Recently, several Freshfields Bruckhaus Deringer attorneys penned an article for Bloomberg Law in which they offered insights into what federal antitrust enforcement will look like in 2023.
The authors include Jamillia Ferris, a partner in the antitrust, competition, and trade group and a member of the firm’s global antitrust leadership team; Meghan Rissmiller, a partner in the antitrust, competition, and trade practice; and Megan Yeates, an associate in the antitrust, competition and trade group. Attorneys Tom Morgan and Lauren Vaca also contributed to the article.
Overall, the Freshfields attorneys predict that the recent federal efforts to use novel theories of harm in courts to scrutinize mergers is a harbinger of more enforcement in the coming year, and they advise merger parties to build in more time for international deals to evolve.
Despite a series of court losses by U.S. federal agencies in 2022 as they pushed the boundaries of antitrust enforcement, the agencies show no signs of being deterred in their active enforcement strategy. Thus, holistic planning and an international strategy to close deals remains fundamental for those undertaking mergers and the firms advising them.
Novel Theories of Harm
Dealmakers need to be prepared for government agencies to continue to closely examine transactions for their potential effects on labor. They will be looking for novel theories of harm in their merger assessments, particularly related to labor and forward-looking competitive effects, and this will lead to longer and more complex reviews, which should be factored into deal timelines.
Monopsony in labor markets has been the focus of authorities of late, with labor specifically being called out in President Biden’s Executive Order on Promoting Competition in the American Economy. Meanwhile, the Department of Justice (DOJ) focused on the theory of harm when it recently blocked Penguin Random House’s acquisition of Simon & Schuster.
The Freshfields attorneys also predict that agencies will closely look at “nascent and future competition, broader innovation, and the role of data” as they consider whether to challenge mergers, particularly vertical deals such as Illumina/Grail and UnitedHealth/Change Healthcare.
Fixing It First
While the DOJ has repeatedly rejected “fixes” offered by companies looking to merge, the judge in the UnitedHealth/Change Healthcare deal found the fixes were in fact sufficient, and the Freshfields attorneys predict we will see more “fix it first” or “litigating the fix” strategies in 2023, with merging parties making potential fixes part of a robust and strategic defense.
All Tools Are on the Table for Agencies
As stated by DOJ Assistant Attorney General Jonathan Kanter and FTC Chair Lina Khan, agencies will continue to look to use all the tools available to them in the context of antitrust enforcement in 2023.
For instance, recently, federal agencies have revived their use of Section 8 of the Clayton Antitrust Act, which prohibits a person from simultaneously serving as an officer or on the board of directors of competing corporations (with limited exceptions); in the Booz Allen/EverWatch deal, the DOJ alleged, under Section 1 of the Shearman Antitrust Act, that mere entry into the transaction agreement could harm competition; and “the new Federal Trade Commission Act Section 5 policy statement on unfair methods of competition foreshadows an expansive approach to FTC enforcement in 2023.”
Merging parties should also expect state attorneys general to continue to take a proactive role in challenging deals that affect their own markets.
Deal Success Must Happen Globally
“Parties should plan for longer timelines to allow for in-depth investigations and potentially litigation, and consider international risks, and importantly, international strategies, on every deal.”
Just because a merger is allowed in the U.S. does not mean it’s free and clear to go ahead. Ultimately, deals must now be successful globally, and U.S.-centric deals can still be derailed by international enforcers. The Illumina/Grail deal was blocked in the EU in 2022 despite the FTC’s administrative law judge’s rejection of the FTC’s attempt to block it.