discover misconduct during M&A due diligence and take steps to disclose and remediate may avoid prosecution.
As it broadens its use of certain investigative tools, the DOJ is pushing for reconsideration of a recent appellate ruling,
U.S. v. Brewbaker, that, if it stands, could significantly constrain per se criminal enforcement of the antitrust laws. In Brewbaker, the Fourth Circuit affirmed the defendant’s fraud convictions but overturned the district court’s denial of the defendant’s motion to dismiss a bid-rigging indictment. The court reasoned that because the defendant had both horizontal (competitive) and vertical (supply) relationships with a coconspirator, the alleged conduct should have been subject to the rule of reason – and for practical purposes not prosecuted criminally. The DOJ has petitioned the court for rehearing en banc. If the panel’s decision is upheld, it could have lasting implications for how the DOJ proceeds with indictments involving parties that engage in dual distribution or other multifaceted business arrangements.
Constitutional Challenges to FTC
On April 14, 2023, the U.S. Supreme Court held in Axon Enterprise Inc. v. FTC that district courts retain federal-question jurisdiction over challenges to the constitutionality of FTC administrative proceedings. Several defendants have since asserted challenges to the constitutionality of various aspects of the FTC, but a court has yet to rule in their favor. For example, in Illumina, discussed above, the court held that Congress did not unconstitutionally delegate legislative power to the FTC because the public interest standard for bringing enforcement actions and the law governing the forums in which actions may be brought provided sufficient Congressional guidance to the agency on how to act. The court also held that the FTC has “quasi-legislative/quasi-judicial authority rather than purely executive authority” and therefore the Commissioners did not unconstitutionally exercise executive powers while insulated from presidential removal; that the FTC can “investigate, prosecute, and adjudicate rights without violating due process”; and that the “interagency clearance process which allocates antitrust investigations” between the FTC and DOJ has a rational basis and did not violate Illumina’s equal protection rights.
Republican FTC Commissioner Christine S. Wilson resigned at the end of March 2023, leaving the Commission with only three commissioners, all of whom are Democrats. Since former Commissioner Wilson’s departure, there have been no dissenting statements from Commission action explaining alternative points of view. President Biden nominated Republicans Andrew Ferguson and Melissa Holyoak to the Commission but they have yet to be confirmed. While the confirmation of the nominees will not change the political valence of the FTC, we may once again see the majority commissioners engaging with dissenting views.
The coming year could prove to be quite busy for U.S. antitrust enforcers on many fronts, including mergers investigated, cases tried and rules finalized.
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